COST-BENEFIT ANALYSIS OF
FOUR TYPES OF POLICIES
 I. Cost: any burden
(monetary or non-monetary,
real or perceived), that a
group must bear, e.g.:
 A. Federal child-care
programs (taxes).
 B. Busing to achieve school
desegregation (taxes,
psychological stress).
 C. Tariffs (higher prices for
goods).
COST-BENEFIT ANALYSIS OF FOUR TYPES
OF POLICIES
II. Benefit: any satisfaction (monetary or nonmonetary, real or perceived) that a group
will enjoy from a policy, e.g.,
A. Federal child-care programs (lower child
care costs for parents).
B. Busing to achieve school desegregation
(improvement in opportunity, greater racial
harmony).
C. Tariffs (more jobs for workers, more profits
for businesses).
COST-BENEFIT ANALYSIS OF FOUR TYPES
OF POLICIES
III. Costs and benefits can be either widelydistributed (to many, most, or all citizens) or
narrowly-concentrated (for a relatively small
number of citizens or groups). Examples:
A. Widely-distributed costs: income tax, Social
Security tax, farm subsidies.
B. Narrowly-concentrated costs: factory air
emission standards, higher capital gains taxes for
the wealthy, gun control regulations).
C. Widely-distributed benefits: Social Security
benefits, strong national security, clean air, federal
highways.
D. Narrowly-concentrated benefits: farm
subsidies, tariffs, exemption from antitrust
legislation.
COST-BENEFIT ANALYSIS OF FOUR TYPES
OF POLICIES
IV. Four types of policies:
A. Majoritarian policies.
1. Involve widely distributed costs and
widely distributed benefits.
2. Examples: Social Security, national
defense.
3. Analysis:
A. Usually not dominated by interest groups: virtually everyone
benefits from these, so why should an interest group use scarce
resources to lobby for policies that everyone will benefit from?
Interest groups will benefit whether or not they devote resources
to lobbying ---> lack of incentive to participate.
b. When a policy is adopted and people are convinced that
benefits are worth the cost, debate ends and the program tends
to steadily grow, and perhaps even
becomes a "sacred cow" that government dare not touch (e.g.,
Social Security).
COST-BENEFIT ANALYSIS OF FOUR
TYPES OF POLICIES
B.
Interest group policies.
 1. Involve narrowly concentrated costs
and narrowly concentrated benefits.
 2.Examples: tariffs, antitrust
exemptions.
 3. Analysis: these tend to be fought
over by interest groups: the affected
parties are small enough, and the
potential costs and benefits are great
enough, to warrant interest group
participation.
COST-BENEFIT ANALYSIS OF FOUR TYPES
OF POLICIES
C. Client policies.
1. Involve widely distributed costs and narrowly
concentrated benefits.
2. Examples: farm subsidies, airline or trucking
regulation, pork barrel bills.
3. Analysis:
 a. Strong incentive for interest groups to participate.
Groups will receive the benefits, but the costs will be
spread out to everyone.
 b. Since costs are so widely distributed and therefore
relatively small to each consumer, cost payers are
sometimes unaware that they are even paying the
costs (e.g., dairy subsidies).
 c. Since interest groups benefit so much from these,
they are said to be a "client" of the related federal
agency – client groups.
COST-BENEFIT ANALYSIS OF FOUR TYPES
OF POLICIES
 D. Entrepreneurial policies.

 1. Involve narrowly concentrated costs and widely






distributed benefits.
2.Examples: consumer product safety legislation,
ending farm subsidies, deregulation.
3. Analysis:
a. Strong incentive for potential cost-paying
group to participate.
b. Prospective beneficiaries may find widely
distributed benefits too small to work hard for.
c. Because of a and b, policies of this
category are often defeated by the concerted
efforts of cost-paying interest groups.
d. Despite this, such policies are from time to
time passed through the strong efforts of people
who act on behalf of the unconcerned or unaware
---> these are called policy entrepreneurs (e.g.,
Ralph Nader).
TAXING AND SPENDING
I. Sources of federal revenue.
A. In the past:
1. Tariffs and excise taxes were the major sources of federal revenue.
2. Income tax of 2% passed in 1894 was ruled unconstitutional by
Supreme Court since it was not proportional to state populations --->
passage of 16th Amendment in 1913 struck down the proportionality
clause.
