Chapter 13 Social and Economic Policy Pearson Education, Inc. © 2006 American Government 2006 Edition (to accompany the Essentials Edition) O’Connor and

Chapter 13

Social and Economic Policy

Pearson Education, Inc. © 2006

American Government2006 Edition(to accompany the Essentials Edition)

O’Connor and Sabato


The Policy Process Public Policy

An intentional course of action followed by government in dealing with some problem or matter of concern.

Based on law. Authoritative and binding on people. Those who do not comply can be penalized.

The impact or meaning of a policy depends on whether it is vigorously enforced, enforced only in some instances, or not enforced at all.


Theories of Public Policy Elite Theory

Chosen few or elite make all important decisions in society.

Unequal distribution of power is normal and inevitable.

Other views Bureaucratic Theory Interest Group Theory Pluralist Theory


A Model of the Policy-Making Process

Sequence of stages or functional activities. Policies do not just happen; rather they

are the products of a predictable pattern of events.

Problems must first be recognized and defined. A problem that disturbs or distresses people

gives rise to demands for relief, often through governmental action.


A Model of the Policy-Making Process Problem must get on the governmental agenda. Formulation of alternatives for dealing with the

problem. Policy adoption is the formal enactment or approval of

an alternative. Budgeting provides financial resources to carry out

the approved alternative. Policy implementation is the actual administration or

application of the policy. Policy evaluation determines the policy’s actual

accomplishments, consequences, or shortcomings.


Stages of the Public Policy Process


Problem Recognition and Definition Not everything qualifies as a problem

deserving of government intervention.

Perceptions of government responsibility play a role. These have changed over time.

Usually there is not a single agreed-on definition of a problem. Political struggles may occur at this

stage.


Agenda Setting Agenda

A set of issues to be discussed or given attention.

Systemic Agenda All public issues are viewed as requiring

governmental attention; a discussion agenda.

Governmental (Institutional Agenda) The changing list of issues to which governments

believe the should address themselves.


Getting on the Congressional Agenda President is an important agenda-setter for Congress. Interest groups are major actors and initiators in the

agenda-setting process. Major problems that evolve from crisis or other

extraordinary event may receive automatic agenda status.

Individuals may also push issues to the congressional agenda. Private citizens, members of Congress, other officials

Agenda setting is a competitive process.


Policy Formulation The crafting of appropriate and acceptable proposed

courses of action to ameliorate or resolve public problems.

Routine formulation A repetitive and essentially changeless process of

reformulating similar proposals within an issue area that is well established on the government agenda.

Analogous formulation Handles new problems by drawing on experience

with similar problems of the past. Creative formulation

Involves attempts to develop new or unprecedented proposals that represent a departure from existing practices.


Policy Adoption

The approval of a policy proposed by the people with the requisite authority, such as a legislature.

Major legislation requires much negotiation, bargaining, and compromise. Complex legislation takes time to pass. Legislation passed is often incremental.


Budgeting

Most policies require money in order to be carried out. A policy can be nullified by a refusal to

fund. Noise Control Act

Having the potential to curb funding can be a powerful tool for congressional committee chairs.


Policy Implementation

The process of carrying out public policy through governmental agencies.

Some are enforced by other means such as the courts. Product liability Product dating


Techniques used by Administrative Agencies Authoritative techniques

Rests on the notion that people’s actions must be restrained by government in order to prevent or eliminate activities or products that are unsafe, evil or immoral.

Incentive techniques Encourage people to act in their own best interest by

offering payoffs or financial inducements to get them to comply.

Capacity techniques Provide people with information, education, training or

resources that will enable them to participate in desired activities.

Hortatory techniques Encourage people to comply with policy by appealing to

their better instincts. “Just Say No.”


Policy Evaluation The process of determining whether a

course of action is achieving its intended goals.

Important players in this process Congressional committees Presidential commissions Private research organizations General Accountability Office (GAO)

Evaluation research and studies can stimulate attempts to modify or terminate policies and restart the policy process.


Roots of Social Welfare Policy Early 19th century attitudes toward social

welfare were focused on belt-tightening and charity. NO governmental intervention.

