Chapter 13

Domestic and

Economic Policy

Five Steps in the Policy Making Process

• agenda building -- identifying a problem and getting it on the agenda

• agenda formulations – the debate that occurs between government officials, and between the public in the media, and in campaigns

• agenda adoption – the selection of a strategy for addressing a problem

• agenda implementation – the administration of the selected policy (by bureaucrats, the courts, etc.)

• agenda evaluation – when the public, officials and groups determine if the selected policy has the desired impact

Defining Poverty

• low income poverty threshold in 2000 was $17,500 for a family of four

• the poverty level has changed since then to account for changes in the consumer price index, which enables the government to adjust the poverty level by taking into account changes in prices of goods and services

• the official poverty level is based on pre-tax income, but does include in-kind subsidies, like food stamps and subsidized housing

Major Government Assistance Programs

• Temporary Assistance to Needy Families (TANF) –replaced AFDC in

1996, this program uses federal funds which are administered by the states to help needy families.

• Supplemental Security Income (SSI) – provides a minimum income to the elderly and disabled who do not qualify for Social Security benefits.

• Food Stamps – these coupons that can be used to purchase food are now distributed to more than 28 million Americans with little or no income

• Earned Income Tax Credit (EITC) – a tax credit used by low income workers who get back part or all pf the their Social Security taxes

Economic Policy Making

• Fiscal Policy – the use of changes in government spending or taxation to change national economic variables, like the unemployment rate

•Keynesian Economic Theory posits that using fiscal policy can alter economic variables (increasing government spending during economic turn downturns, for example)

• Monetary Policy – the use of changes in the money supply to change credit markets, unemployment and the inflation rate

•Monetary policy is determined by the Federal Open Market

Committee (FOMC), part of the Federal Reserve System

The Public Debt

• the deficit is when the government spends more money than it receives in any given year

• the public debt is the total amount of debt carried by the federal government, also called the national debt

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