Public Policy Process essay

These chapters are from the book

Magleby, D. B., Light, P.C, & Nemacheck, C.L. (2015). Government by the People. Boston, MA: Pearson

12 The Federal Bureaucracy and the Public Policy Process: Creating and Executing the Laws

Early in the morning on April 20, 2010, British Petroleum began another test of its new exploratory oil well in the Gulf of Mexico. The well was connected to a floating oil rig called the Deepwater Horizon. Although the rig was considered one of the safest in the industry, methane gas soon surged up the mile-deep pipeline and exploded without warning on the rig. Eleven oil workers were killed in the fire and the Deepwater Horizon began sinking. Torn lose from the rig, the well started spewing oil into the sea, creating the largest oil spill in U.S. history.

The spill was caused by a number of failures, including the rush to start pumping oil. However, the disaster was rooted in what President Barack Obama later called the “cozy relationship” between the federal government’s Minerals Management Service (MMS) and the oil industry. Located within the Department of the Interior, the MMS was responsible for implementing federal laws regulating oil and gas drilling. It set safety standards for offshore oil drilling even as it granted permits that allowed the industry to extract as much oil as possible. As the spill showed, even the most carefully written laws have little effect if the federal bureaucracy does not do its job in helping the president obey the Constitution’s requirement to execute the laws faithfully.

• 12.1 Outline the constitutional roots of the federal bureaucracy, its organizations, and its employees, p. 358.

• 12.2 Analyze the bureaucracy’s implementation options and its effectiveness, p. 365.

• 12.3 Assess presidential and congressional tools for controlling the federal bureaucracy, p. 368.

• 12.4 Relate politics and public policy, and differentiate the three types of public policy, p. 370.

• 12.5 Outline the key steps in making public policy, and assess the different types of policy, p. 372.

• 12.6 Assess ways in which citizens can influence the public policy process, p. 380.

Oil from the Deepwater Horizon failed drilling project burns during the early hours following the explosion that killed 11 workers. The disaster caused the largest oil spill in U.S. history and affected every state along the Gulf Coast.

Confronted with these failures, Obama immediately decided to overhaul the MMS by breaking it into two new agencies, one for assuring safety and the other for granting permits. He accepted the resignation of the political appointee heading the agency and gave the U.S. Coast Guard absolute authority to supervise British Petroleum’s efforts to stop the spill. He also appointed a special commission to investigate the disaster. Finally, Obama promised a new era of accountability in government oversight of the industry.

Under the reorganization, MMS was split into a new Bureau of Safety and Environmental Enforcement and a Bureau of Ocean Energy Management. The first agency was designed to regulate all laws governing deepwater drilling, while the latter was given responsibility to promote oil drilling. By dividing these responsibilities, Congress and the president hoped to avoid the conflicts of interest that encouraged British Petroleum and its partners to move as fast as possible to drill new wells even if that sometimes caused shortcuts in safety.

In this chapter, we examine the origins, functions, and realities of the federal bureaucracy as it works to implement the laws. Strengthening workplace safety, environmental protection, and economic development are all tasks that require government bureaucracy. All were important endeavors when they emerged from Congress and were signed into law by the president as public policies, but they could not become achievements without the bureaucracy. We also explore how governmental departments, agencies, and employees are held accountable to the president, Congress, and the U.S. public. Finally, we examine the overall process for making public policies and the key questions Congress and the president must answer when they decide to create new programs.

Understanding the Federal Bureaucracy: Constitutional Origins, Organizations, and Employees

• 12.1 Outline the constitutional roots of the federal bureaucracy, its organizations, and its employees.

The Framers clearly understood that the new national government would need an administrative system to protect the young Republic from foreign and domestic threats. They also understood that the new departments of government would need talented employees if they were to succeed.

This chapter uses the words bureaucracy and bureaucrats to describe the federal government’s organizations and employees. Although these words are often used as a way to criticize government, a bureaucracy is simply a form of organization that delivers goods and services at the lowest cost through specialization of jobs, close supervision of employees, and clear rules for making decisions. Therefore, we will use the word bureaucracy as a familiar way to describe the federal government’s administrative organizations and employees, but will also refer to government departments and agencies and federal employees whenever possible to make clear that many federal employees and their departments and agencies work hard to meet public expectations for efficient, effective government.

bureaucracy

A form of organization that operates through impersonal, uniform regulations and procedures.

bureaucrat

A negative term for describing a career government employee.

