Jaymie Ticknor Political Science 1050 Sect 002 8 10 15 17 22 24 and 29 April 2014 Lecture 9 Chapter 17 Economic and Social Policy Types of Public Policies Public Policy is a term applied to all government programs and regulations Domestic Policy consists of all government programs and regulations that directly affect those living within a country Foreign Policy involves relations with other nations Stages of Policy Making Agenda setting making an issue so visible that important political leaders take it seriously Systemic Agenda public outcry but no government response Institutional Agenda elected officials take it seriously and take legislative action Policy Deliberation debate and discussion by groups and political leaders about issues placed on the policy agenda stakeholders may not agree Final policy is intended to balance the interests of different groups Policy Enactment passage of laws by public officials requires negotiation bargaining and compromise Policy Implementation translation of legislation into set of government programs or regulations techniques Authoritative techniques people s actions are restrained by government three felonies sent to permanent sentence Incentive technique offers financial incentive for compliance disincentive would be syntax on cigarettes to decrease behavior more effective Capacity techniques provide people with appropriate resources e g education Hortatory techniques appealing to people s better instincts Just Say No training campaign less effective Policy Outcomes effect of policy outputs on individuals and businesses or policy evaluation which is the determination of the effectiveness of a policy Evaluated by Congressional Committees Presidential Commissions Interest groups and Academics Judging the State of the Economy Gross Domestic Product GDP measure of total economic activity in a nation over the course of a year strongest impact on approval rates in presidential elections exporting more than importing can increase this debt in relation to GDP if low less concern Business Cycle alternating periods of economic growth and economic slowdowns expansion recession and then recovery Recession reduction in GDP growth for two quarters 6 months Governments try to implement policies that will not disrupt economy Unemployment typically 4 6 currently approx 6 7 Inflation price increases over time on same product measured through Consumer Price Index which tracks the costs of essentials over a period of time How is Unemployment Calculated total number of citizens currently seeking employment but are without a job total number of people in the workforce Government conducts a monthly national survey to calculate unemployment Fiscal Policy the sum total of government taxing and spending which determine whether government revenues exceed expenditures Budget government s annual plan for taxing and spending Deficit amount by which annual spending exceeds revenue Surplus amount by which annual revenue exceeds spending Two Philosophies Over Fiscal Policy Fiscal Policy and Economic Growth Keynesianism economic policy based on the belief that government spending can be used to jump start the economy F D R broke with traditional belief in a balanced budget and ran large deficits during the 1930s to get the economy moving again Three types of spending Government consumer and business spending downward spiral only government left Using Tax Rates Supply side economics reduction in tax rate will generate overwhelming economic growth that will produce the same level of government revenue more money more spending Applied during Reagan administration reduced tax rates led to significant budget deficits during the 1980s Reagan eventually increased taxes to balance budget Monetary Policy efforts taken by government to vary the supply of money in the economy to stabilize the business cycle if money supply increases too quickly then you will have inflation if money supply decreases too much there is less money to spend and invest economy slows down Federal Reserve is responsible for controlling money supply control interest rates and bank reserves The Dreaded T Word Taxes taxes are a much debated topic in the United States Three important dimensions of tax policy Tax Burden the total level at which Americans are taxed large tax cuts over last ten years one reason for increased federal deficit and recent increase in top tax bracket how much people typically pay for taxes Tax Base the income 39 6 property wealth or economic activity that is taxed some support more broad based taxes sales and sin taxes Tax Preferences special tax treatment received by certain activities property or investments Tax Structure structure in which tax rate depends on amount of taxable income Progression Tax tax structure so that higher income people pay a larger proportion of their income in taxes than do lower income people Buffett Rule raise taxes on rich Regressive Tax tax structure so that low income people pay a larger proportion of their income sales tax Tax Reform Flat Tax tax that everyone pays at the same rate Pros simple structure easy to generate more government revenue Cons rich will pay less and poor more than they currently do may increase economic inequality Taxes International Comparison tax burden in U S is much lower than in the world s other developed countries among the lowest of the 13 major industrialized countries Other countries pay more but provide more services U S relies more on income and payroll taxes other countries rely more heavily on consumption taxes National Debt currently the national debt is at almost 17 trillion dollars approx 73 of GDP accumulated deficits over several years whereas deficit is only one year Our debt considered moderate compared to other advanced nations Japan and Italy have proportional debts that are more than twice as large Economic slowdown or spending stimulus package at around 2008 Social Insurance for Senior Citizens 1935 Congress enacted the landmark Social Security Act Social security is a social insurance program for seniors and the disabled if born before 1937 get full benefits at 65 1960 or later full benefits at 67 can receive benefits at 62 but will be reduced Paid for by payroll taxes 6 2 of every paycheck employer matches percentage maximum taxable earnings are 117 000 2014 pay more not more benefits Pay as you go structure payments to current retirees are made from current payments into the systems Social Security