US Public Policy Process, Social & Economic Policy

Definition & Scope of Public Policy

• Thomas Dye’s concise definition: “policy is whatever government chooses to do, or not do.”
  • Emphasises both action and inaction as policy.
• Policy = the concrete outcomes of the institutional interactions we studied all term (House/Senate bargaining, party competition, presidential-congressional relations, Supreme Court review, voter feedback, etc.).
• Core of most U.S. political debate: what government ought to do.
  • Historical thread: Federalists vs. Democratic-Republicans (Hamilton vs. Jefferson) already fought over federal capacity.
  • These are normative questions (values, “shoulds”) rather than purely empirical questions.

The Systems⁠/⁠Stages (Policy Cycle) Model

• Dominant conceptual framework in policy studies (aka systems model or stages model).
• Policy emerges from the interaction of “government actors” + “surrounding context.”
• Canonical cycle:
  1. Agenda-Setting
  2. Policy Formation → (culminates in Policy Adoption)
  3. Implementation
  4. Monitoring / Data Collection
  5. Evaluation
  • Cycle is iterative: evaluation feedback must re-enter both the public and policy agendas for change to occur again.

Stage 1 – Agenda-Setting

• Public agenda = issues broadly salient to voters, media, activists.
• Policy agenda = subset that actually commands attention of elected officials.
  • Often overlap, but not identical. Many “viral” topics never reach formal debate.
• Transition mechanisms (public → policy agenda):
  • Policy advocates / entrepreneurs (legislators, individual champions).
  • Lobbyists & interest groups (mobilise resources, frame problems).
  • Think-tanks & policy analysts (produce research, craft solutions).
  • Congressional Budget Office (CBO) “scores” proposals (e.g., $10$-year cost projections) – key gatekeeper.
• Context of jump matters: sudden crises → fast, sweeping policy; slow “boil” issues → incremental policy.

Stage 2 – Policy Formation & Adoption

• Competing courses of action debated; some proposals may directly contradict others.
• Policy adoption = authoritative decision committing government to a course:
  • Most familiar: passage of a bill by Congress.
  • Also occurs through Supreme Court rulings, executive orders, bureaucratic rule-making, regulatory changes, etc. – all legally binding.

Stage 3 – Implementation

• Translation of statute/rule into on-the-ground reality.
• Two classic approaches:
  • Top-down: directives originate at highest level, cascade downward.
  • Bottom-up: frontline implementers innovate first, lessons filter upward.
• Debates over which is more efficient fall under Public Administration research.

Stage 4 – Monitoring (Data Collection)

• Continuous observation by agencies, GAO, CBO, think-tanks, advocacy groups.
• Aim: quantify impact, efficacy, efficiency over $ext{years}$, not days.

Stage 5 – Evaluation

• Formal assessment: Did policy solve, mitigate, exacerbate, or ignore the problem?
• Tools: GAO audits, inspector-general reports, external evaluations, academic studies.
• For redesign, findings must re-enter public + policy agendas → cycle restarts.

U.S. Social Policy – Historical Evolution

Constitutional Root

• Preamble lists promotion of the “general welfare.” For $ext{19}^{\text{th}}$ century, states handled most welfare tasks.

The New Deal (Great Depression, FDR, $1930\text{s}$)

• First federal-level, broad-spectrum social policy response.
• “Alphabet-soup” agencies tackled jobs, banking, farms, housing.
• Signature statute: Social Security Act ($1935$).

Social Security – Design & Mechanics

• Dual insurance + assistance program.
  • Funding: payroll deductions under FICA (employee + employer contributions withheld pretax).
  • Benefits:
  • Old-Age Insurance: eligible after $10$ years of contributions and age $65$ (higher benefits if you delay; reduced benefits possible at $62$).
  • SSDI: disability payments for qualifying disability until age $65$ (then convert to old-age category).
  • SSUI: federal-state unemployment insurance up to $39$ weeks (state decides duration; e.g., Oklahoma currently $24$ weeks, previously $13$ pre-pandemic).
• Solvency challenges:
  • Longevity ↑ since $1935$.
  • Large Baby-Boom cohort moving from contributor → beneficiary; worker-to-retiree ratio ↓.
  • $1990\text{s}$: federal borrowing from SS Trust Fund not yet repaid.
• Politically popular – deemed the “third rail” (touch it and you “die”).

