Chapter Fourteen:

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Chapter Fourteen Domestic and Economic Policy
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Chapter Fourteen Learning Objectives

• Describe the policymaking process, including
• -- Agenda building
• -- Policy formulation
• -- Policy adoption
• -- Policy implementation
• -- Policy evaluation

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Chapter Fourteen Learning Objectives

• Explain the meaning of a personal health
  insurance mandate.
• Describe increases of unauthorized immigrants and
  the effects of this increased population.
• Explain the attempts of the U.S. House and Senate
  to pass bills controlling the flow of
  unauthorized immigrants and the companies who
  hire them.

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Chapter Fourteen Contents

1. The Policymaking Process
2. Health Care
3. Immigration
4. Crime in the Twenty-first Century

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Chapter Fourteen Contents

• Energy and the Environment
• The Politics of Economic Decision Making
• The Politics of Taxation

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The Policymaking Process

• The Policymaking Process
• Domestic Policy

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The Policymaking Process

• Five Steps of Policymaking
• Agenda Building
• An issue must get on the agenda

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The Policymaking Process

• Congress must be aware that a problem exists and
  requires congressional action

AP Photo/Charles Dharapak
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Timeline of Economic Crisis

• Late 90s early 2000s, people were able to
  obtain mortgages at a low interest rate, but many
  were obtained subprime mortgages
• Around 2004 Banks began to stop issues subprime
  are adjustable rate mortgages
• 2004 2008 Banks lost billions from people who
  were not able to pay pack loans, foreclosures
  skyrocketed, and the credit of both banks and
  individuals suffered
• 2008 POLICY Decision - 700 Bank Bailout Bill

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The Policymaking Process

• In late 2008, as banks were no longer taking
  excessive risks, it was feared that this could
  lead to a potential freeze on credit and lending
  by the nations firms thus leading to a
  possible shut down of the economy. Financers
  pleaded to the government for assistance.

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The Policymaking Process

• Policy Formulation
• Various policy proposals are discussed among
  government officials and the public

12
The Policymaking Process

• Bush-appointed Secretary of Treasury Henry
  Paulson proposed via three-page memo a 700
  billion bill to buy toxic mortgage-related
  assets. Congress created a 110-page bill filled
  with pork and oversight provisions.

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The Policymaking Process

• Policy Adoption
• This step involves choosing a specific policy
  from among the proposals that have been
  discussed.

AP Photo/Richard Drew
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The Policymaking Process

• After the House refused to pass the bank bailout
  bill, Senate leaders decided to amend an existing
  bill already passed by the House
• The Troubled Assets Relief Program (TARP) was 451
  pages filled with earmarks to attract votes.

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The Policymaking Process

• Policy Implementation
• This step involves the implementation of the
  policy alternative chosen by Congress.

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The Policymaking Process

• Officials soon realized that TARP could be spent
  on preferred stock in banks, rather than buy
  toxic banks, which would not resolve the
  financial crisis, eventually returning TARP funds
  to the government.

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The Policymaking Process

• Policy Evaluation
• After a policy has been implemented, it is
  evaluated.
• Groups inside and outside government conduct
  studies to determine what actually happens after
  a policy has been in place for a given period of
  time.

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The Policymaking Process

• Initially, the public didnt mind the switch to
  preferred stock, rather they were concerned with
  employee compensation and future lending
  practices.
• Soon the TARP program was viewed as a Wall Street
  bailout for special interests.

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Health Care

• Health Care
• America spends almost twice as much as Britain or
  Japan.
• Spending is measured by the percentage of the
  gross domestic product (GDP).

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Health Care

• The Governments Role in Financing Health Care
  Through 2009
• Medicarea state-federal program, specifically
  designed to support U.S. residents over 65
• This program is funded by tax on wages and
  salaries.

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Health Care

• Created in 1965, pays hospital and physicians
  bills for those residents over 65
• Second-largest domestic spending program after
  Social Security
• Government has cut reimbursement funds and have
  capped specific procedures

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Health Care

• The Governments Role in Financing Health Care
  Through 2009
• Medicaida state-federal program, specifically
  designed to subsidize health care for the poor

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Health Care

• This program is funded out of general government
  revenues.
• In 2007, 34 million people were enrolled in the
  program.

