Policy

The government often attempts to pass legislation that solves a particular problem in our society.  When the government passes a law or takes an action, we refer to this as a policy – a consistent way of doing things. 

Public policy is typically divided into three main categories – domestic, economic, and foreign.  Before examining each of these policy areas more in depth, it’s important to first look at the policy making process.  How does this government come to the point where they create a new policy or alter an already existing one? 

The policy making process has five key steps:

1.      Agenda Building

2.      Policy Formulation

3.      Policy Adoption

4.      Policy Implementation

5.      Policy Evaluation

First, the agenda building piece of this process refers to the priority list of the government.  Both Congress and the President have an agenda about what they want to achieve during their time in office.  However, government entities are not the only parties who can help determine the agenda for policy changes. 

Interest groups, political parties, the public, and private businesses all attempt to sway the government to make policy changes.  The agenda is often driven by a need (real or perceived) in society, not necessarily because someone wants something changed.  For instance, after Hurricane Katrina hit in 2005, the government saw a need for changing the way federal agencies respond in an emergency situation.  Another example of the need for a change would be the federal government’s adoption of “net neutrality” rules that govern the Internet.

Can you answer:  What would be on your agenda if you were the president or a member of Congress?

After the government becomes aware of what issues are part of the agenda, the next step of the policy process is policy formulation, whereby government officials create potential changes to laws.  This work includes writing specific legislation that will be scrutinized by members of Congress, the president, the general public, the media, and various groups. 

Once a specific policy has been created, the process moves to policy adoption, where Congress and the president must pass any proposed bills into law if they wish to move the policy forward.  Because the lawmaking process is difficult to navigate, the supporters of a given policy sometimes must compromise certain parts of a bill so critics will agree to pass it.

After the law has been passed through Congress and has the president’s signature, then comes policy implementation.  When a law is passed, it often requires action by the government to make the policy happen. 

When the Affordable Care Act was passed, the law stipulated the government had the duty to create a website where citizens purchasing health insurance could shop for different policies to meet their needs.  The Department of Health and Human Services was tasked with the job of creating this website.  This is an example of how a policy is implemented.

The final phase of the policy process is policy evaluation.  Groups inside and outside of the government look at the successes or failures of a particular policy.  With respect to the Affordable Care Act, the implementation of the website was a colossal failure when implemented, but not because it was a bad idea.  The site crashed and had extremely long wait times that frustrated users and ultimately led to the resignation of then Secretary of Health and Human Resources Kathleen Sebilius. 

Another significant example of policy evaluation is how critics viewed the No Child Left Behind Act of 2001.  This law reformed educational policies, but has been widely criticized by teachers, government officials, and other outside groups.  Since then, it has been amended and still continues to be evaluated for potential changes.

Can you answer:  what government policies are currently being heavily scrutinized by the public and members of Congress?

Domestic Policy

The policy making process is used for all three types of policies, but domestic policy specifically aims to solve problems occurring within the nation’s borders.  Internal problems make up much of what the country struggles to correct and there are a wide variety of perspectives

Health care has consistently been a domestic policy issue for the last century.  Costs of care, medicine, and other associated services have radically increased and this presents a problem since we all get sick at some point.  The population is living longer, new technologies are more expensive, and many people do not have the money (or a health insurance plan) to cover their medical costs. 

Because most Americans are of the belief that no one should be denied health care services because they lack financial resources, the government believed policies need to be enacted to ensure all Americans receive adequate care.  Two major programs the federal government enacted to alleviate this problem are Medicare and Medicaid. 

Medicare is a government program that provides health insurance costs for elderly citizens, regardless of their level of income.  The eligibility for this program is granted once a person turns 65 years of age.  The program is funded through a tax on income.

Medicaid is a separate government program that provides health insurance to financially poor citizens.  The government sets a poverty level that determines eligibility for this program, and it is funded mostly by a grant from the federal government and supplemented by individual states.

One of the more significant problems with the Medicare and Medicaid programs is the rising cost to fund them.  When people retire, they are no longer putting tax dollars into the system.  They are living longer and thus, taking money out of the system for longer periods of time.  Additionally, the ‘baby boomer’ generation is larger than other generations.  There are not enough younger workers to support these programs.

Since Medicaid eligibility is determined by income, the number of citizens receiving these benefits fluctuates, but the trend has seen this number also increasing. 

The overall costs of Medicare and Medicaid are approaching $1 trillion for this year and have a projected increase each year for the next ten years.  The percentage of the federal budget of these programs also increases each year. 

Small illustration of current fiscal policy

Another key domestic policy that has created political turmoil in recent years is environmental policy regulation.  The government has enacted several pieces of legislation that empower the Environmental Protection Agency to regulate the amount of pollutants in our ground, air, and water. 