Building the Federal Bureaucracy

Under the Constitution, the federal bureaucracy is responsible for faithfully executing the laws on behalf of the president, Congress, and the judiciary. The Framers gave the president the authority to determine how the bureaucracy would look, although Congress had to approve the actual structure of the departments and agencies through laws. The Framers believed that federal departments and agencies would be relatively small, and they expected Congress to establish the same departments that had existed under the Articles of Confederation, including the departments of war, state, and treasury, and the postal service.1 Nevertheless, the Framers made three key decisions about executing the laws that continue to shape federal administration to this day.

First, the Framers prohibited members of the House and Senate from holding legislative and executive branch positions at the same time. Without this provision, the executive branch would have lost some of its independence.2

Second, the Framers decided to give the president authority to nominate the senior officers of government. At the same time, they gave the Senate authority to confirm or reject the president’s appointees under the Constitution’s “advice and consent” function. They also gave Congress the power to create new departments and agencies through legislation signed by the president, and the power to determine the number of federal employees, the budgets they administer, and the taxes they collect. Nevertheless, the Constitution clearly designates the president as the federal government’s administrator in chief. Once the laws are passed, employees are hired, and budgets and taxes set, the president is responsible for making sure the laws are implemented and obeyed.

As the federal government’s mission grew, so did its bureaucracy. By 2014, the federal bureaucracy was composed of 15 departments, 50 lesser agencies, the U.S. Postal Service, and the three branches of the armed services (Air Force, Army, and Navy). It also employs one of the largest workforces in the world. Nearly 4.5 million people worked for the federal government in 2012, including 700,000 postal workers, more than 2.2 million full-time federal employees, and 1.4 million military personnel. In addition, by the mid-2000s an estimated 7.6 million employees worked indirectly for the bureaucracy under contracts to private firms such as Lockheed Martin and Boeing, while another 3 million also worked indirectly under federal grants to colleges, universities, and state and local governments.3 (See Figure 12.1 for the number of executive branch, military, and legislative and judicial personnel at the start of each decade from 1962 to 2012, and ask whether they suggest that government is too big.)

Types of Federal Organizations

Federal employees work for departments and agencies, which are classified into four broad types: (1) departments, (2) independent stand-alone agencies, (3) independent regulatory commissions, and (4) government corporations.

Departments tend to be the most familiar and largest federal organizations. They also generally have the most extensive missions and biggest budgets.

department

Usually the largest organization in government with the largest mission; also the highest rank in the federal hierarchy.

Alexander Hamilton helped set many of the precedents that govern the federal bureaucracy today. He was a strong advocate of what he called “execution in detail,” which involved detailed regulations that federal employees must follow, and he argued for an expansion in the number of federal employees as the federal government’s mission expanded.

FIGURE 12.1 TOTAL NUMBER OF GOVERNMENT EMPLOYEES BY CATEGORY

• ■ Why has there been such a dramatic decrease in the number of military personnel over time?

SOURCE: U.S. Office of Personnel Management, “Historical Federal Workforce Tables,” 2012, available at http://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports.

Independent stand-alone agencies are also under the president’s control but tend to have fewer federal employees and may have more focused missions than departments. In general, the word “independent” is used to distinguish agencies that exist outside a department from those that operate within a department.

independent stand-alone agency

A government agency that operates outside a traditional government department, but under the president’s direct control.

Independent regulatory commissions are a special kind of independent agency. They are created to insulate the agency from congressional and presidential control through the appointment of a board of commissioners who serve for a fixed term of office.

independent regulatory commission

A government agency or commission with regulatory power whose independence is protected by Congress.

Finally, government corporations are designed to operate much like private businesses and have special authority to set the prices of their services. They are supposed to make money.

government corporation

A government agency that is designed like a business corporation, and is created to secure greater freedom of action and flexibility for a particular program.