Late 19th century Farmers and rural Americans sought help

Failing commodity prices; exploitation of railroads

1890s severe economic depression Acceptance and expectance of government

intervention


Social Security Costs and Revenues, 1970-2080


Income Security Great Depression

Social and economic thinking began to change f Idea that government could and should be used as a

positive influence in society FDR elected in 1932

Unemployment extremely high; bad for economy Created Civil Works Administration by executive

order to put people to work Creation of Social Security

1935 law established old-age insurance (Social Security) and assistance for the needy, children, and others, and unemployment insurance.


Health Care National health insurance considered at time Social

Security legislation was passed AMA strongly opposed it; so it was omitted

1945 Truman put health insurance on the national policy agenda again. First idea received favorably by public. AMA opposed again. Fearful of regulation.

Medicare introduced by Johnson Provide hospital care for the elderly already covered

by Social Security. Wilbur Mills (D-AR) Chair Ways and Means

Expanded policy: included Medicaid


Social Welfare Policies Today: Income Security Programs Protect people against loss of income due

to retirement, disability, unemployment or deal or absence of family breadwinner. Non-means-based programs

Social insurance Old age, survivors and disability insurance Unemployment insurance

Means-tested programs May either come as cash or in-kind benefits,

such as food stamps. Supplemental Security Income Family and Child Support


Welfare Reform of 1996 Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 Required single mothers with a child over five

years of age to work within two years of receiving funds

Included a provision that unmarried mothers under the age of 18 be required to live with an adult and attend school in order to receive welfare benefits

Set a five-year lifetime limit for aid from block grants


Welfare Reform of 1996 Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 Included a requirement that mothers must

provide information about a child’s father in order to receive full welfare payments

Cut off food stamps and SSI for legal immigrants Cut off cash welfare benefits and food stamps for

convicted drug felons Limited food stamps to three months in a t hree

year period for persons 18 to 50 years old who are not raising children and not working.


Earned Income Tax Credit Program

Designed to help the working poor Helps them by subsidizing their wages

and provides an incentive for people to go to work.

Results in a net cash rebate for many low-income tax payers who pay no federal income tax.

Created in 1975 – Senator Russell Long (D-LA)


Food Stamp Program Initial program was an effort to expand the domestic

market for farm commodities. Provided the poor with the ability to buy more food,

thus increasing demand for American agricultural produce.

1939-1943 Made permanent in 1964 Extended nationwide in 1974 Benefits low income families. Combats hunger and

reduce malnutrition. Food stamps went to over 21 million beneficiaries in

2003 at cost of $2.9 billion. Average participant’s monthly disbursement: $84 in

food stamps


The Effectiveness of Income Security Programs Entitlement programs

Income security programs to which all those meeting eligibility criteria are entitled.

Spending for such programs is mandatory. Funds must be provided for them unless laws

creating the programs are changed. Difficult to control spending for this reason.

Often a matter of considerable debate. Range of such programs are characteristic

of all democratic industrial societies.


Health Care U.S. government spends billions on health

Medicare Part A: automatic at age 65 Part B: optional; covers payment for items not covered by part A. Financed by a payroll tax of 1.45 percent paid by both

employees and employers on the total amount of a person’s wages.

Medicaid Provides comprehensive health care to all who qualify as needy. In 2002, Medicaid served over 40 million people at a cost of 284

billion. Jointly financed by national and state governments Some variation by state in terms of who is covered

Aids Funding High Cost of Health Care


The Roots of Economic Policy During the nation’s first century states bore

the responsibility of managing economic affair.

Nineteenth Century Government long role in economy Tax, tariff, public lands disposal, and public

works projects and the national bank But national regulatory programs were few and

restricted. State governments active in promoting and

regulating private economic activity.


The Nineteenth Century After Civil War, U.S. experienced rapid

economic growth. Large scale manufacturing enterprises New problems arose Business cycle: fluctuations between expansion

and recession that is a part of modern capitalist economics.

During recessions people lose their jobs and income, and the economy experiences a low or even negative growth rate.


The Progressive Era Laissez-faire economics

A French term literally meaning “to allow to do, to leave alone.” It is a hands-off governmental policy that is based on the belief that governmental involvement in the economy is wrong.

Major reform Interstate Commerce Act 1887 Sherman Antitrust Act 1890 Establishment of the Department of Agriculture

(1862) Homestead Act Morrill Land Grant Act


Financial Reforms Bank holiday

Only financially sound banks were permitted to reopen. New banking laws

Glass-Steagall Act (1933) Required the separation of commercial and investment banking

and set up of the FDIC Securities Act (1933)

Required that prospective investors be given full and accurate information about the stocks or securities being offered to them.

