Social and Domestic Policy
Business and Labor Policy
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Although free enterprise is the foundation of the
American economic system, ours is a mixed
economy.
◦ Mixed Economy: system in which the government both
supports and regulates private enterprise
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Government promotes or discourages trade by
placing tariffs on imports.
The Government uses tax incentives, government
loans, free services and information, and direct
cash payments to subsidize businesses.
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The Commerce Department provides
information services, financial assistance, and
research and development services to
businesses.
The Small Business Administration offers
credit subsidies, advice, and information to
small firms.
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Constitutional Basis of Regulation
◦ The Constitution’s commerce clause allows
regulation of the economy.
◦ The Founders designed this clause to allow the
federal government to control interstate commerce.
◦ The Supreme Court has broadened the
interpretation of interstate commerce to include a
wide variety of economic activities.
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Demand for Reform
◦ The federal government took a laissez-faire
approach to the economy until the late 1800s.
◦ At that point, most American businesses were small
and locally owned.
◦ As the economy changed, corporations began to
dominate industry.
◦ Large corporations would merge to form
monopolies and calls for reform began.
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The Sherman and Clayton Antitrust Acts
◦ The Sherman Antitrust Act of 1890 regulated
monopolies and corporate trusts that tried to restrain
trade.
◦ Trust: a form of business consolidation in which
several corporations combine their stock and allow a
board of trustees to operate as a giant enterprise
◦ Monopoly: business that controls so much of a
product, service, or industry that little or no
competition exists
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The Clayton Antitrust Act of 1914 prohibited
price-fixing and interlocking directorates.
◦ Interlocking Directorates: circumstance in which the
same people served on the boards of directors of
competing companies
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The Federal Trade Commission (FTC) enforces
the act.
Today, oligopolies are more common than
monopolies with about 50 multibillion dollar
companies controlling about a third of the US’s
manufacturing capacity.
◦ Oligopoly: a few firms dominating a particular industry
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The 1906 Pure Food and Drug Act makes it
illegal to sell foods or drugs that are
contaminated, unhealthful, or falsely labeled.
The Federal Trade Commission protects
consumers from misleading and fraudulent
advertising.
Congress set up the Consumer Product Safety
Commission in 1972 to protect consumers
from hazardous products.
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Congress created the Securities and Exchange
Commission during the Great Depression to
protect small investors from being misled
about the value of stocks and bonds and to
investigate cases of suspected fraud in the
sale of securities.
In 2002, the Sarbanes-Oxley Act required the
heads of large corporations to be held
personally responsible for improper
accounting procedures.
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The American Federation of Labor was
formed in the 1880s.
Workers organized unions to negotiate labor
contracts.
New Deal laws of the 1930s guaranteed
labor’s right to join unions, bargain
collectively, and strike.
◦ Collective Bargaining: negotiating labor contracts
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The Wagner Act of 1935, creating the
National Labor Relations Board (NLRB), was
modified by the Taft-Hartley Act of 1947.
◦ Guarantees the right of all workers to organize and
bargain collectively.
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The Landrum-Griffin Act of 1959 helped end
fraud in union elections and protect the
rights of union members.
Agriculture and Environment
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Early Agricultural Legislation
◦ Congress created the Agriculture Department in
1862.
◦ The Morrill Act established colleges of agriculture.
◦ The Homestead Act gave land to those willing to
farm.
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Farm Problems
◦ In the 1920s, many farmers lost their land due to
market changes and drought.
◦ During the 1930s Congress made loans to farmers
and limited crop production to increase farm prices.
◦ The Agricultural Adjustment Act (AAA) paid farmers
to not produce their usual amount of corn, wheat,
hogs, and other commodities.
◦ The AAA was overturned by the Supreme Court but
quickly replaced with similar legislation.
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The Department of Agriculture provides
marketing services to farmers.
Three federal programs prevent farm prices
from falling below a certain level:
◦ Price supports
 Lends money to farmers equal to a price of a crop.
◦ Acreage allotments
 Government give money only for the number of acres
needed to supply all markets.
◦ Marketing quotas
 Farmers will only market assigned portions of
overproduced goods.
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The concern for a deteriorating environment,
beginning in the 1950s, ultimately led to the
creation of the Environmental Protection
Agency (EPA) in 1970.
Air pollution regulation began in 1955 and
was strengthened in the 1960s.
In the 1990s, clean-air laws mandated
sharply reducing car exhaust emissions and
placed restrictions on power company wastes.
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Water pollution laws prohibit the discharge of
harmful amounts of petroleum and other
dangerous materials into navigable waters.
The Water Pollution Control Act of 1972 set
the goal of completely eliminating water
pollution.
since then, the law has been changed and
amended to make it easier for states to
comply with the Act’s standards.
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As the EPA implemented environmental laws,
communities complained about unfunded
mandates.
In 1996 Congress restricted the imposition of
requirements unless funds were provided.
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Native Americans and early settlers found
clear lakes and rivers, unending forests, and
rich deposits of metal.
Americans used these resources to build a
strong industrial nation.
The 1973–1974 energy crisis resulted in a
new energy policy.
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Competing interest groups, such as energy
companies and conservation organizations,
struggle to shape new policies and programs
that reflect their concerns.
One example of this is the debate over oil
drilling in the Arctic National Wildlife Refuge.
Health and Public Assistance
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As the Depression deepened, private charities
and state and local governments could not
cope with the problems of the poor.
New Deal Programs
◦ The New Deal included the Social Security Act of
1935.