We will discuss each of the four types of federal organizations next.

DEPARTMENTS

Departments are the most visible organizations in the federal bureaucracy. Today’s 15 departments employ more than 70 percent of all federal civil servants and spend 93 percent of all federal dollars. Secretaries head 14 of the departments, while the attorney general heads the Department of Justice.

Measured by the total number of employees, the five largest departments are the Defense Department, which governs the armed services; the Department of Veterans Affairs, which helps veterans return to civilian life after military service; the Department of Homeland Security, which helps protect the nation from terrorism, runs the airport screening lines, and manages the response to natural disasters such as hurricanes; the Department of the Treasury, which oversees expenditures and raises revenues through the Internal Revenue Service; and the Department of Justice, which enforces the laws by representing the nation in court cases and investigates crime through the Federal Bureau of Investigation.

Defense, Health and Human Services, Justice, State, and Treasury are considered part of the inner cabinet that is the most important, while the outer cabinet composed of the other ten departments is considered to be less important to the president. Presidents meet with the secretaries of the inner cabinet frequently, but rarely meet with the secretaries of the outer cabinet, and then only when an emergency arises or a key policy issue is under review by Congress or the judiciary.

The 15 federal departments were created using one of three different approaches.

• • The first involves a merger of already-existing agencies into a new organization. In 2003, for example, the Congress merged 22 separate agencies and their 170,000 employees into the Department of Homeland Security. (Figure 12.2 shows the department’s organization chart as of January 1, 2012.)

• • The second approach involves the break-up of an existing department into two or more new departments. In 1979, for example, Congress split the Department of Health, Education, and Welfare into the new departments of Education and Health and Human Services.

• • The third approach involves the elevation of an independent stand-alone agency to department-level status. In 1988, for example, Congress elevated the Veterans Administration to cabinet status as the new Department of Veterans Affairs.

INDEPENDENT STAND-ALONE AGENCIES

The word independent means at least two things in the federal bureaucracy. Applied to a regulatory commission, it means the agency is outside the president’s control. Applied to an agency of government, it merely means separate from a traditional department. Whereas independent regulatory commissions do not report to the president, independent agencies do.

As a general rule, independent stand-alone agencies work on specific problems. Becoming an agency is often the first step toward becoming a department. The Veterans Administration was created in 1930 as an agency, for example, and became a department in 1989. Independent stand-alone agencies are usually headed by an administrator or director, which is the second most senior title in the federal bureaucracy after cabinet secretary. There are more than 50 such agencies today.

FIGURE 12.2 THE DEPARTMENT OF HOMELAND SECURITY

• ■ What are the benefits and drawbacks of having all of these organizations housed within one department?

The spread of independent stand-alone agencies can add to confusion about who is responsible for what in the federal government. For example, the federal government has more than 15 different intelligence agencies, which include the CIA, the Defense Intelligence Agency, the FBI, and the National Security Agency. These agencies had a history of keeping secrets not only from the people but also from each other, which contributed to the intelligence failures leading up to the war in Iraq. In late 2004, Congress created an Office of the Director of National Intelligence to oversee the intelligence community.

INDEPENDENT REGULATORY COMMISSIONS

Independent regulatory commissions have a measure of independence from both Congress and the president. By definition, these commissions are headed not by a single executive but by a small number of commissioners appointed by the president, with Senate confirmation, for fixed terms of office. Although the president appoints all independent regulatory commissioners and the Senate confirms each one separately, they have fixed terms of office and are sworn to uphold the Constitution. Unlike other presidential appointees, however, commissioners cannot be removed from office without cause, which is defined by law to mean inefficiency, neglect of duty, or unethical behavior. As a result, independent regulatory commissions are generally insulated from political pressure.

Congress has created dozens of independent regulatory commissions with the power to protect consumers (the Consumer Product Safety Commission), regulate stock markets (the Securities and Exchange Commission), oversee federal election laws (the Federal Election Commission), monitor television and radio (the Federal Communications Commission), regulate business (the Federal Trade Commission), control the supply of money (the Federal Reserve Board), and watch over nuclear power plants (the Nuclear Regulatory Commission). Independent regulatory commissions are not completely independent, however. The president and Congress must approve their annual budgets, and their decisions are subject to judicial review. Moreover, presidents often nominate commissioners on the basis of party loyalty, which means that commissions can be highly political.