B. Presently (2007 figures):
1. Individual income taxes (progressive taxes): 43% of all federal
revenue.
2. Social insurance (payroll) taxes (regressive taxes): 32% of all federal
revenue.
3. Corporate taxes: 13% of all federal revenue.
4. Excise taxes: 2% of all federal revenue.
5. Borrowing: 6% (this has risen due to resumption of deficit spending)
Other: 4%
TAXING AND SPENDING
II. Where the money is spent (2009 figures): fed. spending is ~
$3.5 trillion
A. Direct benefit payments to individuals – also known as transfer
payments (Soc. Secur., Medicare, Medicaid, etc.): 54%.
Nondiscretionary/mandatory
B. National defense: 26%. Discretionary.
C. Net interest: 9%. Nondiscretionary/mandatory.
Nondefense discretionary (grants to states, federal operations,
etc.): 11%
III. Entitlements ("uncontrollables"): federal money that is
1) provided to those who meet eligibility requirements and
2) is automatically spent each year without congressional
review.
Some have a built in COLA, also without annual review. This in
turn creates additional budget pressures.
B. Examples: Social Security, Medicare, federal pensions, interest
on national debt.
C. These account for more than 2/3 of the federal budget --->
difficulties of bringing the budget into balance.
TAXING AND SPENDING
IV. The budget process.
A. Executive branch.
1. Agencies prepare their estimates of budget
needs and present them to OMB. Amount
requested is typically based upon the amount
granted in the previous year (plus inflation and
any additional needs).
2. OMB reviews these requests and makes
recommendations to the President.
3. President reviews OMB recommendations and
then submits a budget to Congress.
B. Congress.
1. CBO provides an independent analysis of the
President's budget -- a check on OMB.
2. Roles of Budget, Ways and Means, Finance, and
Appropriations Committees.
3. Input and lobbying from agencies.
TAXING AND SPENDING
4. Majority vote needed in both houses.
5. Government Accountability Office (GAO) is a congressional
watchdog agency that ensures money is spent as prescribed
by law
C. Political influences.
1. Political party differences.
2. Interest group/PAC influence.
3. Iron triangles.
4. Public opinion.
D. Presidential action.
President signs or vetoes entire taxing and spending bills – no
line item veto.
Congress can override a veto with 2/3 vote in both houses
TAXING AND SPENDING
V. Deficit-spending.
A. Budget deficit: incurred when govt. expenditures
exceed income during a one year period. For fiscal
2009, the deficit is projected to be $1.8 trillion!!!!
B. National (public) debt: amount owed by fed. govt. - accumulation of past budget deficits.
C. Huge budget deficits during the 1980's (>$200
billion per year) ---> national debt tripled from $1
trillion to $3 trillion during the 1980's. Tax cuts and
increases in defense spending were among the main
causes.
tax cut in 2001 + recession + terrorist attacks of 9/11 +
wars in Afghanistan and Iraq + end of “paygo” ended
budget surpluses ---> resumption of record-high
budget deficits
Boy, did they get that one
wrong…
TAXING AND SPENDING
 J. Current national debt
(2014): >$18.2 trillion. This
amounts to ~$57,000 for
every person in the US. In
1990s, national debt as a
percentage of GDP (define),
was less than it was in the
early 1950s. Soaring deficits
have reversed that trend.
 K. Economic crisis of 2008-09
once again led to soaring
budget deficits and therefore
a soaring national debt.
TAXING AND SPENDING
D. Failure of Congress to pass the Balanced Budget
Amendment.
E. In 1990, Cong. and Bush 41 agreed on a pay-as-you-go
(“paygo”) proposal that would allow Congress to increase
spending ONLY if that increase was offset by higher taxes
and/or spending cuts elsewhere. The “paygo” agreement,
however, expired in 2002. Its expiration helps to explain the
rising deficits since then.
F. Government shutdown in mid-90s as a result of budgetary
politics
H. Reduction of deficits under Clinton and development of
SURPLUSES ---> political differences over what to do with
these surpluses: Republicans favored tax cuts, Democrats
wanted to apply the surpluses to the Social Security System
to bolster it.
MANAGING THE ECONOMY
I. 2 types of economic policies.
A. Fiscal: taxing and spending
considerations -- budget matters. Fiscal
policy is conducted by Congress and
the President.
B. Monetary: regulation of
money supply by Federal Reserve
Board ("the Fed") adjusting interest
rates to increase or decrease inflation.
