Public Policy, Economic Policy,
and Social Welfare Policy
Michael R. Baysdell
PS 123 U.S. Government
Saginaw Valley State University
The Policy Making Process
 The most important decision affecting policymaking is deciding what belongs on the political
agenda.
 Shared beliefs determine what is legitimate for the
government to do.
 Legitimacy is affected by…
 a) Shared political values
 b) Weight of custom and tradition
 c) Impact of events
 d) Changes in the way that political elites think
and talk about politics
Increasing Gov’t Sphere
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People believe that government should continue to do what it is doing now.
Changes in attitudes and events tend to increase government activities.
Government growth cannot be attributed to one political party.
May also be enlarged without public demand and even when conditions are
improving (Medicare Part B)
 Groups are a motivating force in adding new issues
 (1) May be organized (e.g., corporations) or disorganized (urban
minorities)
 (2) May react to a sense of relative deprivation--people’s feeling that they
are worse off than they expected to be Examples: unions and factory
regulation; the black riots of the 1960s
 (3) May change the values and beliefs of others; example: the white
response to urban riots
Institutions Add New Issues.
 Courts make decisions that force action by other branches: school
desegregation, abortion
 (ii). Change the political agenda and rearrange political forces
 (iii). Courts facilitate change when there is no popular majority.
 Bureaucracy is a source of political innovation
 (ii). Professionalization of reform
 (iii). Forms alliances, especially with senators and their staffs
 Senate
 (i). More activists than ever
 (ii). Source of presidential candidates with new ideas
 Media
 (i). Helps place issues on political agenda
 (ii). Publicizes issues placed there by others, e.g., safety standards
proposed by Senate
 c) Summarize public opinion dynamics:
Summary of Public Opinion Dynamics
 Popular attitudes chance slowly, unless they
are spurred by critical events.
 Elite attitudes are more volatile and more
interdependent with government actions.
Costs and Benefits
 Costs and benefits of a proposed policy provide a way to understand how an
issue affects political power.
1. Cost: any burden, monetary or nonmonetary that some people must, or
expect, to bear from the policy
2. Benefit: any satisfaction, monetary or nonmonetary that some people must,
or expect, to receive from the policy
3. Two aspects of costs and benefits are important.
a) Perception of costs and benefits affects politics
b) People consider whether it is legitimate for a group to benefit.
4. Politics is a process of settling disputes over who benefits/pays and who
ought to benefit/pay—so ideas and values are as important as interests.
5. People prefer programs that provide benefits to them at low cost.
6. Perceived distribution of costs and benefits shapes the kinds of political
coalitions that form, but does not necessarily determine who wins.
Case Study: Business Regulation
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Majoritarian politics
1. Antitrust legislation in 1890s
a) Public indignation strong but unfocused
b) Legislation vague; no specific enforcement agency
c) Sherman Act (1890)
2. Antitrust legislation was strengthened in the twentieth century.
a) Presidents took the initiative in encouraging its enforcement.
b) Politicians, business leaders were committed to a strong antitrust
policy.
 c) Federal Trade Commission (created in 1914)
 d) Clayton Act (1914)
 e) Enforcement was determined primarily by the ideology and personal
convictions of the current presidential administration, not by interest group
activism.
 Entrepreneurial Politics: 1906 Pure Food and Drug Act, 1970s Clean Air Act
Business Regulation Cont’d
 Interest group politics: Labor-management conflict
 a) 1935: labor unions seek government protection for
their rights; business firms in opposition
 (1) Unions win.
 (2) Wagner Act creates National Labor Relations Board
(NLRB).
 b) 1947: Taft-Hartley Act a victory for management:
permits states to pass right-to-work law
 c) 1959: Landrum-Griffin Act another victory for
management: requires secret ballot union elections, union
financial reports
 Client Politics: Licensing of doctors, lawyers, barbers—
restricts entry and allows members to charge higher rates
Deregulation
 Idea: governmental regulation was bad in
industries that could be competitive
 Example: airline fares, long distance
telephoning, trucking
 A challenge to iron triangles and client
politics
Economic Policy (Ch. 16)
 Both the deficit and the balanced budget have led to policy debates.
