Chapter 13

Making Domestic

Policy

1

1. What is the definition of politics?

2. What are the four types of politics?

3. What was Madison’s a priori assumption about human nature?

Enduring Questions

2

Four types of politics

3

Economic terms

Economic systems– Free-market capitalism– Socialism– Mixed

Key processes– Fiscal policy

Revenues Expenditures

– Monetary policy Reserve ratio Rediscount rate Open-market transactions

Performance measures– Debt– Deficit– GDP– Inflation– Unemployment

4

Six biggest sources of federal debt(in alphabetical order)

5

1. Economic downturn

2. Economic recovery measures

3. TARP, Fannie & Freddie

4. Tax cuts (Bush era)

5. Wars in Iraq and Afghanistan

6. Everything else

Six biggest sources of federal debt(relative size)

6

Key players

Legislative branch– Appropriations & finance committees– CBO

Executive branch– CEA– OMB– Treasury– Fed

Judicial branch Interest groups7

Federal Highest Tax Rates(1913-2004)

Source: Updated from Congressional Quarterly Weekly Report, September 18, 1993, p. 2488.

8

Average Personal Income Tax Rates(2006) for Married Couples with Two Children

Source: Organization for Economic Co-Operation and Development (2006).

9

1. Raise retirement age

2. Raise withholding tax rate

3. Raise withholding cap

4. Reduce benefits

5. Privatize investments

Changing Social Security

10

1.Increasing costs

a)People are living longer

b)Higher-priced medical and surgical techniques

2.Waste & inefficiency

a)Bloated overhead charges

b)Paper records

Healthcare problems

11

Patient Protection &Affordable Healthcare Act

1. Extends health care insurance to uninsured Americans

2. Provides federal subsidies to people who have trouble paying

3. Penalizes people who do not buy health insurance

4. Dependent children under age 26 covered by parents’ insurance

5. Adds more people to Medicaid

6. Levies taxes and fees on medical devices, drugs, high-cost health insurance plans, health insurers12

Out-of-pocket healthcare costsU.S. v. 25 other rich nations (2008)

13 Source: http://motherjones.com/kevin-drum/2011/04/skin-game-continued