II. Developments in economic policy.
A. Constitution gave Congress power to
regulate interstate and foreign
commerce.
B. Industrial Revolution's excesses led to
Congress making greater use of
economic regulatory powers, e.g.,
breaking up trusts, regulating meat and
drugs, regulating railroads.
MANAGING THE ECONOMY
C. Great Depression of 1930s led to even greater
regulation of economy by Congress. Unemployment
rate of 25%, bank failures, farm crisis, and deflation
demanded aggressive actions.
D. Keynesian economics.
1. During Depression, New Deal was influenced by
British economist John Maynard Keynes.
2. Keynes suggested that government could manipulate
the economic health of the economy through its level
of spending. In hard times, govt. should increase
spending (even if it means running large deficits) to
stimulate economic health. In inflationary "boom"
times, govt. should decrease spending to "cool down"
the economy.
MANAGING THE ECONOMY
3. Keynes influenced passage of
Employment Act of 1946, which made govt.
responsible for maintaining high
employment rates.
4. Difficulty posed by Keynesian economics:
once govt. spending rises, it is
politically difficult to cut it (consider the
fights in recent years over entitlement
reform). This helps to explain why we have
had such high budget deficits.
5.Economic crisis of 2008-09 once again led
to Congress passing stimulus and bailout
packages in order to jump start the economy.
Keynes is not dead!
MANAGING THE ECONOMY
E. Supply-side economics.
1. Definition: cuts in taxes will
produce business investment
that will compensate for the
loss of money due to the lower
tax rates. Tax rates will be
lower, but business will boom,
unemployment will go down,
incomes will go up, and more
money will come into the
Treasury.
2. Most associated with the
Reagan Administration (19811989).
3. Unfortunately, the Reagan tax
cuts were not accompanied by
spending cuts, and the national
debt tripled from $1 trillion to $3
trillion.
MANAGING THE ECONOMY
4. Tax cuts under Bush 43 have prompted
concern that they have contributed to a rising
national debt.
F. Monetarism.
1. Whereas Keynesians suggest that the level
of govt. spending (i.e. fiscal policy) is most
important for determining the economic
health of the nation, monetarists believe that
the money supply (monetary policy) is the
most important factor.
2. Thus "the Fed" can tighten up money
supply (through adjusting interest rates) to
reduce inflation, or it can loosen up money
supply to stimulate the economy
MANAGING THE ECONOMY
III. Modern developments
A. The push for a balanced budget amendment.
1. High deficits have led some to believe that Congress
needs to be "tied down" to a constitutional amendment
that would require that spending not exceed income.
2. Supporters say that this is the only way to end the
"spending bias" of Congress, and that it is the only way to
overcome the political difficulties of cutting spending.
3. Opponents say that such an amendment would be
"tinkering" with the Constitution, that it would decrease
needed flexibility in times of crisis, and that Congress
would figure out a way of evading the amendment anyway.
MANAGING THE ECONOMY
4. This amendment was proposed in Congress, but was
voted down by the House in 1992.
5. The line-item veto could have precluded the need for
such an amendment, i.e., the president could have deleted
wasteful spending with "the stroke of a pen.“
B. “Paygo” was passed in the early 1990s -> coupled with an
expanding economy, the budget was balanced in the late
1990s.
C. Expiration of paygo and war on terrorism and in Iraq in
early 2000s led to resumption of huge budget deficits.
Economic crisis of 2008-09 led to an explosion of red ink.
MANAGING THE ECONOMY
D. Trade policy
1. Increasing trade deficits (where imports
exceed exports) caused by:
a. Expanding economy in China
Rising oil prices from our overseas suppliers
2. Trade deficits (explain) have led to calls for
protectionism (explain)
3. Offshoring -> loss of American jobs
4. However, there has been more of a push for
free trade rather than for tariffs
a. GATT
b. WTO
c. NAFTA
d. CAFTA
GOVERNMENT REGULATION
OF BUSINESS
I. Background.
A. Regulations: Rules imposed by government on
business to achieve some desired goal. (e.g., clean
air regulations on factories, protection of wetlands
and fragile environments, safety regulations in coal
mines.)
