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GITELSON CHAPTER 14: DOMESTIC POLICY

AND POLICYMAKING (4)

A. Making Public Policy:

Government actions are often necessary. The belief that only government can deal with a major crisis increasingly leads to the making of public policies. Public policies are actions taken by government officials in response to problems and issues raised through the political system. At the national level, public policies emerge from each of the three major branches of government, legislative, executive, and judicial. Congress makes policy by enacting laws, presidents issue executive orders, and judges make policy through court decisions (G 387 – 388).

Six-stage process of public policymaking (G 389 - 391).

1. Issue identification, where some event, person, or group calls attention to a problem

that needs government action.

2. Agenda setting, where the issue or problem is seriously considered by the

policymaking institution.

3. Policy formulation, policymakers and their staffs deliberate the pros and cons of each

issue.

4. Policy adoption, includes efforts to obtain enough support to enable a proposal to

become the governments stated policy. This stage is often a point of bargaining and

compromise, sometimes emerging a very different and changed policy.

5. Policy implementation, the carrying out of the policy through public programs and

actions.

6. Policy evaluation, involves looking at government actions and programs to see

whether their goals have been achieved or to assess their effectiveness and efficiency.

Models of decision making (G 392 - 393)

1. Rational - the ideal process in which a policymaker has a clear objective and all the

information needed to make a sound and reasoned decision, resulting in the selection

of the best way to achieve the desired goal.

2. Incremental - a more realistic model of decision making that sees public policy as a

process of making decisions at the margins of current policies by adding to

or subtracting from those policies.

3. Elite - the theory that public policies are made by a relatively small group of

influential leaders who share common goals and points of view.

4. Pluralist - a theory that attributes policy outcomes to pressures exerted by different

interest groups.

Questions:

A1. What is public policy?

A2. Who makes public policy?

A3. How many stage are involved in public policymaking?

A4. Do policies change during the policymaking process?

A5. Name the four models of decision making.

 

 

 

 

B. Economic Policy (G 393- 408)

The American economy is defined mostly by its large “private sector” and characterized by the degree of freedom of its free-market system .. a system which emphasizes and “preserves” competition as a the means of achieving the most good for the most people. On a comparative basis (e.g., with socialized Europe, a Cold War Russia) the American economy is less effected by centralized planning and control. At most the federal government influences and to a limited extent manages the course of the country’s economy by means of a multitude of monetary and fiscal policies which help shape the future, but it can not alone cause nor guarantee the next boom or even “better results next quarter”.

Appreciate the history and particularly the differences in the economic goals of the government from the first 100 years and today. The early government had significant economic and developmental goals to grow, to trade and to create infrastructure. Bounties and government bonuses were given to ship builders, ship operators for new port activity, and to upstart factory builders. The ultimate government development project to achieve America’s manifest destiny the race to build a transcontinental railroad. No one company would risk the undertaking alone, but several did with government lucrative incentives of free land and some indirect financing guarantees and importantly a blind-eye labor practices! Where the Civil War preserved the union North and South then the transcontinental railroad united the country East and West, thereafter “these United States” changed in grammatical treatment from plural to singular.

During the industrial boom through the early 1900’s when government incentives and economic freedom led to significant development and progress particularly railroad, oil, steel making and later the auto industries. The pendulum swung too far though- freedom without responsibility, power and wealth excessively concentrated so as to be anti-competitive or worse monopolistic, abuse of workers particularly new immigrants with no minimum wage, lack of safety, marked by notable fires and accidents in NY City sweat shops and other abuses of labor - - all caused Congress to pass pro-union, anti-trust legislation regulating business and the economy which led to the first round of growth of the federal government and its regulatory agencies. To pay for this, a very modest income tax was introduced for the first time.

The early 1900’s saw the fragmented and often failing banking industry to become subject to federal regulation under 12 regional Banks of the Federal Reserve System requiring member banks to always have on-hand at least regulated minimum deposit at all times available to depositers. The most important impact of the “Fed” is its role like the banker’s banker allowing banks to borrow from it at a interest which is periodically determined by the Board of Governors. All lending and the interest rate to the public by banks and other lenders is competitively set by ultimately tied to that lending banks ability to borrow itself from a “central bank” i.e. the “Fed” is in the role of central banker. The gap in the interest rate between a lending banks rate to the borrowing public and the rate it borrows from the fed is where banks profit potential is. Thus whether money or interest rates, the Fed is where it can be said the buck “stops here” or more correctly starts here. This area of money supply and interest rates managed by the Federal Reserve is called monetary policymaking.

After World War 1 the economy boomed with the newest industries of auto making, appliance manufacturing, and the discovery of national marketing (profits from the national marketing of 5-cent chewing gum allowed Wrigley to buy Catalina Is.) Woolworth and Sears became national retailers. Despite prohibition speakeasies flourished along with a sense lawlessness. Far from anarchy still freedom is not always good for the public if safety is sacrificed. Illusions of stock market wealth spread publicly with quick rich stories of stocks continuously rising guaranteeing riches could be made at only 10 percent down. The market boomed like a gold rush -- same mentality - -as new novice investors all sought to double triple their money (like Enron!) … until the 1929 stock market crash. when new investors were no more and now old investors all wanting to sell at once! Abuse of too much freedom and too little oversight by government contributed to a decade of despair and a second round growth federal economic regulation in the 1930’s. You can not buy stocks with 10% down any more.

 

 

But it was the great depression of the 1930’s caused a shift in the roll of the federal government from one of detached benign neglect (free markets with few rules) more toward one of ever-present regulator and often employer-of-last-resort. This shift during the first 2 terms of the 4 terms of the F.D. Roosevelt presidency did improve conditions but not remarkably. Government could not solve the lingering unemployment problem hitting 25% rarely under 10 -15%.

During this period the government began using fiscal policy as an influence on behavior of the private sector. Specifically using the theories of Keynsian (pronounced like “caines -see -in”) Economics, the government intentionally spends more money than it takes in taxes …thus purposely having a shortfall in cash flow called a deficit. The government puts money out for an employee or contractor that otherwise would be unemployed short term. This is a good thing as a fine-tuning policy; but done to an extreme, it is called “printing money” like a counterfeit. Fiscal policy helped but did not solve the problem of inadequate market demand to reach full production. During the last 2 terms of FDR, it was in the end the war production demands caused by World War 2 that caused the nation’s economy to fully recover and to regain a “full employment” status.

From the 1950’s through today, full employment was usually around mostly 4% unemployed. During these times recessions, the unemployed nationally reached as high as 8%, maybe spiking worse but rarely for long. Unfortunately national averages tend to hide local unemployment which can be far worse and go much longer. This tends to reflect a dynamic change in an industry or technology, or changing market share, or possible obsolense? Business failures, closings are often the fair result of changing competitive economies and has a good aspect of accommodating change despite the associated unemployment.

but what if the cause is due to lower cost of production overseas? Tariffs or import tax can correct this price difference but should it.

Economic policy with respect to foreign trade is the last area of policymaking. The competing interests are on one-hand free-market open-border global-economic free-trade pro-NAFTA pro-consumer cheaper-PC-import advocates versus status-quo protected -home-market pro-tariff “tax the imports” keep-the-jobs-here advocates. . and each side has reasonable arguments, but through the 1990’s the world is moving toward the former group, the advocates of free trade.