Ch.17 Domestic Policies

Earned Income Tax Credit (EITC)

A provision in the U.S. Tax Code that allows low-income individuals with at least one child to claim a credit against taxes owed or, for some, to receive a direct cash transfer from the IRS.

depression

A severe and persistent drop in economic activity.

progressive taxation

A tax system in which higher-income individuals are taxed at a higher rate than those who make less.

regressive taxation

A tax system in which lower-income individuals are taxed at a higher rate than those who make more.

monetarists

Advocates of a minimal government role in the economy, limited to managing the growth of the money supply.

Keynesians

Advocates of government programs to stimulate economic activity through tax cuts and govern-ment spending.

budget deficit

Occurs when the government is bringing in less money than it is spending.

budget surplus

Occurs when the government is bringing in more money than it is spendin

17.2 Analyze the goals and tools of economic policy making.

Policy makers try to achieve a number of objectives with economic policy, including stimulating economic growth, controlling inflation, maintaining a positive balance of trade, budgetary discipline, avoiding negative externalities, and ensuring a vibrant economy. Fiscal policy refers to the overall spending and taxing impact of the federal government. Policy makers can use spending and taxing to stimulate economic activity—by increasing spending and/or cutting taxes—or slow it down—by cutting spending and/or increasing taxes. Fiscal policy, however, is not very flexible. Monetary policy refers to Federal Reserve policies that influence the availability and cost of credit in the overall economy. The Fed uses these tools to expand credit when the economy is stalled or in decline and to shrink credit when inflation becomes a problem

Children's Health Insurance Program (CHIP)

Program that pays for health care services for children in households above the poverty line but below 133 percent to 400 percent of the poverty line, depending on the state.

means-tested programs

Social insurance programs that require recipients demonstrate need before getting benefits.

payroll tax

Tax levied on salaries and wages for Social Security and Medicare.

discretionary spending

That part of the federal budget that is not tied to a formula that automatically provides

17.6 Explain the key provisions of the Affordable Care Act and the challenges it has faced

The ACA was a major reform of the U.S. health care system that originally required everyone to have health insurance (either from the employer, the government, or purchased on their own). The insurance mandate was removed in 2017. To help make insurance more affordable to many, the ACA subsidizes individuals and small businesses who cannot afford to buy private health insurance and funded the expansion of Medicaid. The ACA made it so that insurance companies are no longer allowed to deny coverage to people with preexist-ing conditions or to place lifetime limits on benefits. Since its passage, the ACA has faced a number of obstacles including constitutional challenges to the insurance mandate, the Medicaid expansion, and its coverage requirements. The Republican controlled congress in concert with the Trump administration, have worked to limit the effectiveness of the ACA.

17.7 Compare and contrast systems of social safety nets across countries

The American welfare system is considerably different from those of other rich democracies. The United States system is smaller, less comprehensive, less redistributive, and tilted more toward the benefit of the elderly. Structural and political linkage factors explain most of the differences. Federalism and the decentralization of power in our constitutional system are important in this story, as is the prevailing political culture that celebrates individualism and is uncomfortable with big government. The power of business and the weakness of organized labor are also important

17.1 Explain the reasons for federal involvement in economic and societal affairs.

The Constitution provides that the government is respon-sible for providing for "the general welfare." The normal operations of a market economy produce an abundance of problems that people want government to alleviate. Wealthy democracies have safety net programs that help to ensure minimum standards of living and protect against loss of income from economic instability, old age, illness, disability, and family disintegration.

balance of trade

The annual difference between payments and receipts between a country and its trading partners.

appropriations committees

The committees in the House and Senate that set specific spending levels in the budget for federal programs and agencies.

Affordable Care Act (ACA)

The far-reaching health care reform law passed in 2010. The Act was aimed at increasing access to health insurance for all Americans and driving down the rising, burdensome cost of health care in the United States.

17.3 Identify the components of the federal budget, and analyze the problems associated with the national debt

The federal budget is the detailed accounting of how government spends and receives money. It includes expenditures on all government programs and revenues from taxes and other sources. 526 FEDERAL SAFETY NET PROGRAMS 17.5 Describe the major federal safety net programs and assess their effectiveness. The major distinction among safety net programs is between programs that are based on insurance principles (Social Security and Medicare) and means-tested pro-grams (SNAP and Medicaid) that are based on need. Federal government outlays cover a very broad range of programs, including national defense, social insurance such as Social Security and Medicare, safety net programs for the poor such as Medicaid and food stamps, subsidies to various businesses such as agriculture and oil and natural gas, scientific research and higher education, food and drug safety regulation, and more. Government receipts mainly come from income, payroll, corporate, and excise taxes. The deficit is the annual difference between govern-ment outlays and government receipts. Annual deficits have grown dramatically in recent years. The national debt is the total of what the U.S. government owes to individuals, firms, and governments to pay for the sum total of annual deficits. The national debt has grown most dramatically during war and economic crises, including the recent Great Recession. More than half of the federal budget is taken up by mandatory spending—spending that occurs based on formulas and not annual decisions by Congress.

17.4 Explain government regulation and why regulations change

The federal government plays an important regulatory role where markets do not operate to protect the public; these include things like food, drug, and product safety; the many unsafe and exploitative practices of financial institutions; air and water pollution; deep-water oil drilling; and regulation of utility rates where companies have monopoly power. The deregulation fervor of the 1980s and 1990s was halted by the reaction to the flood of unsafe products from abroad, the collapse of the financial system because of the unregulated practices of many of its leading firms, and the oil spill disaster in the Gulf of Mexico, and the demand that government do more to protect the public. In the Trump era we are seeing renewed pushes for deregulatio

negative externalities

The harmful effects of economic activities on third parties.

17.5 Describe the major federal safety net programs and assess their effectiveness

The major distinction among safety net programs is between programs that are based on insurance principles (Social Security and Medicare) and means-tested pro-grams (SNAP and Medicaid) that are based on need. Social insurance programs like Social Security, Medicare, and unemployment compensation are funded by a payroll tax on the earnings of individuals who may receive benefits; such benefits are based on their lifetime contributions. Social Security and Medicare have proven very successful and are highly popular. Both programs primarily benefit older Americans. Means-tested programs distribute benefits on the basis of need to those who can prove that their income is low enough to qualify. These programs are funded by general income tax revenues. The United States reformed its welfare program in 1996. TANF has been successful in shrinking the welfare rolls, but the degree to which it has helped lift former recipients out of poverty has not been impressive

deregulation

The process of diminishing regulatory requirements for business.

entitlement

entitlement