B. History of govt. regulation of business.
1. Industrial era of late-19th/early-20th
century had produced a number of "ill side
effects of capitalism:"
a. Growth of abusive monopolies and
oligopolies that unfairly drove out
competition.
b. Atrocious working conditions.
c. Unsafe and unhealthy products: The
Jungle, Silent Spring (1962: unsafe
pesticides), Unsafe at any Speed (1965:
unsafe automobiles).
d. Business bribery of politicians.
GOVERNMENT REGULATION OF BUSINESS
2. Growth of such abusive practices by
monopolies led to an antitrust policy:
a. Such policy did not necessarily mean
that all monopolies were bad. The
policy was merely to regulate or break
up the abusive ones and restore
competition.
b. Examples of such antitrust policy:
1.Sherman Antitrust Act, 1890.
2.Clayton Act, 1914.
3. Federal Trade Commission Act, 1914: FTC to
be "traffic cop" to ensure competition. Issues
cease and desist orders and negotiates consent
decrees with businesses to end unfair
practices.
3. Development of other regulatory commissions
(e.g., FCC, SEC).
GOVERNMENT REGULATION
OF BUSINESS
D. Developments in recent years.
1. FTC and Antitrust Division
intentionally understaffed by Reagan
and Bush to discourage excessive
antitrust activity.
2. Corporate mergers have exploded in
recent years (e.g., G.E. and RCA, Time
and Warner (then Time Warner/AOL),
RJ Reynolds and Nabisco, XM and
Sirius satellite radio), with little
response from the federal govt.
3. Antitrust lawsuit against Microsoft
was an exception to this trend.
GOVERNMENT REGULATION
OF BUSINESS
4. Business claims that with such strong
foreign competition, it needs to consolidate
in order to be competitive.
5. Energy crisis in early 00s led to pressure
for Bush 43 to tighten regulation of energy
markets. Bush claimed that California’s
problems were the result of its own
deregulation policy, and was therefore
reluctant to have FERC (Federal Energy
Regulatory Commission) impose price caps
6. Collapse of subprime mortgage market in
2008 and the resulting crisis has led some to
call for re-regulation of banking and finance
GOVERNMENT REGULATION
OF BUSINESS
II.
The debate over regulation.
A. Arguments in favor of regulation.
1. Prevents unhealthy monopolies and
oligopolies as existed in Industrial
Revolution.
2. Protects consumers from unsafe and
unhealthy products.
3. Protects consumers from unsafe
practices, e.g., airline regulations that
prevent pilots from flying excessive hours,
federal airline inspections, etc.
4. Protects working people from unsafe
working conditions.
5. Protects those (e.g., poor, consumers)
who lack strong voice in govt. "Levels out
the playing field" with giant corporations.
GOVERNMENT
REGULATION
OF
BUSINESS
B. Arguments against regulation.
1. Not needed -- Market forces will compel businesses to work for the
benefit of consumers. If businesses don't, consumers will simply buy
elsewhere.
2. Regulation is inefficient. Businesses have to hire hordes of people
to comply with the endless regulations imposed by Washington. This
makes U.S. business less competitive with the rest of the world,
which is not overburdened by such regulations.
3. Regulation kills jobs. Because it lessens our competitiveness with
the rest of the world, we lose business (and the jobs that come with
it) to other nations.
4. Regulation increases prices. Complying with regulations costs
money; these costs are then passed on to the consumers in the form
of higher prices.
5. Regulations have become increasingly unreasonable, e.g., farmers
are denied the use of their lands because a rodent on the endangered
species list lives there, loggers lose their jobs because the spotted owl
nests in forests that would otherwise be open to logging, property
owners are prevented from developing property because it includes
some federally-protected "wetlands."
ENVIRONMENTAL POLICY
I. Context of American environmental policy.
A. Environmental policy is affected by federalism:
Centralization/decentralization tension between
national govt. and state govts. Latter have incentive to
reduce regulations for fear that businesses will relocate to
other states, while former may want a uniform policy.
B. Key issue has not been whether or not the
environment should be protected, but the
extent to which it should be protected and the costs of
doing so. Involves a delicate balance because
environmental regulation involves so many competing
interests:
1. The public wants a clean environment.
2. Business is concerned about the extent
and the costs of regulations.
3. Workers are concerned that excessive
regulation may lead to loss of jobs, e.g.,
logging restrictions to protect the
spotted owl could lead to loss of jobs for
loggers.
ENVIRONMENTAL POLICY
II.
Key legislation.
