Domestic Policy Essentials Notes

Domestic Policy Essentials

Definition: The government’s use of taxing, monetary, and spending powers to manipulate the economy.
Purpose: To counteract the business cycle (e.g., stimulating the economy or counteracting inflation).

Historical Revenue Sources: In the 1800s, revenue primarily came from tariffs on imported goods; now, it mainly comes from income tax.
Goals of Federal Tax System:
- Raise government revenue.
- Achieve income redistribution, reducing wealth disparities.
- Reward investments through tax deductions for business expenditures.

Progressive Tax: Tax rate increases with higher income brackets, contrasting with regressive taxes that burden lower incomes more.
Current Trends: The individual and corporate income tax systems have grown less progressive over time.

Budget Deficit: Amount whereby government spending exceeds revenue within a fiscal year, contributing to national debt.
National Debt: Total amount borrowed by the government over time.
Subsidies: Government grants to support specific economic sectors.
Budgeting Bodies:
- Office of Management and Budget (OMB) prepares the president’s budget.
- Congressional Budget Office (CBO) supports Congress with reliable cost and economic impact information.

Definition: Regulatory efforts to control the economy through the money and credit supply.
Federal Reserve System: Composed of 12 banks managing cash exchanges and regulating member banks.
- Responsibilities: Ensure high employment and price stability.
- Leadership: Comprised of seven members appointed by the president, confirmed by the Senate.

Purpose: Government regulation to control monopolistic firms in the market.
Monopoly Definition: A firm controlling an entire market, eliminating competition.
Economic Regulation Trends: Increased in the 20th century, with some deregulation in the 1980s-1990s, particularly by Republican presidents.

Historical Perspective: Pre-1929, limited government intervention was largely accepted (laissez-faire capitalism).
Keynesian Economics: Advocated by John Maynard Keynes, emphasizes government’s role in stimulating demand via public spending or tax cuts.
Opposition: Shift in the 1980s with Republican interest in supply-side economics and lower taxes, contrasting continued Democratic support for active government roles.

Definition: Policies that promote economic and social well-being of citizens.
Categories of Social Policy:
- Contributory Programs: Funded by contributions from current or future recipients (e.g., Social Security, Medicare).
- Noncontributory Programs: Based on need, not prior contributions (e.g., TANF, Medicaid).
- Tax Expenditures: Benefits provided through tax breaks (e.g., deductions for mortgage interest).

Social Security: Provides cash benefits after retirement or disability; adjusted for cost of living (COLAs).
Medicaid: Health services for low-income individuals, significantly expanded since 1965.
Supplemental Nutrition Assistance Program (SNAP): Largest anti-poverty program offering food assistance.

Objective: Ensuring all individuals can reach their potential regardless of socio-economic background.
Key Policies: Education, health, and housing policies.

Federal Involvement: Increased post-WWII; significant laws include NDEA (1958) and ESEA (1965).
Impact of NCLB (2001): Aimed for improved standards, generated considerable debate.
Subsequent Reforms: Successful adjustments by the Obama administration, including passage of the Every Student Succeeds Act.

Major federal programs include the GI Bill for veterans and Pell Grants for low-income students; however, state funding has declined.

Key institutions: U.S. Public Health Service, National Institutes of Health (NIH), CDC.
Major developments include the Affordable Care Act (2010) with significant provisions affecting health access for low-income populations.