Unfulfilled New Deal Health-Care Goal

• FDR tried, failed to add health coverage.
• Truman (post-FDR) lobbied $\approx 8$ years, still stalled.

The Great Society & War on Poverty (LBJ, elected $1964$)

• Comprehensive anti-poverty campaign; cornerstone = health-care coverage.

Medicare ($1965$)

• Single-payer, federal-funded insurance for seniors.
  • Eligibility: age $\ge 65$ and $\ge 10$ years payroll contributions (spousal contributions count); earlier access with disability.
  • Coverage parts: hospital, physician, prescription, vision, etc.; some parts accessible pre-$65$.
  • Current enrolment $\approx 55{,}500{,}000$; extremely high satisfaction.

Medicaid ($1965$)

• Means-tested (income-tested) joint federal-state program.
  • Must cover residents at/under federal poverty line (FPL); states may raise threshold.
  • Additional eligibility: children <18, certain disabilities.
  • States administer; program names vary (e.g., “SoonerCare” in Oklahoma).
  • Today serves $\approx 70{,}000{,}000$ people; $\approx 65\%$ of U.S. births paid by Medicaid.
  • Less popular politically (no “earned premium”).

FPL Example ($2021$)

• Single adult poverty line = $\$12{,}880$.

• Pre-ACA Medicaid minimum: $75\%$ FPL ⇒ $\$9{,}660$.

• ACA expansion: $138\%$ FPL ⇒ $\$17{,}774$ (single) or $\$36{,}570$ (family of $4$).

• State expansion map: most states (dark blue) adopted; hold-outs (orange) still considering.

  • Financial logic (per Gov. John Kasich): federal government covers $100\%$ of new costs initially – “they backed a dump-truck of money up to my state.”

CHIP (Children’s Health Insurance Program, $1990\text{s}$, Clinton)

• Targeted low-cost coverage for children, recognising $0$-$5$ health access ↑ lifelong outcomes.

Patient Protection & Affordable Care Act (ACA, $2010$)

• Goals: (a) increase coverage quantity; (b) raise minimum quality standards.
• Key mechanisms:
  1. Individual mandate: taxpayers must attest to monthly coverage; no exemption ⇒ Shared Responsibility Payment equal to lowest-cost plan for that person in state.
  2. Employer provisions:
  • Large employers: must insure all full-time workers.
  • Small employers: receive tax credits for coverage offered.
  1. Medicaid expansion to $138\%$ FPL (states choose to accept generous federal match).
  2. Subsidised Marketplaces: online “exchanges” showing standardised Bronze/Silver/Gold/Platinum plans.
  3. Premium tax credits for individuals $100\%$–$400\%$ FPL (sliding-scale).
• Nickname “Obamacare” originated as pejorative; official name remains ACA.

Economic Policy

Two Branches

1. Fiscal Policy – taxing & spending decisions (Congress + President).
2. Monetary Policy – money supply & interest-rate management (Federal Reserve).

Monetary Policy (Federal Reserve System)

• Governance: $7$ governors + chair, presidentially appointed, long staggered terms → insulation from partisan swings.
• Primary dual mandate: maximise employment & moderate inflation.
• Main tools:
  1. Open-market operations: buy bonds (inject $→ economy grows); sell bonds (drain$ → slow growth).
  2. Reserve requirement (fractional reserve ratio): lower ratio ⇒ banks can loan more; raise ⇒ less lending.
  3. Discount / federal-funds rate: Fed loans to banks; rate ↓ ⇒ cheaper credit, borrowing ↑; rate ↑ ⇒ borrowing ↓ (used heavily $2022$-$2024$ to counter post-COVID inflation).

