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This text discusses the rising costs of healthcare and the government's role in funding and providing healthcare services through programs such as Medicare and Medicaid. It also touches upon the Affordable Care Act and welfare programs.
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The Policy-Making Process • Agenda Building: identifying a problem and getting it on the agenda. • Congress will listen to constituents, the media and interest groups to identify problems • Policy Formulation: the debate that occurs among government officials and the public in the media, in Congress, and through campaigns. • Policy Adoption: selection of a strategy for addressing the problem from among the solutions discussed. • Policy Implementation: the administration of the policy adopted • Policy Evaluation: Congress checks to see if the implementation was effective and beneficial to the public good • Can do this through oversight of the bureaucracy of by listening to constituents
Health Care Costs • Healthcare spending has gone up from 6 percent of our income in 1965 to 15 percent today. • Compared to other advanced industrial countries, our spending as a percentage of GDP is quite high, double the rate of some countries. • One cause of the rising cost is that the population is growing older, and older people need more care. • Advanced Technology. While useful, advanced diagnostic machinery is very expensive
Government’s Role in Healthcare • The government funds about 45 percent of health care spending, private insurance provides about 35 percent, and the rest is picked up by individuals or charity • Medicare:federal health-insurance program that covers U.S. residents over the age of sixty-five. • You CARE about your grandma • The costs are met by a tax on wages and salaries. • In 2006 it was expanded to cover doctor visits, procedures and medicine. • 2nd most expensive federal program next to Social Security • Medicaid: Medicaid is a joint state/federal program that provides medical care to the poor, including elderly persons in nursing homes. • funded out of general government revenues
National Health Care • Affordable Care Act: • Allows for states to pay for insurance for the uninsured • Paid for out of general tax funds • Forces businesses to provide healthcare to workers • Fines if they don't • Exemptions for small businesses • Forces people to have health insurance • Fines if they don’t
National Federation of IndependentBusiness v Sebelius • In their 2012 SCOTUS ruling, the Roberts court upheld the constitutionality of the Affordable Care Act - not based on the Commerce Clause but - based on Congress’s authority to tax. • This upheld the individual mandate which requires Americans to purchase insurance or pay a tax penalty. • Individual mandate – each person is mandated to have health insurance
Poverty and Welfare • Entitlement spending/programs: • Money/services given to people because they qualify for it b/c of income • They are “entitled” to the help • Sometimes just called “welfare” • Sometimes called “government assistance” • Medicare, Medicaid, Social Security, Food Stamps, and TANF or “welfare” • Temporary Assistance to Needy Families • Block grant from federal government administered by the state
Welfare Reform Act of 1996 • Created TANF • Devolved the administration of welfare to the states • Made it temporary (two year limit and five year total limit) • Created a ‘path to work’ for people receiving welfare • Cut number of people on welfare in half
Welfare Controversies • System may be abused by ‘lazy’ people • Curtailed by TANF • System may encourage people to not find work • Is more of a ‘hand-out’ than a ‘hand-up’ • Some states are pushing drug testing of welfare recipients
Other forms of Welfare • SSI (Supplimental Security Income) • Part of Social Security • Aide to old and disabled • Food stamps • Nutrition for poor families • Earned Income Tax Credit • Extra income tax bonus if you are poor and have children
Income, Poverty, andPublic Policy Figure 18.1- Poverty Rates, 1999
Income, Poverty, andPublic Policy: What Part Does Government Play? • Taxation: • Progressive tax: people with higher incomes pay a greater share. • Proportional tax: all people pay the same share of their income. • Regressive tax: opposite of a progressive tax • Earned Income Tax Credit: “negative income tax” that provided income to very poor people.
Income, Poverty, andPublic Policy: What Part Does Government Play? • Government Expenditures: • Transfer payments: benefits given by the government directly to individuals. • Some transfer benefits are actual money. • Other transfer benefits are “in kind” benefits where recipients get a benefit without getting actual money.
The Evolution of American Social Welfare Programs: New Deal • The Great Depression led many citizens to want the government to help protect against economic downturns and causes of poverty beyond their control. • Social Security Act of 1935 was the first major step by the federal government to help protect people against absolute poverty.