A. National Environmental Policy Act of
1969: required environmental impact
reports (EIRs) before major construction
projects began.
B. Air Quality Act of 1967 and the various
Clean Air Acts from 1960s-1990s:
established emission standards for cars
and factories. Clean Air Act of 1990 has
esp. tough standards to which states must
comply. This is another example of
federal encroachment upon states.
C. Various Clean Water Acts of 1970s and
1980s.
D. Creation of Environmental Protection
Agency (EPA), 1970.
E. Endangered Species Act, 1973
F. CAFÉ (Corporate Average Fuel Economy)
standards established in 1975: set standards for
average m.p.g. of a manufacturer’s automobiles.
G. Creation of the Superfund, 1980, to fund the
cleanup of toxic waste dumps.
ENVIRONMENTAL POLICY
D. Client group environmental policies.
1. These involve programs that have widely-distributed
costs and narrowly concentrated benefits.
2. Example:
a. The Superfund: taxpayers pay the costs, but only the
affected communities benefit.
b. Arctic National Wildlife Refuge (ANWAR): the people
“pay” the cost of losing an environmental treasure, while
only the oil companies benefit. (Could ANWAR be
considered an entrepreneurial policy?)
- Which type of policy is the Endangered Species Act?
DEREGULATION
I. Deregulation or regulatory reform: cutting back on govt.
regulation
II. Areas that have been deregulated
A. Airlines.
1. Before 1978, the airline industry was regulated, i.e. the
Civil Aeronautics Board controlled rates and fares to
protect the industry from excessive competition. As a
result, all airlines charged the same rates and fares.
2. In 1978, Congress passed legislation that 1) led to the
phasing out of the CAB, and 2) allowed airlines to set
whatever rates and fares they wished.
3. Effects of airline deregulation:
a. Due to competition, some airlines went bankrupt.
b. Some smaller cities lost airline service as airlines found it
unprofitable to provide service to them.
c. Concern that airlines have "cut corners" in safety and
maintenance to keep up with the cutthroat competition.
d. On the up side, rates and fares have come way down, and
more people are able to travel by air than before.

DEREGULATION
B. Telecommunications: Telecommunications
Act of 1996
Phone, cable, and other communication
companies were allowed to compete in the others’
core businesses, e.g., local telephone companies
could offer cable t.v. services.
Act also provided for regulation of Internet
content (later overturned by S.C.)
Act also required that TV makers install “V-chip”
allowing parents to block objectionable
programming.
DEREGULATION
III. Evaluation of deregulation: positives:
Restores natural market forces in pricing,
efficiency, resources.
Encourages competition.
Encourages technological innovation.
Prevents government agencies from being
“captured” by the businesses they are supposed
to regulate.
Lower costs for industry, and lower prices for
consumers.
IV. Negatives: See previous notes on Govt.
Regulation of Business. In addition: Due to our
federal system, states will continue to regulate
business. This produces even more confusion:
Under national regulation, there was generally
only one set of regulations; now, with
deregulation, companies may have to deal with
50 different sets of regulations.
GOVERNMENT SUBSIDIES
I. Definition: governmental financial support.
Main types of subsidies:
A. Cash, e.g., Temporary Assistance for Needy
Families (TANF).
B. Tax incentives, e.g., home mortgage interest
payments are tax deductible.
C. Credit subsidies, e.g., Veterans'
Administration home loans.
D. Benefit-in-kind subsidies: non-cash
benefits, e.g., food stamps, Medicaid, Medicare.
GOVERNMENT SUBSIDIES
II. Purpose of subsidies: to encourage a
particular type of private sector action.
A. Example: the govt. has encouraged
home ownership by making mortgage
interest tax deductible. In other words
homeowners have been "subsidized" by the
govt.
B. Most people associate subsidies with
welfare programs for the poor; actually,
most subsidies go to people in the top half
of the nation's income distribution. Many
subsidies, in fact, go to corporations,
leading liberals to criticize such "corporate
welfare." Example: tax breaks for
pharmaceutical companies with operations
in Puerto Rico.
GOVERNMENT SUBSIDIES
III. The politics of subsidies.
A. Most Americans complain about subsidies;
however, most of them also receive them in one
form or another.
B. Once subsidies are established, they are
extremely difficult to eliminate. "Iron triangles
(remember these?) or issue networks develop and
work quite hard to keep the subsidies. Some
subsidies even become "sacred cows;" woe to the
member of Congress who votes against these!
