Introduction to US Domestic Policy and Economic Distinctions

Categories of United States Public Policy

• The federal government of the United States is fundamentally involved in three broad areas of public policy:
  • Domestic Policy: Internal affairs and programs that affect the population within the nation's borders.
  • Economic Policy: Management of the nation's financial systems, taxation, and budgeting.
  • Foreign Policy: The strategy and interactions of the United States with other nations and international organizations.

Conceptual Foundations: Inequality, Equality, and Equity

• Inequality is defined as the extent to which one group enjoys more political, social, or economic benefits than another group in society.
• There are two primary recognized types of inequality that policy seeks to address:
  • Inequality of Opportunity: A form of inequality in which laws or specific actions deny certain groups the political, social, or economic benefits available to other groups. It is fundamentally about the inability to compete on a level footing or start from the same "starting line."
  • Inequality of Outcome: A form of inequality in which social or demographic forces (rather than specific laws) cause one group to enjoy more benefits than another. This focuses on the "ending point" or final result of social and economic competition.
• Policies aimed at addressing these inequalities differ in their approach:
  • Equality: Focuses on alleviating distinctions or disadvantages in opportunity by guaranteeing a "level playing field" and a uniform starting point for all individuals.
  • Equity: Focuses on ensuring that individuals who put in similar amounts of effort and start from similar places end in similar places. Equity programs aim to address the ending outcomes and the social forces that skew them.
• Key distinction: Equality often involves changing laws to prevent unequal distribution, whereas Equity often attempts to alleviate outcomes created by pervasive social or demographic forces that may exist even in the absence of discriminatory laws.

Federal Budgetary Distinctions: Mandatory and Discretionary Spending

• Mandatory Spending: Government spending that is automatically set aside and accounted for. This is money that the federal government is legally required to spend on specific programs.
  • These are often referred to as entitlement programs, which guarantee support to individuals who meet specific qualifications.
  • For Fiscal Year $2019$, mandatory spending accounted for more than half ($62\%$) of all federal spending.
  • Major components of mandatory spending include:
  • Medicare, Medicaid, health insurance premium tax credits, and the Children's Health Insurance Program (CHIP): Collectively account for approximately $36\%$ of mandatory spending.
  • Social Security: Accounts for approximately $27\%$ (or $26.5\%$ to $27\%\,$) of mandatory spending.
• Net Interest: Interest payments on the debt held by the US government. For Fiscal Year $2019$, this accounted for $8\%$ of total federal spending.
• Combined Fixed Spending: Between mandatory spending ($62\%\,$) and net interest ($8\%\,$), approximately $70\%$ of the federal budget is "already baked in" and cannot be easily adjusted by Congress during annual budget debates.
• Discretionary Spending: Government spending that Congress must authorize each year through new legislation.
  • This accounts for the remaining $30\%$ of the federal budget.
  • Budgetary battles and political gridlock typically focus exclusively on this $30\%$ chunk of the budget, as the other $70\%$ is legally required.

Program Eligibility Models: Universal and Means-Tested

• Universal Programs: Government assistance programs that apply to all individuals within a specific group regardless of their personal economic need.
  • Primary Example: Medicare. Generally, any retired individual aged $65$ or older qualifies for Medicare regardless of their savings or passive income level.
• Means-Tested Programs: Government assistance programs available only to individuals based on an economic formula. This formula typically compares familial income against the federal poverty line.
  • Primary Example: Medicaid. This is a health insurance program available only to individuals who are economically needy and fall within a certain income range relative to the poverty line.

Defining Poverty and the Federal Poverty Line

• Poverty is the state of being without the socially acceptable amount of money or material possessions for the society in which one lives. Standards for what is "socially acceptable" vary significantly by country.
• The Federal Poverty Line is the specific threshold determined by the United States government as the bare minimum income an individual or family needs to survive on a minimum amount of food, housing, and clothing.
• The poverty line is reassessed annually to adjust for inflation and changes in the cost of goods and services.
• Thresholds based on household size (Yearly Income):
  • Individual ($1$ person): $\$14,580$
  • Family of $5$: $\$35,140$
• Geographic Inequity: The poverty line is set as a uniform federal standard. It applies the same way in highly expensive cities like San Francisco or New York City as it does in less expensive areas like Martin, Tennessee, or the state of Kansas (noted as the most recession-proof state).
• Specific Anecdote: The speaker describes living on a graduate school stipend of $\$14,000$ a year in Atlanta. Because Atlanta is significantly more expensive than Martin, the experience of being near the poverty line differed greatly than it would have in a more affordable region, despite the federal definition being identical for both locations.