 1. Republicans wanted to return the 1999 surplus to the public, while
Democrats wanted to use it for new programs.
 2. Both goals were served
 a) Republicans: Economic Growth and Tax Relief Reconciliation Act
of 2001, one of only three large tax cuts since WWII
 b) Democrats: Tax cuts end on 2010; and spending was increased
to many federal programs
 3. Economic forecasts are always uncertain – see that September
11th attacks and subsequent military actions had significant economic
implications
 4. In recession --according to Keynesian theory
 a) Tax revenues decrease.
 b) Spending on social programs needs to increase.
 C) This aggravates Supply-Siders and Tax-and-Spenders
Government Spending (Ugh!)
 2006 Government spending at all levels: $3 Trillion
 $10,000 for each American
 Government spending increased because of 3
events: The Great Depression, World War II, and
LBJ’s Great Society
 Governments buy everything from F-22s to toilet
paper for government buildings
 Government spending creates competition within the
private sector. EX: Lockheed “Skunk Works” F-117
 The National government gives money to local and
regional governments to spend. See next slide.
Cooperative Federalism
 Ways of Distributing $ to states:
 Grants-in-Aid: grants of federal mone to cities
(land-grant colleges too)…allows Congress to
become enmeshed in public ed. And mental health
 Block grants—fewer strings. EX: TANF
 Revenue Sharing—no strings, done away with in
1986 by Reagan
 Federal Agency Aid--FBI aid, other agency aid,
FEMA, Census Bureau
Establishing the Federal Budget
“The President proposes, and Congress disposes”
 The government’s fiscal year is Oct. 1- Sept. 30.
 1st step: President confers with his advisors and drafts a
budget to submit to Congress
 Second step: Congress accepts, rejects, or modifies.
House sets budget targets and bills are referred to
committees and subcommittees. Full house must vote,
and this process must be completed by September 15.
Process is repeated in the Senate.
 President may approve or veto the budget
 Different political parties distribute discretionary funds
VERY differently. Republicans—Military spending
Democrats--Welfare
 Now, let’s look at the results….
Mandatory and Discretionary Spending
Federal Spending
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Mandatory spending refers
to money that lawmakers
are required by law to
spend on certain programs
or to use for interest
payments on the national
debt. Includes Social
Security, Income Security,
Medicare, Debt Interest,
Veterans benefits
2%
15%
1%
16%
1%
1%
0.7%
2%
2.5%
3%
23%
8%
12%
14%
Defense
Health
Discretionary spending is
Medicare
Science, space and
technology
Income security
spending about which
Energy, natural
Social Security
government planners can
resources,&environment
Veteran’s benefits
make choices. VERY small!!
Agriculture
Administration of Justice
(Education, Employment,
Other
Transportation
Social Services,
Net interest
Education
Transportation, Justice,
Note: Because of rounding, totals may be less or greater than 100%.
Source: Statistical Abstract of the United States
Environment
Entitlements
An entitlement program is a social welfare program that
people must receive to if they meet certain eligibility
requirements.
Social Security
– Social Security is the largest category of government
spending.
Medicare
– Medicare pays for certain health benefits for people
over 65 or people who have certain disabilities and
diseases.
Medicaid
– Medicaid benefits low-income families, some people
with disabilities, and elderly people in nursing
homes. Medicaid costs are shared by the federal and
state governments.
Discretionary Spending
Defense Spending
 Spending on defense accounts for about half of the federal
government’s discretionary spending.
 Defense spending pays military personnel salaries, buys military
equipment, and covers operating costs of military bases.
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Other Discretionary Spending
Other discretionary spending categories include:
education
training
environmental cleanup
national parks and monuments
scientific research
land management
farm subsidies
foreign aid
The Budget Process
1. President submits budget.
2. House and Senate budget committees analyze the budget, with
the Congressional Budget Office.
3. Each committee proposes to its house a budget resolution that
sets a total budget ceiling and ceilings for each of several
spending areas.
