Public policy is anything the government chooses to do or not to do.
POLICYMAKING AND EVALUATION
The first step in policymaking is identifying and defining the problem.
After identifying a problem, determine how important it is and how urgent is the need to act.
The next step is to review possible solutions and select those most likely to be successful.
Elected leaders choose which policy options to adopt and how to implement them.
- Government bureaucracies usually carry out the task of executing policy.
- The courts play a role in the policy process as well.
Government assesses the impact of policies to determine their continued utility.
- Policies often have unintended consequences that are not always apparent when they are adopted.
Whether government adopts a policy depends largely on its costs and benefits.
- Policies that allocate costs and distribute benefits widely are easiest to sustain.
- Policies with widely distributed costs but concentrated benefits tend to raise little opposition.
- When costs and benefits are concentrated, interests may clash and government must mediate the disputes.
DOMESTIC POLICY
Domestic policy refers to government action that affects citizens within the United States.
The government began taking steps to protect the environment in the twentieth century.
- Theodore Roosevelt established the National Park Service in the early 1900s.
- Citizen activism led to expanded environmental protection in the 1970s.
- Pollution has declined substantially since the adoption of environmental regulations.
Environmental policies have generated controversy.
- Costs are concentrated on industry; benefits are distributed to everyone.
- Government initially tried to compel compliance by threats and fines.
- Moved to system of regulatory negotiation in which government and industry forge a consensus for acceptable action.
- Regulatory negotiation led to cap and trade, a market-based system in which companies can trade pollution credits with one another for cash.
- Some states and localities have taken measures on their own to reduce carbon emissions.
The modern social safety net shows the dramatic change in government policy over time.
- Prior to 1900, few laws protected workers; private organizations provided relief to the poor.
- The Great Depression forced the federal government to take a larger role in alleviating suffering.
- The Social Security Act of 1935 established Social Security, unemployment compensation, and other aid programs.
- Government added health-care coverage (Medicare/Medicaid) in 1960s.
- These programs have considerably reduced poverty, especially among older citizens.
The cost of social safety net programs is large and growing.
- Entitlements account for about 40 percent of the federal budget.
- Reform efforts have targeted public assistance programs known as welfare.
- States struggle with costs of sustaining funding for government programs.
- The poor lack the political clout to advance programs that aid them.
- Religious groups have recently partnered with government to administer federal antipoverty programs.
Health-care costs have become a major threat to the financial security of many Americans.
- In most other industrialized nations, government provides universal coverage.
- Some states have taken initiative in providing government-sponsored health care.
ECONOMIC POLICY
Federal government became much more active in the economy during the Great Depression.
Fiscal policy: use of government's tax and spending authority to influence the national economy.
- John Maynard Keynes: Governments can control overall economic demand by buying more goods and services or decreasing taxes.
- Supply-side economics: Government's main economic role is keeping prices low by reducing regulations and taxes.
The federal government runs a deficit to pay for all of its programs.
- The government finances the deficit by selling Treasury bonds on which it must pay interest.
- Economists worry that large government deficits may slow economic growth.
Government can regulate economic activity by controlling the availability of money.
- A federal agency called the Federal Reserve controls the supply of money.
- All nationally chartered banks must belong to the Federal Reserve System.
- Member banks can borrow money at low rates from the 12 regional Federal Reserve banks.
- The regional Federal Reserve banks work with a board of governors to establish and implement monetary policy.
The Federal Reserve uses several tools to affect changes in monetary policy.
- The reserve requirement ratio is the amount of money the Fed requires banks to keep on hand (in relation to the total customer deposits) to meet their liabilities.
- The discount rate is the short-term interest rate the Fed charges to its members.
- Open market operations refer to the Fed's role in buying and selling government securities in the marketplace.
- The Federal Open Market Committee meets eight times a year and can adjust the rate at which member banks loan each other money to cover short-term needs.
Protectionism is the use of taxes and tariffs to protect domestic production by limiting imports.
Free trade policies and treaties such as NAFTA remove barriers to international trade.
The World Trade Organization is the principal world body responsible for negotiating and enforcing international trade agreements.