Government regulation of pollutants is not the only environmental issue in play.  Presidential administrations have begun to address the issue of global warming and created restrictions and penalties for the burning of fossil fuels that emit carbon dioxide and other greenhouse gases.

Democrats and Republicans have vehemently disagreed about the scientific evidence behind global warming studies, but the Obama administration has adjusted policies under existing laws to discourage use of coal and oil in favor of cleaner forms of energy.

Economic Policy

The federal government has a vested interest in maintaining a vibrant economy.  The prosperity of individuals and businesses means not only a happy population, but increased revenue through taxes.  This, in turn, allows the government to provide more services (i.e. social programs and defense) for the people. 

Though economic policy is technically part of domestic policy, it is deemed important enough to be considered by itself.  We typically distinguish it from domestic policy (as domestic policy deals with social issues). 

Government action affecting the economic is divided into two distinct policy areas:  fiscal policy and monetary policy.

Fiscal policy relates to the federal government’s taxing and spending policies that affect businesses and citizens.  The tax policies of our federal government generate the money needed to run the day to day operations of the government and fund the social programs we have in place.

The budget for the federal government in 2016-2017 is approximately $4 trillion, and the primary source of this money comes from the income tax.  This will make up about $1.5 trillion of the money needed for government operations. 

Currently, the United States uses a progressive tax on income.  This means that the higher one’s income, the higher percentage of that income will be paid to the federal government in taxes.  The lowest earning incomes are taxed at a rate of 10% while the highest bracket is at 35%. 

While a progressive tax is the current policy, many conservatives have argued for a regressive tax.  In this situation, the tax rates would decrease as income increases.  On its face, this seems unfair, but the concept behind it is that the highest income earners would be free to invest and spend more of their money (since they’re taxed at a low rate).  When these wealthy individuals invest and spend, it stimulates the economy and benefits every worker. 

While a regressive tax is unlikely to become policy, another segment of society has pushed for a flat tax on income.  This would tax all incomes at the same percentage.

Can you answer:  What would be the benefits and drawbacks to each type of tax listed above?

Taxes on corporations, luxury taxes, and numerous other forms of taxes make up the rest of what the federal government collects.  However, the biggest problem the United States has with its fiscal policy is deficit spending.  This occurs when the government spends more money than it collects in taxes. 

The most common form of dealing with deficit spending is by borrowing money from other nations.  China and Japan are the two leading lenders to the United States.  For many years, the federal government has habitually borrowed money from other nations to make up the shortfall in its budget.

Here’s the way it will look for 2016-2017:

Outlays (expenditures):  $3.952 trillion 

Receipts (tax money):    $3.336 trillion

Deficit for 2016-2017:   $616 billion

The federal government will borrow that money to meet its obligations.  When they borrow that money, the debt incurred is added to an already running tab from previous years.  Currently, the overall national debt is approximately $19 trillion. 

The three major entitlement programs (Social Security, Medicare, and Medicaid) account for 50% of the federal budget.  Defense spending takes an additional 25% of the budget.  This does not leave much room for other programs and expenditures. 

Because entitlement programs and defense are considered so important to the nation, members of the government often lack the political courage to even suggest making changes.  As a result, the federal government continues to borrow.

The government has operated at a budget deficit for most of its existence, and typically, it’s not that significant of a problem.  However, the exponential growth of the national debt during the last 15 years is a concern.

Aside from fiscal policy, the federal government also controls monetary policy, which is where the federal government controls the supply of money in an attempt to keep a stable economy.  In the United States, monetary policy is controlled by the Federal Reserve Bank System, which is often referred to as “The Fed.”

The Fed is a series of national banks controlled by a board of five individuals who make some of the most important economic decisions for the United States.  They have several tools to control the overall flow of money and the economy.

The Fed controls the amount of money flowing

First, the Fed controls the amount of money that circulates at any given moment.  They can choose to release more money into the system, thereby encouraging more economic activity among businesses, banks, and individuals.  When money is easier to access, the goal is to speed up the economy.  When the Fed contracts the amount of money available, the goal is to slow down the economy and prevent a high degree of inflation.

The Fed also requires larger banks to give the Fed a sizable deposit of their cash, so that in case of an emergency, the Fed can infuse any needed cash to that particular bank.  By raising or lowering the dollar amount on that deposit, the Fed can speed up or slow down the economy.

Another way the Fed can speed up or slow down economic activity in the nation is by increasing or decreasing interest rates at which they loan money to banks.  Those banks, in turn, raise or lower the interest rates they provide to their customers. 

A good example of the Fed in action was in 2007-2008, when the economic recession from the housing crisis hit the country.  To encourage people to buy houses and cars, the Fed lowered interest rates to 0.0%, which meant citizens could purchase a home at extraordinarily low rates.