Social Security, for example, is “3rd rail of Amer.
Politics:” touch it & you die.
C. Another reason subsidies are hard to eliminate
is that they are often difficult to "see."
The dairy industry, for example, receives heavy
subsidies for milk production, yet few people
seem to be aware of this. If consumers are not
even aware of the subsidies, how can they even
complain?
GOVERNMENT SUBSIDIES
IV. Subsidies that promote commerce.
A. Examples of subsidies to business and
industry.
1. Oil companies receive tax breaks to
encourage oil production and make us less
dependent on foreign oil.
2. Airlines received billions in federal aid after
the 9/11 terrorist attacks. A federal agency
took over United Airlines pension program in
2005.
3. Bank and auto company bailouts in 2009
GOVERNMENT SUBSIDIES
B. Examples of subsidies to agriculture: The federal
govt. today provides loans and cash payments to farmers
("price support payments"), and in some cases pays
farmers to not grow crops to prevent surpluses.
Criticisms of these subsidies:
1. Though these are supposed to help farmers, much
(30%) of these subsidies go to huge "agribusiness" firms,
leading once again to charges of "corporate welfare."
2. Consumers end up paying higher prices for food, yet
so much of the subsidies go not to the small farmers, but
instead agribusiness.
V. Social welfare subsidies.
A. Major social welfare programs:
Social Security: for elderly, survivors, and disabled
(OASDI). No means test, i.e., one does not have to prove
that one lacks the means in order to qualify for benefits.
In other words, one does not have to have a low level of
income to qualify for these benefits. Even upper income
people qualify for benefits if they fall into one of the
three categories. Financed by FICA (Federal Insurance
Contribution Act) payroll tax: 6.2% of first $102,000 of
earnings (and same from employer).
.
GOVERNMENT SUBSIDIES
2. Medicare: Federal medical coverage for the elderly. Financed
by payroll tax of 1.45%.No means test.
3. Unemployment insurance: Payments to the unemployed. No
means test.
4. Temporary Assistance to Needy Families (TANF): Payments
to poor families with children. The program that most people
are talking about when they discuss the "welfare system."
Means test.
5. Supplemental Security Income (SSI): Cash payments to
disabled people whose income level is below a certain amount.
Means test.
6. Food stamps: Coupons given to the poor in order to buy
food. Means test.
7. Medicaid: Federal medical coverage for the poor on TANF or
SSI. Means test
GOVERNMENT SUBSIDIES
B. Two kinds of welfare policies.
1. Majoritarian policies: Everybody benefits from these, and everybody pays (e.g.,Social Security). Often become
politically popular; "sacred cows" at times.
2. Client policies: Relatively few people benefit, but everybody pays (e.g., TANF). Can you see why there is such
widespread resentment?
The Social Security problem.
1. Demographic problems.
a. Increasing birth rate during Baby Boom era.
b. Declining birth rate since then.
c. Increasing life expectancy, esp. due to medical improvements
d. These two factors have created the following situation: When Social Security began in 1935, there were 16 people
working for every Social Security recipient. Now there are just 3, and by the year 2020 there are projected to be only 2!
What is now a huge surplus in the S.S. Trust Fund will decline to the point at which, unless something is done, more
money will be going out than coming in. These realities have led some to propose reforms for Social Security:
1) Increasing the age of recipients from 65 to 67or 70
2) Adopting means testing for recipients
3) Reducing the annual "COLA" (cost of living adjustment) for recipients, i.e., reducing the annual benefits increase
4) Reducing benefits for recipients.
5) Increasing the amount of income (currently ~$97,500) that is subject to Social Security tax.
6) Privatizing part of Social Security deductions, i.e., allowing citizens to earmark part of their Social Security
contributions to their own choices of investments in hopes of earning greater returns.
GOVERNMENT SUBSIDIES
E. Welfare has become a huge political issue for the two parties:
1. Republicans linked the "welfare mess" to various social
pathologies, e.g., a higher illegitimacy rate, a higher rate of singleparent families, higher crime rate, drug problems, etc. They stressed
welfare reform and claimed that the Democrats had blocked their
efforts at reform.
2. Given this political climate, even Democrats stressed the
importance of welfare reform. President Clinton promised to "end
welfare as we know it," and signed a huge welfare reform bill in 1996
(Personal Responsibility and Work Opportunity Reconciliation Act)
that was passed by the Republican Congress! Some of the bill's
highlights:
a. Ended the federal entitlement status of various welfare programs.