Independent regulatory commissions tend to be much less visible than departments until a crisis occurs. The Securities and Exchange Commission (SEC) was on the front pages for three years, for example, as one corporation after another disclosed accounting fraud in their annual reports to investors. The SEC was created in the 1930s to restore investor confidence in the stock market after the Great Depression, but it was accused of being negligent in monitoring accounting practices at big companies such as Enron and WorldCom in the early 2000s, and not discovering the financial scandals that led to the 2008 financial collapse.

The giant investment firm Goldman Sachs came under fire for its behavior in the 2008 economic collapse. It was accused of betting against investment packages that it sold to clients, which allowed the firm to make money even as its clients lost. Congress began investigating the lack of federal oversight of the action in 2010, but the firm had not been punished for its behavior by 2012.

GOVERNMENT CORPORATIONS

Government corporations are the least understood organizations in the federal bureaucracy. Because they are intended to act more like businesses than like traditional government departments and agencies, they generally have more freedom from the internal regulations that control traditional agencies. They often have greater authority to hire and fire employees quickly and are allowed to make money through the sale of services such as train tickets, stamps, or home loans.4

Government corporations cover a wide range of policy issues such as public radio and television (the Corporation for Public Broadcasting), mail delivery (the U.S. Postal Service), train travel (the National Railroad Passenger Corporation, which is better known as Amtrak), and national service (the Corporation for National and Community Service), and a host of financial enterprises that make loans to banks and other institutions (the Federal National Mortgage Association, or Fannie Mae).

Types of Federal Employees

The federal civilian workforce is composed of three different types of employees: (1) presidential appointees who run the bureaucracy and make major policy recommendations to the president and Congress; (2) members of the Senior Executive Service who help translate policy into action; and (3) members of the civil service who implement policy under the direction of presidential appointees and senior executives. (A full picture of the federal workforce would also include military personnel, but we will focus on civilian employees here.)

PRESIDENTIAL APPOINTEES

Roughly 3,000 presidential appointees head federal departments and agencies, including 600 administrative officers subject to Senate confirmation and another 2,400 who serve “at the pleasure of the president,” which means they are appointed by the president without Senate confirmation. The president also appoints another 1,000 U.S. marshals, U.S. attorneys, and ambassadors to foreign nations, all subject to Senate confirmation, but two-thirds of these positions are given to high-level civil servants. As the president’s handpicked team, all of these presidential appointees submit their resignations at the end of the president’s final year in office.

THE SENIOR EXECUTIVE SERVICE

Presidential appointees work closely with the 7,000 members of the Senior Executive Service, which includes roughly 6,400 career executives appointed through a rigorous review process and another 600 presidential appointees who serve at the pleasure of the president. Except for the 600 political executives who are appointed for a limited time on the basis of their loyalty to the president, members of the Senior Executive Service are selected through a highly competitive process that emphasizes their skills as managers.

Senior Executive Service

Established by Congress in 1978 as a flexible, mobile corps of senior career executives who work closely with presidential appointees to manage government.

OF the People: Diversity in America: The Federal Workforce

The federal bureaucracy is more representative of the public now than it was in the 1950s, when most of its employees were white and most female employees were clerk-typists. Women held 44 percent of all federal jobs at the end of 2013, whereas minorities held slightly more than one-third at 34 percent.

Even though the number of women and minorities in the federal workforce is at an all-time high, both groups still face barriers in rising to the top. First, women and minorities are not equally represented in all departments and agencies. They tend to be concentrated in departments with strong social service missions such as Education, Health and Human Services, Housing and Urban Development, and Veterans Affairs. Military and technical departments such as Defense, Energy, and Transportation have far fewer women employees.

Second, women and minorities are not represented at all levels of the federal bureaucracy. Women held two-thirds of lower-paying technical and clerical positions in 2013, and minorities were also heavily represented at the bottom of government. Together, women and minorities held barely 15 percent of the top jobs. Nevertheless, they are moving into the top jobs at a fast rate, largely because so many older, white males are retiring, which has created space for women and minorities.