Can you answer:  Why might the federal government want to slow the growth and expansion of the economy?

Economic policy also includes government decisions that will determine how the United States economically interacts with the rest of the world.  This includes determining what the nation’s policy will be with respect towards tariffs.  These are taxes specifically on goods imported from other nations.  The government can also implement an import quota, a limited number of any good.  These measures are designed to make foreign products more expensive, encouraging Americans to buy American-made products.

The government has also entered into treaties with foreign nations regarding free trade, such as the North American Free Trade Agreement (NAFTA).  This treaty, which includes the United States, Canada, and Mexico, eliminated the trade barriers that existed between these nations, including tariffs.  The agreement allowed the three geographic neighbors to freely trade goods and services competitively, with little restrictions.

The overall value of NAFTA is still debated today, because while the elimination of trade barriers opened up economic opportunities in neighboring countries, the United States manufacturing sector lost a significant amount of jobs to Mexico, where laborers work for significantly less wages. 

Foreign Policy

A nation’s foreign policy is characterized by its external goals and the tactics they use to achieve these goals.  It should be noted that because foreign policy is directed primarily by the president, foreign policy goals tend to be more fluid than domestic policy.  Presidents have an easier time implementing their agenda in foreign policy, because it does not frequently coincide with Congress’ power or authority.

The United States has multiple tools at its discretion for achieving its objectives.  One of the most widely used means of achieving goals is through diplomacy.  Most nations can work out their problems through effective communication and peaceful means. 

Diplomacy often includes the development of a treaty or executive agreement with a foreign nation.  Treaties are binding agreements between nations that must be carried out by every presidential administration, regardless of whether or not they agree with the treaty.  Treaties are negotiated by the president and ratified by 2/3 of the Senate. 

Executive agreements differ because they are negotiated by the president and require no Senate action.  The drawback is that executive agreements are not binding.  Future presidents are not obligated to continue with those policies.

Another tactic employed often by the United States is through providing economic aid to foreign nations.  Since the United States has a significant amount of financial resources, it uses money as a means of garnering goodwill and favors from other nations.  Typically, though, the money the United States provides these nations must be used on items such as food, medicine, or infrastructure, and not for weapons.  Currently, the federal government allots about $35 billion to be distributed annually.

A more specific example of economic aid would be the implementation of the Marshall Plan in post-World War II Europe.  The United States offered billions of dollars in grants and loans to European nations to help them rebuild.  While Americans were sympathetic to Europeans who had lost so much during the war, the United States was not acting purely out of kindness.

The Marshall Plan required that recipient nations of the money spend that money on American products and services.  The economic aid to Western Europe also prevented the spread of communism, which was the primary foreign policy goal of the United States from 1945 to 1989.

With economic aid, the United States provides vital cash to nations who would otherwise struggle to serve their people.  If a nation provokes the United States or misuses their economic aid, they risk economic sanctions.  The federal government understands that the United States is one of the largest markets in the world, and withholding trade and economic aid packages to foreign nations can prove catastrophic.

For instance, North Korea spent considerable time and resources to build a nuclear weapons program.  American presidents have consistently withheld economic aid and prevented trade with North Korea as a form of punishment.  These sanctions have crippled North Korea’s ability to sustain its population and provide key resources to them.

Additionally, President Obama and Secretary of State John Kerry negotiated an agreement with Iran, whereby they would give up the pursuit of a nuclear weapons program in exchange for an economic aid package and the removal of trade sanctions. 

The federal government has also demonstrated a willingness to provide technical assistance to foreign nations.  Many Third World nations lack the scientific know-how or expertise to bring about significant change in their countries.  The United States will essentially offer technical information, policy ideas, or help in the form of individuals with certain skills in exchange for something in return.

Presidents and other federal officials have one more significant way to influence other nations – military intervention.  When the United States cannot convince or manipulate another nation to do what we want, the last resort is to use force.  The size and might of the United States military gives the federal government many different options in terms of coercing other nations into action. 

In most instances, military intervention is a last resort.  However, one notable example of using the military to achieve an objective came in 2011, when President Obama ordered a covert military action on foreign soil (Pakistan) to capture or kill Osama bin Laden.  The president bypassed any discussion with Pakistani government officials and simply acted in a way that he believed would most like achieve a goal.

President Obama also routinely authorizes drone strikes on targets in the Middle East in an effort to curtail terrorism.  This is a continued policy from the George W. Bush administration.

The Bush administration also authorized a military invasion into Iraq in 2003.  The Iraqi dictator at the time, Saddam Hussein, had violated international agreements and the Bush administration claimed Hussein was developing weapons of mass destruction.  President Bush opted not continue with any diplomatic efforts or economic sanctions because he believed that time was a crucial factor.