AP Photo/J. Scott Applewhite
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Health Care

• Today, there are about 60 million, exceeding over
  300 billion
• The Federal government pays 55 percent of total
  costs.

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Health Care
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Health Care
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Health Care

• Universal Health Insurance
• President Obama signed into law on March 23,
  2010, the Patient Protection and Affordable Care
  Act.
• VERY CONTROVERSIAL
• Obamacare explained
• Obamacare Rebutal

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Health Care

• On March 30, the President signed the Health Care
  and Education Reconciliation Act of 2010.

AP Photo/Stephen Chemin
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Health Care

• Largest expansion of government services since
  Lyndon B. Johnson
• An opt-out provision if an individual rejects the
  coverage
• Illegal immigrants will not be covered.

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Health Care

• Health-care Reform Building an Agenda
• The Problem of the Uninsured
• Over 45 million Americans are uninsured
• The uninsured are young, entry-level workers
  without health benefits

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Health Care

• Health-care Reform Building an Agenda
• The Problem of High Costs
• New technology and lifesaving measures are a
  costly burden on the system.
• The Medicare trust fund was projected to run out
  of funds in 2017.

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Health Care

• Health-care Reform Adopting a Policy
• Universal Health Insurance
• Personal Mandate
• Public Option

David McNew/Getty Images
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Health Care

• Health-care Reform Implementing Policy
• Most of the provisions do not go into effect
  until 2014 and the last provision is not
  scheduled until 2018.
• Voters will not receive benefits for at least two
  election cycles.

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• Americans have spent many billions of dollars on
  health care over the last half-century. What kind
  of return have they received for that spending?
  One way to answer the question is to observe that
  since 1950, the life expectancy of the average
  American has increased about one year with the
  passage of each span of six years. Much of that
  increase in life expectancy is doubtless due to
  health-care spending. In todays dollars, since
  1950 the average American spent 11,400 on health
  care in every span of six years. Therefore, we
  could say that on average, Americans spent
  11,400 to buy one year of additional life. If
  someone asked you how much your life is worth in
  dollar terms, you probably would be hard-pressed
  to provide a figure. You might reject the
  question entirely. Insurance companies and
  government agencies, however, routinely need to
  estimate the economic value of a persons life. A
  typical estimate by economists would be about
  75,000 a year. This is about six times what it
  cost to buy those additional years of life. By
  these calculations, health-care spending appears
  to be a bargain. That does not mean, however,
  that we are spending too little on health care.
  To ask if we are spending too little, the correct
  question is as follows If we spend one
  additional dollar on health care, will we get one
  additional dollars worth of benefit? This is a
  hard question to answer.
•  

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• We stated in this chapter that Americans spend
  more on health care than the people of almost any
  other country. It is not an accident that the
  United States is also the only truly rich country
  that does not have a national health insurance
  system. Insurance provision by the government
  tends to hold down total costs for several
  reasons. One is that the government is in an
  excellent bargaining position to demand lower
  prices from medical care providers and from
  pharmaceutical companies. But is such bargaining
  a good idea? The pharmaceutical industry, for
  example, makes more profits selling drugs in
  America than in Germany, where the government has
  negotiated lower prices. One effect of the high
  profits that the industry earns in the United
  States is that it is able to fund a vast research
  effort aimed at finding new drugs. Some experts
  believe that the industry would be unable to
  mount such an effort if Americans paid German
  prices for drugs. (Such thoughts may have been on
  the minds of the Republicans who barred the
  government from negotiating lower drug prices as
  part of the Medicare drug benefit.) American
  spending, in other words, may be providing the
  rest of the world with a free ride in terms of
  pharmaceutical research. What applies to
  pharmaceuticals may also apply to other branches
  of medicine. It is possible that Americas lavish
  medical spending is one of the main engines
  driving worldwide progress in medical science.

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Immigration

• Immigration
• The Issue of Unauthorized Immigration
• Approx. 12 million undocumented aliens
• Hispanic populations have grown dramatically in
  the southwestern states.

AP Photo/Ralph Fresco
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Immigration

• Characteristics of the Undocumented Population
• Studies show unauthorized immigrants return home
  to retire.
• A great deal send money home to relatives .
• Many live in mixed households some have lawful
  family members.