More state authority. Funded by federal block grants and matching
state funds. Note the impact of federalism.
b. Limited welfare payments to no more than five years.
c. Welfare recipients must work within two years of applying for
benefits.
d. Required food stamp recipients to work.
e. Prohibited aliens (legal or illegal) from receiving various welfare
benefits. (Later changed – legal aliens may receive welfare benefits)
f. Required teen mothers to live with parents and attend school in
order to receive welfare benefits.
3. Welfare rolls declined by 60% between 1996-2004
HEALTH CARE POLICY
I. A mostly private health care system
Traditional approach: fee for service. Paid for by insurance (3rd
party payer).
Rising costs of health care -> HMOs: Health Maintenance
Organizations
II. Federal involvement with health care
Medicare (a prescription drug benefit for Medicare patients was
added during the first Bush 43 administration).
Medicaid
Research efforts
III. Problems w/health care
Rising costs
Uninsured. Working poor and unemployed unable to afford
health insurance
High cost of malpractice insurance because of increased
litigation
Unnecessary procedures, esp. to protect physicians from risk of
lawsuit, e.g., growing number of caesarian sections.
Endless paperwork from fed. govt. and insurance companies
Lack of flexibility and choice with HMOs
HEALTH CARE POLICY
IV. Health care reform
An early priority of Clinton, who appointed Hillary to
head a task force on health care
Various proposals
 Single payer, i.e., socialized medicine
 “Managed competition.” Use of HMOs to accomplish
“cost containment.” Problems of HMOs -> desire for
“HMO patient’s bill of rights.”
 Requiring coverage from employers.
 Abolishing employer provided coverage and requiring
people to buy health insurance individually
C. This is a major policy concern for Obama. One of his
priorities is to insure those who are currently without
health care insurance.
Reasons for failure of major health care reform
Reaction against Hillary’s task force
Added expenses imposed upon citizens
Congressional gridlock
Tainted with “socialized medicine.”
Interest group pressure
Contributions to members of Congress
EDUCATION POLICY
I. Impact of federalism
Education is largely run by state and local govt. Impact
of 10th Amendment
However, federal government has also taken some
involvement by attaching “strings” to federal education
grants to the states. States don’t have to take the money,
but if they do, they must comply with those federal
requirements
II. Important federal education legislation.
Head Start program for disadvantaged preschool-age
children, 1964
Elementary and Secondary Education Act, 1965: funding
for disadvantaged students
Title IX of Education Act of 1972: banned sex
discrimination in federally funded education programs
Individuals with Disabilities in Education Act, 1975

.
EDUCATION POLICY
 Even though states are not required to
participate, the act makes funds available to
states that adopt at least the minimum policies
and procedures specified in the IDEA regarding
the education of children with disabilities.
 When passed, federal government was supposed
to pay for 40% of the cost of educating students
with disabilities. However, Congress has yet to
provide all of this 40%. As of 2007, the federal
government pays for only about 12% of special
education costs.
No Child Left Behind Act of 2001: In order to receive
federal funds for education, states must:
1. Adopt subject matter standards
Test all students in grades 3-8 on those standards
Identify low-performing schools based upon that
testing
Require low-performing schools to develop
improvement plans
Allow parents of students in such schools that do
not improve to transfer to other public schools
ALL students must be proficient in state standards
by 2014
MAKERS OF FOREIGN POLICY
I. Key foreign policy players.
A. Foreign policy is a shared responsibility of the President and
Congress. System of checks and balances applies, e.g., war
(Cong. declares, but Pres. is Comm. in Chief), treaties (Pres.
makes them, but Senate ratifies), appointments (Pres. makes
them, but Senate approves them).
B. Despite shared responsibilities, the President is primarily
responsible for foreign policy (U.S. v. Curtiss-Wright), and has
extensive support within the executive branch:
1. Secretary of State: Cabinet official responsible for foreign
affairs.
2. Other Cabinet officials: Since foreign policy affects domestic
policy, other Cabinet officials (e.g., Commerce, Treasury,
Defense, Agriculture) also have inputs.
