Making Public Policy

Economic Policy and the Budget

Key Concepts- Politicians & economists have conflicting

views on how to regulate the economy Economic policy-making involves several

parts of the government The budget indicates how much the

government will collect in taxes and spend

Government Role in the Economy

Fiscal Policy – Congress, CBO, Sec. of Treasury, OMB and the President Raising money

Taxes – Social insurance, Individual income, Corporate, and excise

Borrowing Spending

Spending money Entitlements National Defense Interest on Debt Grants

The Budget

Policy document Collect in taxes Spend in revenues How these revenues will be spent 2008 = $2.66 Trillion in receipts , $2.9

Trillion in spending

Spending

Discretionary spending – Departments and agencies = $1.4 Trillion

Mandatory spending- examples - Social Security, Medicare, and Medicaid = $1.788 Trillion

Iraq and Afghanistan not included in regular budget

Figure 16.4: Tax Burdens in Nineteen Democratic Nations

Figure 16.5: Federal Taxes on Income, Top Percentage Rates

Source: Updated from Congressional Quarterly Weekly Report (September 18, 1993), 2488.

Monetary Policy controls money supply by changing

reserve rates, interest rates & treasury notes Federal Reserve Board = The Fed members

are appointed by the president and serve 14 yr. terms

Social Welfare

Two Kinds of Welfare 1. Benefit most or all - ex. Social

Security 2. Benefit only a small amount – ex.

Medicaid

Social WelfareThe big Three

Old Age, Survivors, and Disability Insurance (OASDI) or Social Security

Medicare – For retired & disabled people Medicaid – For low income

Social Welfare

Both SS and Medicare are controversial policies. The problems with funding them cut across several aspects of the policy-making process.

Foreign & Military Policy

The Constitution’s ambiguous definition of the foreign policy powers invites conflict

Defense Budget

Taxes fund the military Privatization of some functions 2009 - $655 billion China - $70 billion & Russia - $50

billion

Figure 20.1: Trends in Military Spending (in constant dollars)

Source: Office of the Under Secretary of Defense (Comptroller), "National Defense Budget Estimates for FY 2003."

Environmental Policy

Environmentalists v. energy producers Protection v. costs Rachel Carson – Silent Spring

Figure 16.2: History of the National Debt

President as Chief Diplomat

1. In charge of foreign policy 2. Appoints ambassadors 3. Executive agreements 4. Negotiates treaties 5. Recognition of foreign

governments

A. Senate must approve appointments

B. Senate must approve treaties (2/3)

President as Commander in Chief

1. Civilian authority over the military

A. War Powers Act 1973

B. Congress declares war