38
Immigration

• Concerns about Unauthorized Immigration
• Laws and customs
• Coyotes may exploit or abuse clients
• Contributes to the illegal drug trade

39
Immigration

• Attempts at Immigration Reform
• Public opinion is contradictory.
• 1/5 favor immediate deportation.
• Though a serious problem, most dont believe it
  should be a priority issue.

40
Immigration

• Immigration and the Obama Administration
• Administration instituted harsh crackdowns on
  employers of undocumented workers.
• Immigration reform was tabled for Health Care.

41
Immigration

• The Arizona Immigration Controversy
• In April 2010, Arizonas governor signed
  legislation that would make it a crime to not
  carry immigration documentation.
• The 2010 election and health care legislation
  forced immigration to take a seat behind top
  issues.

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Crime in the Twenty-first Century

• Crime in American History
• Crime has been an issue of concern throughout
  Americas history.
• Industrialization and bureaucratic institutions
  like factories and schools socialized citizens
  into patterns of conformity and rules.

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Crime in the Twenty-first Century

• In the 20s and 30s, organized crime flourished
  during prohibition.
• Crime rates began to rise in the 50s and grew
  substantially in the 1960s.
• Since 1995, violent crime rates have declined.

44
Crime in the Twenty-first Century

• The Prison Population
• Many Americans believe the best solution to
  curbing crime is to impose stiff prison
  sentences.
• In 2008, 2.3 million people were imprisoned in
  jails.

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Crime in the Twenty-first Century

• The Incarceration Rate
• Men are ten times more likely to be incarcerated
  than women.
• Prisoners are also disproportionately African
  America.

46
Crime in the Twenty-first Century

• Prison Construction and Conditions
• Prisons are releasing criminals early due to
  overcrowding.
• Several states are building more prisons to house
  the growing inmate population.

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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
51
Energy and the Environment

• Energy and the Environment
• Energy policy addresses two key issues
• Americas reliance on foreign oil
• Potential global warning caused by increased
  emissions of CO2

Theo Heimann/AFP/Getty Images
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Energy and the Environment

• OilA Strategic Issue
• The United States imports three-fifths of the
  petroleum it consumes primarily from the Middle
  East .
• President Obama has attempted to reduce the U.S.
  dependence on foreign oil.

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Energy and the Environment

• Global Warming
• There is much debate over the amount of warming
  that will occur.

Johnny Johnson/Getty Image
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Energy and the Environment

• Scientists agree that global warming will be
  significant.
• Documentaries like Al Gores An Inconvenient
  Truth, brought the issue into the limelight.

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Energy and the Environment
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Energy and the Environment

• The BP Deepwater Horizon Oil Spill

AP Photo/Bill Haber
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Energy and the Environment

• Extent of the spill
• Largest oil spill in American history
• Over 3,850 square miles
• Gushing oil rate of 5,000 barrels a day

58
Energy and the Environment

• Attempts to Plug the Leak
• BP, the company responsible, failed at plugging
  the leak.
• Failed attempts resulted in additional amounts of
  oil that leaked into the ocean.

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Energy and the Environment

• Cleanup Efforts
• The Federal Governments Response
• The Failure of Regulation
• Public Reaction

Redux/Stephen Crowley/The New York Times
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The Politics of Economic Decision Making

• The Politics of Economic Decision Making
• Good Times, Bad Times
• Recession
• Unemployment
• Inflation

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The Politics of Economic Decision Making

• To try and control peaks and valleys of the
  national economy, the government has several
  policy options.
• One is to change the level of taxes or government
  spending.
• Another is to influence interest rates and the
  money side of the economy.

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The Politics of Economic Decision Making

• Fiscal Policy
• Keynesian Economics
• School of thought that supports the use of
  government spending and taxation to help
  stabilize the economy
• Summary of Keynesian Economics

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The Politics of Economic Decision Making

• Government Spending and Borrowing
• Keynes believed that forces of supply and demand
  operated too slowly on their own in such a
  serious recession.
• Government should step in and spend what is
  needed to return the economy to a more normal
  state.

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The Politics of Economic Decision Making

• Government spending can be financed through
  increasing taxes and borrowing money.
• It is essential that the spending be financed by
  borrowing, and not by taxes.
• Government should run a budget deficit.