4. Congress is supposed to adopt these resolutions, to guide its
budget debates.
5. Congress considers appropriations bills and sees whether they
are congruent with the budget resolution.
6. Appropriations bills cannot make big changes in the budget
because approximately two-thirds of government spending in
on entitlements.
7. Nothing requires Congress to make cuts, but the process has
made some links between spending and revenues.
8. Reagan secured large cuts in 1981, but was unsuccessful in
subsequent years.
Section Review—Federal Gov’t Spending
1. All of the following are examples of mandatory
spending except
(a) defense spending.
(b) Medicare.
(c) Social Security.
(d) Medicaid.
2. An entitlement program is
(a) a program to provide benefits paid to everyone.
(b) a program to provide benefits paid to government
employees only.
(c) a program to provide benefits to people who meet
certain requirements.
(d) a program to provide benefits to illegal aliens.
Case Study: Social Security
 Passed by liberals in 1935 as OASDI—
Constitutional by 5-4 decision
 Funded by a payroll tax paid by all workers
(deduction on paycheck). Only workers with
enough credits are eligible.
 6.2% tax on salary up to $90,000 limit
 1.45% Medicare tax on all earned income
 Medicare and Medicaid added in 1965 (health
insurance--Medicare 65+; Medicaid poor)
Problems with Social Security
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Problem: there will soon be insufficient people paying
Social Security taxes to provide benefits for every retired
person. Baby boomers aging, will retire soon and require
more health care. AARP strong influence demands policy
favorable to members.
 Solutions opposed by the public include…
a) Raising the retirement age to 70, freezing retirement
benefits, and raising Social Security taxes
b) Privatizing Social Security
c) Combine the first two reforms, and allow citizens to invest
a portion of their Social Security taxes into mutual funds
And now, Medicare Part B (Prescription Drug coverage)
makes the problem even worse.
Foreign, Defense, and Military Policy
 President is the commander-in-chief but Congress
appropriates the money
 President appoints ambassadors but Senate confirms
them.
 President negotiates treaties but the Senate must ratify
them with a two-thirds vote.
 Only Congress can regulate commerce with other nations
and declare war.
 But Americans think that the president in charge and
history confirms that belief.
 National Security Council led by Nat’l Security Advisor,
also contains Veep, Sec of State, Sec of Defense, CIA
director, Chairman JCS, Att’y General
Presidential Deployments
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(1) 1801, Jefferson sends the Navy to deal with the Barbary pirates.
(2) 1845, Polk sends troops to Mexico.
(3) 1861, Lincoln blockades southern ports and declares martial law.
(4) 1940, FDR sends destroyers to Britain to be used against
Germany (Germany was then our ally).
(5) 1950, Truman sends troops to Korea.
(6) 1960s, Kennedy, Johnson send advisors and then troops to
Vietnam.
(7) 1983, Reagan sends troops to Grenada to overthrow a pro-Castro
regime.
(8) 1987, Reagan sends the Navy to protect tankers in Persian Gulf.
(9) 1989, George H.W. Bush orders the invasion of Panama.
(10) 1990, George H.W. Bush sends forces into Saudi Arabia when
Iraq invades Kuwait.
(11) 1999, Clinton orders attacks against Serbs in Kosovo.
(12) 2001, George W. Bush sends troops to Afghanistan.
Times When Presidents were
Unable to Act Decisively:
 (1) Wilson and FDR were unable to ally with Britain before
World War I and World War II.
 (2) Wilson was unable to lead United States into League
of Nations.
(3) Ford could not intervene in Angola, to support an antiMarxist regime.
 (4) Reagan was criticized on his commitments to El
Salvador and Lebanon.
 (5) Congressional debate on Bush’s waging of Gulf War
was extended
 (6) SC struck down Truman’s 1952 seizure of steel mills
 War Powers Act makes Presidents less likely to deploy
troops
Reorganizations
 1973: All volunteer force
 National Security Act of 1947: Created Defense
Department, unified command but separate services.
