Domestic Policy
Policy Areas
(Economic, Business,
Environment, Health
Care)
Economic Policy
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2 Types of Economic Policy:
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Fiscal: taxing/spending considerations (Conducted by
Congress/President)
Monetary: regulation of money supply by “the Fed” (adjust
interest rates)
Developments in economic policy:
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Industrial Revolution’s excesses led Congress to make greater use
of regulatory powers (e.g., breaking up trusts, regulating meat and
drugs, regulating rates of the R.R.)

Great Depression led to greater regulation of economy
(unemployment, bank failures demanded aggressive action)
Economic Approaches

Keynesian economics (John Maynard Keynes)
 Gov’t can manipulate the economy through spending;
Increase spending in hard times to stimulate the
economy; decrease in good times

Supply-Side economics (Reagan ‘81-’89)
 Cuts in taxes will produce business and individual
investment which will compensate for lost tax revenue
(Reagan cuts taxes, but increased spending)

Monetarism (The Fed)
 Monetary policy; not fiscal policy is most important for
guiding economy of nation; control of money supply through
adjustment of interest rates stimulate or tightens spending
Modern Developments
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Push for balanced budget amendment (GrammRudman; 1985)
“Paygo” passed in the early 1990’s (Clinton)
Expiration of “paygo” and war on terrorism in early
2000’s leads to huge budget deficits
Trade policy
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Increasing trade deficits (China; Rising oil prices)
Outsourcing of jobs (loss of U.S. jobs)
Push for free trade; rather than for tariffs
• NAFTA
• CAFTA
Regulation
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Antitrust policies in early 20th C. designed to break up monopolies
and restore competition. (Standard Oil controlled 90%)
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Recent Developments
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Less regulation during Reagan/Bush
Corporate mergers have exploded to be competitive w/ foreign
competition (e.g, AOL Time-Warner)
Collapse of subprime mortgage has led to call for re-regulation
Arguments For


Working conditions; safety of products; eliminate bribery
Protects consumers/workers; protects those w/o “voice”
Arguments Against
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Markets will work for benefit of consumers; kills jobs; increase in prices
Deregulation
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Airlines

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Regulated before 1978; controlled rates/fares
Congress deregulated industry by allowing competition
• Some airlines could not compete
• Smaller cities lost service
• Airlines cut services/but lowered fares
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Telecommunications
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Telecommunications Act of 1996
• Companies could offer all services (phone, cable, internet)
• Provided for regulation of internet content (struck down by S.C.)
• Allowed for V-chip controls for parents
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Evaluation
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Restores competition?
Encourages innovation
Lower prices for consumers
Problem: Companies have to deal w/ state regulations that may be different
Environmental Policy
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Environmental policy affected by federalism
Key issue: Extent of protection vs. costs of protection (competing
interests)
Key legislation
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National Environmental Policy Act (1969); Air Quality Act(1967); Clean
Water Acts (1970’s); EPA (1970); Superfund (1980)
Three types of policy
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Entrepreneurial (Clean Air Acts; only businesses or state pays cost)
Majoritarian (Increase in gas tax; everyone benefits)
Client Group (Superfund; ANWAR; people pay; oil companies benefit)
Question: Which type of policy is Endangered Species Act? (Spotted
Owl vs. Logging)
Health Care
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Private health care
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Problems
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Traditional approach: fee for service; paid for by insurance
HMO’s: health maintenance organization
Rising costs, uninsured, high cost of malpractice, paperwork,
unnecessary procedures, lack of flexibility
Reforms
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Single payer (socialized medicine), requiring coverage by
employers or require people to buy health insurance
Competition across state lines (Conservative)
Voucher system (Paul Ryan)