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The Politics of Economic Decision Making

• Discretionary Fiscal Policy
• Beginning with President John F. Kennedy,
  policymakers have attempted to use Keynesian
  methods to fine-tune the economy.
• Discretionary fiscal policyleft to the judgment
  of the policymaker

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The Politics of Economic Decision Making

• Criticisms of Keynes
• Those who object to Keynes theories argue that
  fiscal policy has no effect or that it has
  negative side effects that outweigh the benefits.

Walter Stoneman/Samuel Bourne/Getty Images
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The Politics of Economic Decision Making
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The Politics of Economic Decision Making

• Deficit Spending and the Public Debt
• U.S. Treasury Bonds
• Public Debt, or National Debt
• The total amount of debt carried by the federal
  government
• China and Japan own most of the debt of the
  United States.

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The Politics of Economic Decision Making

• The Public Debt in Perspective
• Gross Public Debt
• Net Public Debt
• Our Debt Ceiling - 16.4 Trillion

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The Politics of Economic Decision Making

• Are We Always in Debt?
• From 1998 to 2002, President Bill Clinton
  obtained a tax increase as the nation emerged
  from a mild recession.
• A series of events led to the fall of the
  surplus, increasing the federal debt starting in
  2002.

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The Politics of Economic Decision Making

• Events that led to the increase in public debt
• The dot-com bust, which lowered the rate of
  growth and the federal governments tax receipts
• September 11, 2001, and the spending associated
  with Homeland Security
• The War in Iraq

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The Politics of Economic Decision Making

• Congressional discretionary programs
• In 2009, President Obama pushed for the largest
  spending bill not seen since WWII with The
  Economic and Reinvestment Act of 2009.

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The Politics of Economic Decision Making

• Monetary Policy
• Federal Reserve System (The Fed)
• The agency created by Congress in 1913 to serve
  as the nations central banking organization.

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The Politics of Economic Decision Making

• The Fed regulates the amount of money in
  circulation supervises banking industry holds
  reserves deposited by most banks and so on.

AP Photo/Alex Brandon
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The Politics of Economic Decision Making

• Federal Open Market Committee
• The most important body within the Federal
  Reserve System
• The Committee decides how monetary policy should
  be carried out.

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The Politics of Economic Decision Making

• Loose and Tight Monetary Policies
• Monetary Policy
• Loose Monetary Policy
• Tight Monetary Policy

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The Politics of Economic Decision Making

• Time Lags for Monetary Policy
• The time between a policy and its implementation
  may take several months.
• Reliable information may not be available for
  months.

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The Politics of Economic Decision Making

• Monetary Policy During a Recession
• Regulating Banks

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The Politics of Economic Decision Making
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• Review of Terms
• Keynesian Economics
• Budget Deficit
• Treasuries
• National Debt (Public Debt)
• Gross Public Debt
• Net Public Debt
• Federal Reserve System
• Credit
• Interest Rates

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The Politics of Taxation

• The Politics of Taxes
• Federal Income Tax Rates
• The first couple of dollars you make is not
  taxed.
• The last couple of dollars you make is the most
  taxed.

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The Politics of Taxation

• Individuals find legal loopholes to avoid paying
  the highest percent of taxes.
• Loopholes and Lowered Taxes
• Loophole
• Progressive Tax

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The Politics of Taxation

• Regressive Tax
• A tax that falls in percentage terms as income
  rises

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The Politics of Taxation
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The Politics of Taxation
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The Politics of Taxation

• Who Pays?
• Democrats
• Republicans
• The U.S. tax system

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All The Different Taxes

• Federal Income Tax Between 10 and 35 (Varies
  by income)
• State Income Tax (Ibid)
• SS tax 4.6 of gross
• Medicare 1.5 of gross
• Payroll tax varies
• Other state and local taxes

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• What muddies the waters Deductions, credits,
  and exemptions what are some examples of these?
• What about investments, etc?

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• Tax revenue collected - 2,674,007,818,000
• 2012 Budget 128,900,000,000
• How much was actually spent? Over
  3,000,000,000,000

90

• Other options Flat Tax, National Sales Tax

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Questions for Critical Thinking

• Do you believe a flat tax is a better alternative
  to income taxes based on a sliding scale?