Unit 6: Public Policy Questions

1. In the past what was the US governments major source of revenue?

1. Tariffs and excise taxes were the major sources of federal revenue.
2. income tax of 2% passed in 1894 was ruled unconstitutional by upreme !ourt since it was
not proportional to state populations """# passa$e of 1%th &mendment in 191' struc( down the
proportionality clause.
2. Most recently what is the US governments major source of revenue?
&. )irect benefit payments to individuals * also (nown as transfer payments +oc. ecur.,
-edicare, -edicaid, etc../ 04%. 1ondiscretionary2mandatory
3. 1ational defense/ 2%%. )iscretionary.
!. 1et interest/ 9%. 1ondiscretionary2mandatory.
). 1ondefense discretionary +$rants to states, federal operations, etc../ 11%
3. What are Entitlements?
4ntitlements are federal money that is/ 1. provided to those who meet
eli$ibility re5uirements and 2. is automatically spent each year without
con$ressional review. 4ntitlement account for more than 22'rds of the
federal $overnment bud$et666
!. What are some e"am#les of Entitlement #rograms?
ocial ecurity, -edicare, -edicade, &)7!, etc.
5. What is deficit spending?
&. 3ud$et deficit/ incurred when $ovt. expenditures exceed income durin$ a one year
period. 7or fiscal 2889, the deficit is projected to be 91.8 trillion6666
3. 1ational +public. debt/ amount owed by fed. $ovt. "" accumulation of past bud$et deficits.
!. :u$e bud$et deficits durin$ the 1988;s +#9288 billion per year. """# national debt tripled
from 91 trillion to 9' trillion durin$ the 1988;s. Tax cuts and increases in defense
spendin$ were amon$ the main causes. !urrently, national debt is at
91% trillion dollars666
). )eficit spendin$ is simply operatin$ a $overnment bud$et while under a deficit. 3orrowin$
and raisin$ the <debt ceilin$ are constant occurances. =nterest owed on the debt is a
major public policy liability.
$. What is %iscal &olicy?
Fiscal policy are taxing and spending considerations -- budget matters. Fiscal policy is
conducted by Congress and the President.
'. What is Monetary &olicy?
Monetary policy is the regulation of the money supply by Federal Reserve Board (the
Fed! ad"usting interest rates to increase or decrease inflation.
(. What is the #ush for the )alance* )u*get amen*ment a)out?
1. :i$h deficits have led some to believe that !on$ress needs to be >tied down> to a
constitutional amendment that would re5uire that spendin$ not exceed income.
2. upporters say that this is the only way to end the >spendin$ bias> of !on$ress, and
that it is the only way to overcome the political difficulties of cuttin$ spendin$.
'. ?pponents say that such an amendment would be >tin(erin$> with the !onstitution,
that it would decrease needed flexibility in times of crisis, and that !on$ress would fi$ure out a
way of evadin$ the amendment anyway.
4. This amendment was proposed in !on$ress, but was voted down by the :ouse in
1992.
0. The line"item veto could have precluded the need for such an amendment, i.e., the president
could have deleted wasteful spendin$ with >the stro(e of a pen.>
9. Proponents for regulation believe?
1. @revents unhealthy monopolies and oli$opolies as existed in =ndustrial Aevolution.
2. @rotects consumers from unsafe and unhealthy products.
'. @rotects consumers from unsafe practices, e.$., airline re$ulations that prevent
pilots from flyin$ excessive hours, federal airline inspections, etc.
4. @rotects wor(in$ people from unsafe wor(in$ conditions.
0. @rotects those +e.$., poor, consumers. who lac( stron$ voice in $ovt. >Bevels out
the playin$ field> with $iant corporations.
10. Opponents against regulation believe?
1. 1ot needed "" -ar(et forces will compel businesses to wor( for the benefit of
consumers. =f businesses don;t, consumers will simply buy elsewhere.
2. Ae$ulation is inefficient. 3usinesses have to hire hordes of people to comply with
the endless re$ulations imposed by Cashin$ton. This ma(es D.. business less
competitive with the rest of the world, which is not overburdened by such re$ulations.
'. Ae$ulation (ills jobs. 3ecause it lessens our competitiveness with the rest of the
world, we lose business +and the jobs that come with it. to other nations.
4. Ae$ulation increases prices. !omplyin$ with re$ulations costs moneyE these costs
are then passed on to the consumers in the form of hi$her prices.
0. Ae$ulations have become increasin$ly unreasonable, e.$., farmers are denied the
use of their lands because a rodent on the endan$ered species list lives there, lo$$ers lose their
jobs because the spotted owl nests in forests that would otherwise be open to lo$$in$, property
owners are prevented from developin$ property because it includes some federally"protected
>wetlands.
11. What are subsidies? What are the four types?
#ubsidies are governmental financial support. Four types of subsidies
include$
&. !ash, e.$., Temporary &ssistance for 1eedy 7amilies +T&17..
3. Tax incentives, e.$., home mort$a$e interest payments are tax deductible.
!. !redit subsidies, e.$., Feterans; &dministration home loans.
). 3enefit"in"(ind subsidies/ non"cash benefits, e.$., food stamps, -edicaid,
-edicare.
11.What is the purpose of subsidies?
ubsidies are provided by fed. $ovt. to encoura$e a particular type of private sector
action.
&. 4xample/ the $ovt. has encoura$ed home ownership by ma(in$ mort$a$e interest tax
deductible. =n other words homeowners have been >subsidiGed> by the $ovt.
3. -ost people associate subsidies with welfare pro$rams for the poorE actually, most subsidies $o
to people in the top half of the nation;s income distribution. -any subsidies, in fact, $o to
corporations, leadin$ liberals to criticiGe such >corporate welfare.> 4xample/ tax brea(s for
pharmaceutical companies with operations in @uerto Aico.
12.What are the five stages of the Public Policy Process?
1. Recognizing the problem/agenda setting " &lmost no policy is made unless and until a need is
reco$niGed. -any different $roups and people may brin$ a problem or issue to the $overnmentHs
attention throu$h interest $roup activities or court cases. @eople within the $overnment itself have
their own a$endas that they push, includin$ the president, bureaucratic a$encies, and members of
!on$ress. ?f course, these sources do not a$ree on which issues are most important, so $ettin$ the
$overnment to set an a$enda that prioritiGes problems is 5uite a challen$e.
2. Formulating the policy " =f enou$h people a$ree that $overnment needs to act, then a plan of
action must be formulated. &t this sta$e, $enerally several alternative plans from various political
$roups are formed. 7or example, if the issue is $un control, interest $roups from both sides will push
for different solutions, and reachin$ a solution almost always involves compromise all around.
'. Adopting the policy " =n this third sta$e, the policy becomes an official action by the $overnment.
=t may ta(e the form of le$islation, an executive or bureaucratic order, or a court decision. @olicy is
often built in a series of small steps passed over time, so this sta$e may be 5uite complex.
4. mplementing the policy " 7or an adopted policy to be effective, $overnment must see that it is
applied to real situations. 7or example, if new $un control laws are set in place, $overnment officials
must ma(e sure that the $eneral public (nows about them. They must also put enforcement in place
and see that violators are punished appropriately.
0. !"aluating the policy " 4valuation of the $ood or the harm created by a policy usually ta(es place
over an extended period of time. @olicies that may seem sound at the start may have unforeseen
negative consequences or unexpected costs. Inevitably, some will call for changes and/or
corrections, and others will disagree. The whole process occurs again, starting with recognition - or
re-recognition of the problem. As a result, policymaing is a continuous process, and $overnment at
any $iven time is at various sta$es with numerous issues.