Secretary of Defense, Army, Navy civilians
 Goldwater-Nichols Act of 1986: Joint Chiefs of Staff
created (uniformed head of each service, chair and vice
chair appointed by President and confirmed by Senate).
 Current JCS—Gen. Peter Pace (Marines)
 Civilian secretary is responsible for purchasing and public
affars.
Environmental Policy
 Controversial because it creates winners
and losers
 Scientific uncertainty (global warming farce)
 Difficult to impose nationally because of
different considerations—so left to states,
subject to federal control
Legislative successes
 1969. NEPA: requires impact statements
 1970, Environmental Protection Agency established
 1970, Clean Air Act passed. 90% reduction in
hydrocarbons, CO, NOx, led to catalytic converters,
elimination of lead in fuel
 1972, clean water legislation passed, EPA given mandate
to examine pesticides
 1973, Endangered Species Act passed.
 1997 Kyoto Protocol (US a signatory but not ratified)
 Now: Pollution allowances and credits serve as a
compromise between two extremes
Learning Objectives
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After reading and reviewing the material in this chapter, the student should be able to
do each of the following:
Explain how certain issues at certain times are placed on the political agenda for
action.
Define the terms “costs,” “benefits,” and “perceived” as used in this chapter.
Use the above terms to explain the four types of politics presented in the text:
majoritarian, client, interest group, and entrepreneurial, giving examples of each.
Discuss the roles played in the process of public policy formation by people’s
perceptions, beliefs, interests, and values.
Show how voters have contradictory attitudes regarding their own and others’
economic circumstances.
List and briefly explain four competing economic theories. Assess the nature and
impact of Reaganomics.
List the four major executive branch agencies involved in setting economic policy and
explain the role of each.
Analyze federal fiscal policy in terms of the text’s four categories of policy-making
politics.
Trace the history of federal government budgeting practices.
Discuss how the September 11th attacks, as well as the subsequent economic
Learning Objectives (Cont’d)
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Describe the goals of the social welfare system, and contrast its programs with those of the British in terms of
centralization.
Describe the major elements of the system, including the Social Security Act of 1935, the Medicare Act of
1965, and the abolition of the Aid to Families with Dependent Children (AFDC) program.
Explain why some welfare policies involve majoritarian politics, while others involve client politics. Give
examples and indicate the political consequences of each.
Discuss the politics of welfare reform.
List the constitutional powers of the president and compare them with the authority of Congress in foreign
affairs. Explain why the president now has a larger role than the Framers necessarily intended.
Explain why checks on the powers of the national government in foreign affairs are primarily political rather
than constitutional.
Give reasons for the volatility of public opinion on foreign affairs. Describe the problems that the president
may face, using public opinion on the Vietnam War as an example.
Explain the worldview concept and describe the containment strategy of George Kennan. Summarize
essential elements of the anti-appeasement, disengagement, and human rights worldviews.
Analyze the key allocative decisions about the defense budget. Explain how the congressional role in
deciding on weapons systems has changed in recent years.
Explain why the 1947 and 1949 Defense Reorganization Acts did not merge the armed services. Review the
present structure of the department, and explain how it contributes to inter-service rivalries. Discuss the
reforms adopted in 1986 and the challenges the services confront in fighting the war on terrorism.
Explain why the cost overrun problem is due to bureaucratic and political factors, and describe proposed
reforms of the system.
Final Objectives
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List three reasons why environmental policy tends to be so controversial and
provide examples of each.
2.
Describe the role of (a) the United States political system and (b) local
politics in shaping environmental policy. Contrast these with environmental
policy making in Britain.
3.
Describe the role of entrepreneurial politics in the government’s response
to global warming.
4.
Describe the role of majoritarian politics in the government’s efforts to
reduce automobile emissions. Explain why majoritarian politics has worked in
some cases and not others.
5.
Describe the role of interest group politics in the government’s efforts to
resolve the acid rain controversy. List proposed alternative solutions and
outline the terms of the compromise reached by Congress and the Bush
administration.
6.
Describe the role of client politics in the government’s efforts to regulate
the use of agricultural pesticides and logging in U.S. forests.