Securities Exchange Act (1934) Created the Securities and Exchange Commission authorized to

regulate the stock exchange and to reduce the number of stocks bought on margin (on borrowed money).


Agriculture Agricultural Adjustment Act (1933)

Sought to boost farm income by restricting agricultural production in order to being it into better balance with demand.

Supreme Court found it unconstitutional. Constitution did not grant Congress the authority to regulate commerce in Article 1.

Replaced by the Soil Conservation and Domestic Allotment Act. Did not work well.

Congress passed a second AAA Provided subsidies to farmers to limit their crops. Protected farmers, but many thought it a wasteful program.


Labor National Labor Relations Act of 1935 (Wagner Act)

Guaranteed worker’s rights to organize and bargain collectively through unions of their own choosing

National Labor Relations Board Created to carry out the act and to conduct elections

to determine which union, if any, employees wanted to represent them.

Fair Labor Standards Act (1938) Intended to protect the interests of low-paid workers,

the law set 25 cents per hour and 44 hours per week as initial minimum standards.


Labor

Industry Regulations Federal Communications Commission (1934)

Given extensive jurisdiction over the radio, telephone, and telegraph industries.

The Civil Aeronautics Board (1938) Put into place to regulate the commercial

aviation industry. Motor Carrier Act (1935)

Put the trucking industry under the jurisdiction of the Interstate Commerce Commission.


Economic and Social Regulation

Economic regulation Governmental regulation of business

practices, industry rates, routes, or areas serviced by particular industries.

Social regulation Governmental regulation of the quality

and safety of products as well as the conditions under which goods and services are produced.


The Social Regulation Era From the 1960s to the mid-1970s the

national government passed social regulatory legislation on such topics as: Consumer protection Health and safety Environmental protection

All based on commerce clause authority Set up new regulatory agencies to implement

the new regulations More industries affected by government.


Why the surge of social regulations? The late 1960s and early 1970s were a time of social

activism. The consumer and environmental movements were

at the peak of their influence. The public had become much more aware of the

dangers to health, safety, and the environment associated with various modern products.

Members of Congress saw the advocacy of social regulation as a way to gain visibility and national prominence.

The presidents in office during most of this period each gave support to the social regulation movement.


Deregulation A reduction in market controls. In theory, deregulation would increase market

competition and lead to lower prices for consumers. Ford administration made deregulation a major

objective. Conservative Republican

Senator Ted Kennedy held hearings on airline deregulation.

Priority of the Carter Administration as well. Agricultural regulation still controversial.

2002 Bush signed into law a six-year agricultural bill with a price tag of $100 billion.


Stabilizing the Economy Massive scale and persistence of the Great

Depression led to the Employment Act of 1946

Committed the government to maintaining “maximum employment, production, and purchasing power”

Keynes Argued that deficit spending by a government

could supplement the total or aggregate demand for good and services.


Stabilizing the Economy Economic stability

A situation in which there is economic growth, rising national income, high unemployment, and steadiness in the general level of prices.

Inflation A rise in the general prices levels of an economy.

Recession A short-term decline in the economy that occurs

as investment sags, production falls off, and unemployment increases.


Monetary Policy: Controlling the Money Supply Monetary Policy

A form of government regulation in which the nation’s money supply and interest rates are controlled.

Money A system of exchange for goods and services that

includes currency, coins and bank deposits. Federal Reserve Board

A seven-member board that sets member banks’ reserve requirements, controls the discount rate, and makes other economic decisions.


Monetary Policy: Controlling the Money Supply Reserve requirements

Governmental requirements that a portion of member banks’ deposits must be retained to back loans made.

Discount rate The rate of interest at which member banks can

borrow money from their regional Federal Reserve Bank.

Open Market Operations The buying and selling of government securities by

the Federal Reserve Bank in the securities market.


Fiscal Policy: Taxing and Spending Federal government policies on taxes, spending,

and debt management Intended to promote the nation’s macroeconomic

goals, particularly with respect to employment, price stability, and growth.

Revenue Act of 1964 Reduced personal and corporate income tax rates

Tax cuts to stimulate the economy Reagan in 1981 and G.W. Bush in 2001 and 2003

Documents

Chapter 13 Social and Economic Policy Pearson Education, Inc. © 2006 American Government 2006 Edition (to accompany the Essentials Edition) O’Connor and