◦ This act was the first of many governmentsupported social insurance, public assistance, and
healthcare programs.
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Social Insurance: government programs
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Public Assistance: government programs that
designed to help elderly, ill, and unemployed
citizens
distribute money to people with low incomes
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The Social Security Act provides for:
◦ Old Age, Survivors, and Disability Insurance (OASDI)
◦ Medicare
◦ Unemployment insurance
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Social Security
◦ Equal taxes on employers and employees finance
the Social Security system.
◦ Beginning in 1981 a financial crisis threatened the
Social Security system because cash outlays
exceeded income.
◦ Raising the retirement age, taxing some benefits,
and other changes attempted to keep Social
Security going.
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Medicare
◦ In 1965 Congress added Medicare, which pays a
major share of hospital bills for senior citizens, to
the Social Security system.
◦ In 2003 Medicare was reformed to include
prescription drug coverage.
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Unemployment Insurance
◦ A tax on employers funds unemployment
insurance.
◦ Under unemployment programs, federal and state
governments cooperate to provide the needed help.
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Supplemental Security Income (SSI)
◦ In 1974 Congress set up the Supplemental Security
Income system for the aged, the blind, and the
disabled.
◦ The Social Security Administration runs the
program.
◦ The federal government makes a monthly payment
to anyone 65 or older, who is blind or disabled, or
who has little or no regular income.
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Food Stamps
◦ In 1961 the food stamp program was created.
◦ The purpose of the food stamp program is to
increase the food-buying power of low-income
families and to help dispose of America’s surplus
agricultural production.
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Medicaid
◦ In 1965 Congress established Medicaid to help pay
hospital, doctor, and other medical bills for persons
with low incomes.
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Aid to Families with Dependent Children
◦ Aid to Families with Dependent Children (AFDC) was
a program to aid families whose main wage earner
had died, but more than 80 percent of children
receiving aid had living, but absent, fathers.
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The Need for Reform
◦ Many Americans grew frustrated over the mounting
cost of welfare programs while the level of poverty
remained high.
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Sweeping Changes in Welfare
◦ In July 1996 Congress and the president agreed on
an overhaul of welfare.
◦ Aid to Families with Dependent Children (AFDC) was
replaced with lump-sum payments to the states,
who could design and operate their own welfare
programs.
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Health Programs
◦ Most federal spending on health goes for Medicare
and Medicaid.
◦ The Department of Defense provides hospital and
other medical care for active and retired American
military personnel and their families.
◦ The public health service operates research, grant,
and action programs designed to promote the
health of all citizens
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Food and Drug Protection
◦ The Food and Drug Administration (FDA), a federal
agency, tests food and drug products and can ban
or withdraw drugs it finds unsafe.
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Stem Cell Research
◦ Government funding promotes scientific research
with possible applications in treating and
preventing illness.
Education, Housing, and
Transportation
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Public education remains a local
responsibility under state guidelines.
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Federal Aid to Education
◦ The first general aid-to-education act was passed
in 1965.
◦ The federal government provides funding to local
public schools and to higher education.
◦ These funds can be direct or distributed by the
state.
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Aid to Higher Education
◦ The Morrill Act of 1862 granted states public land
for colleges.
◦ The G.I. Bill financed education for veterans of
World War II and later wars.
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Education Issues
◦ Federal aid for education is controversial.
◦ Critics charge education should be a state and local
concern.
◦ In 1983 President Reagan appointed a
commission to study why American students
performed less well than European and Asian
students.
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Education Issues
◦ In 1994 Congress passed the Goals 2000:
Education in America Act to improve graduation
rates and raise academic standards.
◦ Through legislation like the No Child Left Behind
Act, President George W. Bush’s administration
has focused its education reform on testing and
increasing student and teacher accountability.
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Adequate housing is an important part of the
general welfare of any society.
The federal government has developed
several programs to ensure adequate housing
for all citizens.
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The federal government began providing
loans for homes and farms during the Great
Depression.
After World War II, Congress passed the
Housing Act of 1949.
◦ Aimed to provide a decent home and suitable living
environment for every American Family.
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The Department of Housing and Urban
Development (HUD) is in charge of the
Federal Housing Administration, which helps
low-income families purchase homes.
The majority of the federal housing programs
that HUD administers are targeted on cities.
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Urban Renewal: programs under which cities
apply for federal aid to clear slum areas and
rebuild
Urban renewal has restored older
neighborhoods but has also driven out lowerincome residents.
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Public housing has faced serious problems in
attempting to provide affordable urban
housing as many projects have become highrise slums and centers of crime.
In the 1990s, reforms to the nation’s housing
policy gave more control to state and local
officials and focused on closing the gap
between white and minority home ownership
statistics.
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In 1811 the first National Road was
constructed.
Federal funds have helped construct canals,
dams, ports, highways, railroads, and
airports.
In 1966 Congress created the Department of
Transportation (DOT) to coordinate national
transportation policies and programs.
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DOT has numerous federal agencies,
including the Federal Aviation Administration
(FAA) and the Federal Highway Administration
(FHA).
The Federal Road Aid Act of 1916 first gave
aid to states that matched funds.
States now receive billions each year to
maintain the interstate highways.
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Since 1995 the FHA has focused on
transportation needs such as road
maintenance and reducing traffic fatalities
and congestion.
The Transportation Equity Act for the 21st
Century (TEA-21) provided funds to improve
mass transit and develop high-speed rail
systems.