Fiscal Policy Details

Progressive vs. Regressive Taxation

• Progressive tax: higher income ⇒ higher marginal rate.
• Regressive tax: burden proportionally heavier on low incomes (e.g., sales taxes, flat taxes).
• U.S. federal income tax is progressive, though less steep than mid-$20^{\text{th}}$ century.

2022 Marginal Brackets (Single Filers)

• $10\%$ on $0$–$10{,}275$
• $12\%$ on $10{,}276$–$41{,}775$
• $22\%$ on $41{,}776$–$89{,}075$
• $24\%$ on $89{,}076$–$170{,}050$
• $32\%$ on $170{,}051$–$215{,}950$
• $35\%$ on $215{,}951$–$539{,}900$
• $37\%$ on >539{,}900
• Marginal = only the dollars within each band taxed at that rate, so raises are never punitive.

Spending Categories

• Mandatory Spending: legally obligated (contracts, entitlements, interest).
  • Examples (latest CBO):
  • Social Security: $\$1\,000\text{ billion+}$
  • Medicare: $\$747\text{ billion}$
  • Medicaid: $\$592\text{ billion}$
  • Cuts require law changes (long phase-in: $10$–$20$ years).
• Discretionary Spending: all else (defense & non-defense programs) – can be cut immediately in annual appropriations.
  • Rough split: Defense $\approx 750\text{ billion}$ vs. Non-defense $\approx 910\text{ billion}$.

Deficit vs. Debt

• Deficit: projected annual shortfall (planned outlays − expected revenue). Example: plan to earn $1{,}000$, spend $1{,}500$ ⇒ $500$ deficit.
• Debt: cumulative realised borrowing once that deficit is actually financed.

Federal Budget Cycle

1. Executive Phase
   • Agencies send requests $12$–$18$ months before fiscal year (FY).
   • OMB consolidates → President submits proposal to Congress $\approx 8$ months before FY (Jan–Feb).
2. Legislative Phase
   • Congress discards/modifies; aims for First Budget Resolution (May $15$) and Second/Final (Oct $1$).
3. Execution Phase
   • FY runs Oct $1$ – Sep $30$; agencies obligate & outlay.
   • GAO performs selective audits.

• No budget by Oct $1$? Government faces shutdown (no appropriation ⇒ no legal spending).
  • Temporary escape hatch: Continuing Resolution (CR) funds govt at prior levels for $x$ weeks.
  • Recent politics: $2023$ CR passage linked to Speaker Kevin McCarthy’s ouster.

Ethical, Philosophical & Practical Threads

• Constant tension between individual responsibility vs. collective provision (e.g., Social Security payroll principle, Medicare’s earned-benefit framing vs. Medicaid’s need-based framing).
• Crisis as catalyst: Great Depression → New Deal; Great Recession/Persistent uninsured → ACA.
• Intergovernmental dynamics: cooperative federalism (Medicaid match), state discretion (coverage thresholds) vs. federal mandates (ACA employer rule).
• Fiscal sustainability vs. political popularity: entitlement reform debates (SS insolvency projections, Medicare cost growth) show clash of economic maths and electoral incentives.
• Equity considerations: regressive vs. progressive taxation; Medicaid’s role in reducing childhood health disparities; ACA market reforms improving pre-existing-condition coverage.

Key Takeaways for Exam

• Memorise 5 stages of the policy cycle & be able to apply examples.
• Distinguish public vs. policy agenda; list principal agenda-setting actors.
• Know Social Security, Medicare, Medicaid, ACA: year, funding mechanism, eligibility, political hurdles.
• Differentiate fiscal vs. monetary tools and responsible institutions.
• Master terms: mandatory vs. discretionary spending; deficit vs. debt; progressive vs. regressive tax; CR; entitlement; Federal Reserve instruments.