The Evolution of American Social Welfare Programs: Great Society • Johnson declared a “war on poverty” and created many new programs and it was his leadership that made the difference. • Medicare, school-aid programs and anti-poverty programs were some examples. • Other programs were designed to provide training and jobs, not just transfer payments.
The Evolution of American Social Welfare Programs • President Reagan and the Limits to the Great Society: • Reagan (like Johnson) played a lead role in getting attention on benefit programs. • Many programs had benefits reduced, and people were removed from benefit rolls. • Big move of major programs to the states (devolution). • Democrats worked to lessen the cut of the benefits to try and protect the truly poor.
Social Security • Created by FDR as a part of the New Deal • Workers must give part (6.5%) of their paychecks to the federal government • Their employers have to match that 6.5% too • The government then invests that money in the stock market on “safe stocks” • When the workers retire, they get what they paid in and part of what their money earned on the stock market
Problems with Social Security • Social Security/Medicare are the most expensive programs in the federal budget • 44% of all federal spending • Less workers today for each person receiving benefits • 1935 – 25 workers/1 beneficiary • Today – 3.3 workers/1 beneficiary • This leads to the government having to borrow money to pay for Social Security • What happens when the money runs out? • Why less workers? • Baby boomers (ppl born right after WWII) life expectancies are growing • Improved healthcare, drugs • Had less children and grandchildren b/c of birth control, women working more
A comparison of the number of active workers per the number of retirees.
Immigration • The Continued Influx of Immigrants • More than a million people a year immigrate to this country. • Racial Minority Groups will constitute the “majority” of America by 2060. • Some point out the positives of immigration—offsetting the low birthrate and aging population. • Latin Americans are usually Catholic, leading to less use of birth control • Immigrants expand the workforce and bring in more income taxes to fund entitlement programs
Immigration Reform • Self-deportation • Ask illegal immigrants to leave themselves • Illegal immigrant roundups and deportations • Amnesty for those already here illegally • They can become citizens • After them, enforce harsh immigration restrictions • Make it easier to become a citizen legally • A wall
The United States has the highest incarceration rate among major world nations measured by the number of prisoners per 100,000 residents.
Incarceration Rates • The number of people held in jail or prison for every 100,000 people • US is 1309 men, 113 women • Majority of arrests come from drug crimes • Prison system is a booming business • 1923 there were 63 in the US • Today there are 4,500
Federal Drug Policy • Money spent on federal drug interdiction programs has not met with much success, as illegal drug consumption in the U.S. has remained steady. • Between 20 and 40 million Americans violate drug laws every year • That’s out of a total of 300 million Americans • Push for rehab programs instead of prison for drug offenses
Environmental Policy • Environmentalism • Started in the 1960s • Led to the creation of the EPA in the 1970s • More regulation regarding how individuals and businesses interact with the environment • Clean Air Act (1963) • Monitor factory air emissions • Car makers must reduce car emissions • Carbon monoxide • Clean Water Act (1972) • Stop pollution in water
The EPA The Environmental Protection Act, 1970 requires states to set air quality standards, reduce damage done by automobiles, measure city smog, and set environmental guidelines. The EPA also manages the Superfund, which is paid into by industry to cover costs of cleanup if necessary, and toxic waste cleanup.
Labor Policy, Historical Background • The Fair Labor Standards Act, 1938, established the minimum wage, the 40 hour work week, and required that employees be paid for overtime. • The Taft-Hartley Act, 1947 allowed states to outlaw “closed shops” where union membership is required. • States could then pass “right to work laws” where factories couldn’t deny you a job if you refused to join a union.
Global Warming • “political football” kicked back and fourth between liberals and conservatives • Some liberals say man’s pollution is causing increased “climate change” and it will eventually be our demise if we don’t do something • Some conservatives say that it is a natural fluctuation and the liberals are just using it to increase government regulations of businesses • And increased regulation leads to less profits for owners who pass the cost on to employees and customers
Introduction • A major economic policy issue is how to maintain stable economic growth without falling into either excessive unemployment or inflation (rising prices). • Inflation, a sustained rise in the general price level of goods and services.
