U.S. GOVERNMENT & POLITICS, SPRING 2011

PUBLIC POLICY, DAY TWO

Page and Simmons, “Is American Public Policy Effective?”, New York Times, “Health Care Reform: A Summary” (and continuing discussion of OSY chapter 13)

Wednesday, May 11

(this is repeated from Monday’s handout) The federal budget faces long term concerns due to the growth in entitlement programs (over 50% of the budget today), particularly the looming retirement of the large “baby boomer” generation and the rapid rise in health care costs. Tax reductions, while certainly popular, also contribute to the budget deficit. Combined with increasing costs associated with national defense both at home and abroad (OSY chapter 14), it is likely that in the future, the federal government will not be able to maintain entitlement programs at current levels

“BRIEF” BUDGETARY OVERVIEW (repeated from Monday, with more detail)

The federal budget is a collection of public policy decisions – in many ways it’s a current look at the nation’s priorities, but examining the federal budget is also like visiting a museum – we are seeing the consequences of decisions to begin programs long, long ago.

The budget for the current fiscal year 2011 (which began October 1, 2010) is $3.834 trillion. Revenue under the fiscal 2011 budget is projected at $2.567 trillion; hence the fiscal 2010 deficit is about $1.3 trillion. Additional charts: 3 budget tables from the Office of Management and Budget: this link includes Table S-1 (Budget Totals, also handed out in class Monday), Table S-4 (Proposed Budget by Category), and Table S-11 (Funding Levels for Appropriated “Discretionary” Programs by Agency). (All these tables, and even more budget info, can be found here)

SOME KEY POINTS TO NOTE FROM THE BUDGET CHARTS:

· Just under 60% of all government spending is mandatory or nondiscretionary – it will happen due to existing law, without requiring additional congressional or presidential approval. The major programs in this category include Social Security, Medicare, Medicaid, and some (not all) social welfare programs. Interest on the national debt must also be paid; on Table S-4 note how quickly “Net Interest” begins to rise from 2011 onward.

· Discretionary spending thus accounts for about $1.4 trillion (37% of the FY 2011 budget). Almost 2/3 of this goes to security (national defense plus homeland security), leaving about $500 billion to cover everything else (salaries and all the departments and programs of the executive branch, costs of running Congress and the courts, etc.). Some non-security discretionary funds disappear after FY 2011 (they were part of the economic stimulus package passed in early 2009, which ends this year).

· Presently the U.S. has a progressive income tax system, whereby people who earn more income pay a higher percentage of their income in the form of income taxes. Income taxes comprise 44% of all federal revenues (Table S-4 under Receipts). The other major revenue source is the FICA payroll tax (social insurance and retirement receipts): 6.2% of all income up to about $106,000 to Social Security, and 1.45% of ALL income to Medicare; employers and employees both pay the FICA tax. The FICA tax is more regressive; people earning less than $100,000 pay a higher percentage of their total income than people earning over $100K. Note that individual income tax receipts jump starting in FY 2013 – the G. W. Bush tax cuts that were extended in late 2010 will expire at the end of 2012.

· People may pay less in income taxes if they meet certain criteria. The amount of money the government does NOT receive because people use these deductions and credits is called a tax expenditure. Tax expenditures are generally directed at activities that the federal government wishes to encourage – home ownership is a great example. Not all taxpayers are eligible, however, for the deductions and tax credits; some deductions and tax credits do not apply to people earning sizable incomes, and others are not available to lower income taxpayers who do not have enough deductions to itemize. The total revenue not received due to tax expenditures is now just over $1 trillion each year.

Readings for today

Page and Simmons, “Is American Public Policy Effective?”

Writing from a liberal perspective, these authors document several examples of federal (and sometimes state) public policies that have achieved many of their intended goals. Social Security, despite its long-term funding problems, is one such policy, and since their 2000 article, Medicare has been expanded to include prescription drugs. Two programs aimed at the poorest Americans (food stamps and the Earned Income Tax Credit) are also singled out as effective. This article fits well with the Monday discussion of rational versus incremental strategies – many programs that began with rational goals, and that succeeded in addressing perceived problems, over time are reviewed only incrementally and thus may lose some of their effectiveness.

New York Times, “Health Care Reform: A Summary”

This overview discusses the steps leading up to congressional approval of health care reform in 2010, including Republican alternatives and recent efforts to challenge the new law in Congress and the courts.

Questions for today

1. Considering Page and Simmons, as well as the budgetary data we have examined, should the United States federal government do more to help its citizens, and if so what more should be done? Will Americans support “big government” doing more than it does now?

2. Considering health care reform, was the policy model that led to the bill’s passage in 2010 rational or incremental?

3. What issue network players are discussed in the health care reform article? Which ones seem most influential in shaping the bill’s details and securing passage?

4. Why did the health care reform bill pass?

5. Why is public support for health care reform so mixed, almost a year after passage? Where does this issue go in the next 3-5 years?