Domestic Policy

Policy Areas

(Economic, Business, Environment, Health Care)

Economic Policy 2 Types of Economic Policy:

Fiscal: taxing/spending considerations (Conducted by Congress/President)

Monetary: regulation of money supply by “the Fed” (adjust interest rates)

Developments in economic policy: 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 Push for balanced budget amendment (Gramm-

Rudman; 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

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 Antitrust policies in early 20th C. designed to break up monopolies

and restore competition. (Standard Oil controlled 90%) Working conditions; safety of products; eliminate bribery

Recent Developments 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 Protects consumers/workers; protects those w/o “voice”

Arguments Against Markets will work for benefit of consumers; kills jobs; increase in prices

Deregulation Airlines

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

Telecommunications 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

Evaluation Restores competition? Encourages innovation Lower prices for consumers Problem: Companies have to deal w/ state regulations that may be different

Environmental Policy Environmental policy affected by federalism Key issue: Extent of protection vs. costs of protection (competing

interests) Key legislation

National Environmental Policy Act (1969); Air Quality Act(1967); Clean Water Acts (1970’s); EPA (1970); Superfund (1980)

Three types of policy 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 Private health care

Traditional approach: fee for service; paid for by insurance HMO’s: health maintenance organization

Problems Rising costs, uninsured, high cost of malpractice, paperwork,

unnecessary procedures, lack of flexibility

Reforms Single payer (socialized medicine), requiring coverage by

employers or require people to buy health insurance Competition across state lines (Conservative) Voucher system (Paul Ryan)