Good Times, Bad Times • The U.S. economy experiences booms and busts. The busts are called recessions. • Recession, two or more successive quarters in which the economy shrinks instead of grows. • Unemployment • Usually linked to the health of the economy • Today, its around 8%
How to get out of a recession: Keynesian Economics • John Maynard Keynes said: • If we are in a recession, all we need to do is have the government spend lots of money to jumpstart the economy • Major part of the New Deal • Highways, schools, TVA built • Used by Bush 43 and Obama in “stimulus checks” mailed out to citizens after 2008 recession
Keynesian Economics and Debt • We have to borrow the money to jumpstart the economy, not just raise taxes • If we raise taxes, we’re just moving money around, not putting new money in • This is why we are in such amazing debt • Called “discretionary spending” • At the discretion of the government • Optional • Used to boost the economy
Deficit Spending and the Public Debt • The government funds its deficit primarily by selling U.S. Treasury bonds. • Sell $100 bond today, pay back $110 in 10 years • Like a loan, but not from a bank. • Twenty years ago, only 15 percent of these bonds were held abroad. • Today the figure is 40 percent. • Mainly in China
Why are we debt? • We spend more than we make • Spending on military and programs like Medicare and Medicaid (make up the majority of spending) • Making $ from taxes and selling bonds • Just like a family household, we are living outside our means
How can we get out of debt? • Spend less on everything, especially on entitlement programs • Liberals don’t want to do that • Say that those people are already living in poverty • Raise taxes • Conservatives don’t want to do that • Say that it will hurt businesses • Compromise is needed, but probably won’t happen.
Deficit Spending and the Public Debt • Net public debt, the accumulation of all past federal government deficits; the total amount owed by the federal government to individuals, businesses, and foreigners. • Gross domestic product (GDP), the dollar value of all final goods and services produced in a one-year period.
1980 – 800 Billion 1990 – 3 Trillion 2000 – 5 Trillion 2008 – 9 Trillion 2016 – 19 Trillion 2020 – 21 Trillion Net Public Debt AKA National Debt
Monetary Policy • Monetary policy, the utilization of changes in the amount of money in circulation to alter credit markets, employment, and the rate of inflation. • Determined by the Federal Reserve System
The Balance of Trade and the Current Account Balance • The balance of trade, or the difference between the value of a nation’s exports of goods and its imports of goods. The U.S. balance of trade has been significantly negative for many years. • If a country exports more than it imports, businesses will be more prosperous, right down to the workers. If it doesn't’t, everyone “pays”(see what I did there?)
Sources of Federal Revenue Article 1 Section 8 gives Congress the power to lay and collect taxes and to borrow money. The US has borrowed money throughout its history, and has been out of debt only once in its history. The 16th Amendment (1913) allows for the federal government to collect income tax from “whatever source derived.” Congress created the InternalRevenue Service (IRS) to oversee collection of these taxes.
Progressive Income Tax Progressive taxation means that the tax rate one pays increases, or progresses, as one’s income increases. The highest tax rates have gradually lowered since the 1940s. 1940s - 94% top rate 1970s - 70% top rate 1980s - 30% top rate 2010s - 35% - 40% top rate
Individual Federal Income Tax Rates - 2010 Source: Senate Committee on Finance, JCX-51-10, 2010
The Tax Code • Congress has created a very complicated tax code, by using the power to tax it create incentives and punishments. • Special interest groups push for loopholes in the tax code to favor certain people or groups. • Congress has used the tax code as a way to draft social policy by encouraging certain behaviors and discouraging others. • The corporate tax rate has varied between 10% - 35%. About 10% of all federal revenue comes from corporate taxes.
Other Revenue Sources • Excise taxes are levied on particular goods or services, such as alcohol, tobacco, airline travel, and gasoline. • About 3% of federal revenue comes from excise taxes. • States also can have their own income taxes, as well as sales taxes, additional taxes on hotels, alcohol, cigarettes, and other items. • The overall tax burden in the US is lower than most industrialized nations. • US citizens pay 25.4% of their incomes in a combination of income, sales, and other taxes.
Federal Budget Process • The Constitution states “no money shall be drawn from the Treasury but in consequences of appropriations made by law.” • Congress has the “power of the purse,” which means federal dollars cannot be spent unless Congress says so. • The Congressional Budget and Impoundment Control Act, 1974, established the budgeting process which is used today. • It set budgeting guidelines, and created the • Office of Management and Budget (Executive) • and the Congressional Budget Office (Legislative).
