Lecture 22 Lecture 22Policymaking: Fiscal Policy and Economic regulation Party Positions on the economic Agenda Democratso Greater Security § Governmental Benefits • Health Care • Retirement • Welfare § Regulation • Maintain Competition • Anti-Trust and Mergers § Greater Taxation • Tax Increases • Progressive Rates • Income Tax Brackets Republicanso Greater Liberty § Private Provision of Benefits • Cut Benefit Programs • Limited Government § Free Market Principles • Consolidation Acceptable § Lower Taxation • Tax Cuts • Regressive Rates • Flat Tax Economic Issues and electoral PoliticsDemocratic WeaknessesPOLS 1113 1st Editiono Tax increases and progressive rates are hard sellso An effective tool against candidates who support themo Citizens and groups with relatively high incomes fund campaigns§ Republican Weaknesses o Tax cuts are popular but require corresponding cuts in spendingo Programs provide valuable and localized benefits to constituentso The cuts necessary to balance budgets are not enactedU.S. ExpendituresTwo types of Expenditureso Discretionary Expenditures § Public programs that do not include guaranteedexpenditures • Military Services • Agriculture Subsidies • Transportation • Welfare o Mandatory Expenditures § Public programs with guaranteed expenditures • Social Security • Medicare and Medicaid Social SecurityPotential Reformso Benefit cuts and extending the eligible retirement age for futureretireeso Increasing social security revenues by substantially raising theincome cap from $110K o Privatization of portions of social security benefits for futuregenerations § Considered during the George W. Bush Administration § This would require 2 to 3 trillion in immediate debt to raisethe funds § It would change the program from a federal guarantee ofbenefits to a higher risk/reward from equity investments Medicare/MedicaidObama Administration Reformso Marks an effort to both expand coverage and control costs § Includes an insurance mandate for individuals§ Subsidies for working poor to expand coverage § Imposes taxes on plans with high levels of benefits § Closes the pre-existing condition loophole for insurers § Creates exchange marketplaces for consumers § Costs $938 billion over 10 years § Potentially reduces budget deficit by $138 billion over 10
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