3. National Security Council (NSC)
a. Coordinates policies that affect national security.
b. Members include Pres., V.P., Sec. St., Sec. Def., CIA head,
National Security Adviser, and others.
c. National Security Adviser has emerged as a key player who
sometimes has more influence than the Sec. of St., e.g., Henry
Kissinger was Nixon's National Security Adviser who had great
influence with the President. Presidents may rely more upon
the NSA because he is literally "closer " to the Pres. (office in the
White House) and his loyalties are not divided between the
Pres. and a Cabinet Dept. (as with the Sec. of St.)
MAKERS OF FOREIGN POLICY
4. Dept. of Homeland Security: to coordinate anti-terrorism efforts
5. State Department and its Foreign Service: responsible for day-today management of foreign policy.
6. U.S. Information Agency: propaganda agency that includes Voice
of America and Radio Free Europe.
7. Director of National Intelligence: new position that has
responsibilities for overseeing all 15 intelligence agencies.
8. CIA.
a. Functions: gather and evaluate intelligence, i.e., information
about other nations.
b. Created in 1947 to monitor the Soviet threat. Fall of communism
since 80s has led the agency to branch out into other areas, e.g.,
international drug trafficking, terrorism, nuclear proliferation.
c. Agency's covert operations (e.g., helped overthrow govts. in Iran
and Guatemala in 1950s) have led to some concern about govt.
secrecy in a democracy. Can these two co-exist?
D. This concern has led to the creation of intelligence oversight
committees in both the House and Senate.
E. Terrorist attacks of 9-11 renewed the call for a stronger and more
effective CIA.
f. Obama administration released memos regarding use of CIA
torture during Bush administration
MAKERS OF FOREIGN POLICY
9.
NSA: huge cryptologic and surveillance
organization
II.
Influences on foreign policy.
A. Public opinion.
1. Mass public (75%) relatively unaware of
foreign policy, except during crisis.
2. Attentive public (20%) aware and
interested.
3. Opinion makers (e.g., journalists, govt.
officials, "think tank" researchers,
professors) aware and influence the
other two publics.
B. Interest groups.
1. "Think tanks" such as RAND and Council
on Foreign Affairs.
2. Ethnic organizations, e.g., American Arab
Anti-Discrimination Committee, AmericanIsraeli PAC ("Jewish Lobby”).
MAKERS OF FOREIGN POLICY
C. Foreign nations' lobbyists.
1. Many nations hire lobbyists to represent their
interests in Washington.
2. This issue led people like Ross Perot to blast the
government for listening to lobbyists of foreign
nations who obviously do not have the best interests
of the U.S. in mind.
D. Political parties.
1. The tradition has been for the U.S. to have a
bipartisan foreign policy, i.e., one that is united and
not torn apart by party squabbling (“Politics ends at
the water’s edge”). For example, both political
parties supported containment of communist
aggression after World War II, both supported the
Vietnam War, both supported the Gulf War, both
supported the war on terrorism and (initially) the
war in Iraq
MAKERS OF FOREIGN POLICY
 E. Congress.

 1. Key congressional "checks" on the
President: funding, war declaration,
ratification of treaties, approval of
appointments. Key role of Senate
Foreign Relations Committee for
oversight of foreign affairs.
 2. The trend in the 20th century has
been to give the President great
discretion in the area of foreign affairs
(Remember the "imperial presidency"
thesis?); however, there have been
some notable instances of Congress
asserting its authority in foreign
affairs:
 a. Senate blockage of the Treaty of
Versailles after World War I.
MAKERS OF FOREIGN POLICY
B. Neutrality Acts of the 1930s that tried to prevent U.S.
involvement in foreign conflicts.
c. Senator Fulbright's hearings on the Vietnam War in the
1960s that raised doubts about U.S. involvement in the war.
d. War Powers Act of 1973. (Remember?)
e. Congressional refusal to commit troops to Vietnam after N.
Vietnam broke the peace accords in 1975.
f. Some opposition to U.S. involvement in the Gulf War of
1990-91
g. Senate rejection of Comprehensive Test Ban Treaty in
1999.
h. Some criticism of giving MFN status to China
i. Some criticism of Bush’s security measures after 9/11
terrorist attack
j. Increasing criticism against war in Iraq by 2006 – Congress
passed bill in April of 2007 to set a deadline for withdrawal of
US forces from Iraq by 2008.
k. Some in Congress have called for a “truth commission” to
investigate human rights abuses by US during war in Iraq
and Afghanistan.