QUESTIONS

• 1. Why should the federal bureaucracy try to recruit more women and minorities to its top jobs?

• 2. Does increasing diversity improve the bureaucracy’s ability to implement policy?

• 3. Why is the percentage of women in the federal workforce below the percentage of women in the rest of the economy? How can the bureaucracy enhance diversity in scientific and technical fields?

SOURCE: Information assembled from U.S. Office of Personnel Management reports on federal employees, available at http://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/.

THE CIVIL SERVICE

The Framers understood that the new federal government would need employees, and that many of these employees would select government for their career. The Framers believed that this civil service would outlast each administration, thereby maintaining the “institutional memory” of government.

civil service

Federal employees who work for government through a competitive, not political selection process.

For the first 100 years, however, members of the federal civil service were selected largely because of their party loyalty. President Andrew Jackson substantially expanded this “to-the-victor-belong-the spoils” system after his election in 1829. Jackson believed that every job in government was a potential opportunity for employing his political allies.

Jackson’s spoils system gave the president’s party complete control over almost every government job, from cabinet secretaries down to post office clerks. Under this method of patronage, presidents would patronize, or support, their allies by providing jobs and other benefits after an election. In 1883, Congress abolished the spoils system in favor of today’s merit system. Under the merit system, employees are selected on the basis of their qualifications for the position, not their political connections.5

spoils system

A system of public employment based on rewarding party loyalists and friends.

patronage

The process of awarding favors to the party in power.

merit system

A system of public employment in which selection and promotion depend on demonstrated performance rather than political patronage.

Ninety percent of federal employees are now selected on the basis of merit. Nearly all the rest are selected through hiring systems that emphasize a special skill such as medicine. The Office of Personnel Management (OPM) administers civil service laws and regulations, whereas the independent Merit Systems Protection Board is charged with protecting the integrity of the federal merit system and the rights of federal employees.

Office of Personnel Management (OPM)

An agency that administers civil service laws, and regulations.

Merit Systems Protection Board

An independent agency that oversees and protects merit in the federal government personnel system.

Under Office of Personnel Management regulations, most prospective government employees apply for jobs by identifying a job through the USA jobs Web site, submitting a formal application, and taking a civil service test. Some also must also be reviewed for a security clearance if their jobs involve access to secret information.

Federal organizations must keep careful records about each candidate and justify their decisions when challenged. Federal organizations must also give veterans special consideration for most jobs and ensure that all jobs are filled through a truly competitive process. Many federal jobs also involve a test of some kind to prove the merit of their choice.

Since 1962, federal civilian employees have had the right to form unions or associations that represent them in seeking to improve government personnel policies, and approximately one-third of them have joined such unions. Some of the most important unions representing federal employees today are the American Federation of Government Employees, the National Treasury Employees Union, the National Association of Government Employees, and the National Federation of Federal Employees.

Unlike unions in the private sector, federal employee unions lack the right to strike and are not able to bargain over pay and benefits. But they can attempt to negotiate better personnel policies and practices for federal workers, they can represent federal employees at grievance and disciplinary proceedings, and they can lobby Congress on measures affecting personnel changes. They can also vote in elections. This is why members of Congress from districts with large numbers of federal workers often sit on the House and Senate civil service subcommittees.

Regulating Employee Conduct

Because federal employees administer so many laws that can affect election outcomes, they are subject to tight regulation regarding most forms of political participation. In 1939, Congress passed the Act to Prevent Pernicious Political Activities, otherwise known as the Hatch Act. Under the original act, federal civil servants were prohibited from raising money for candidates, wearing campaign buttons, and even putting “vote-for” signs on their lawns. They were also prohibited from running for political office.6

Hatch Act

A federal statute barring federal employees from active participation in certain kinds of politics and protecting them from being fired on partisan grounds.

The National Treasury Employees Union represents thousands of federal employees who work within government. Although it started out as a union for Treasury Department employees, it has expanded throughout the years.

Under pressure from federal employee unions, Congress overhauled the Hatch Act in 1993 to permit greater political participation. The revised act still bars federal officials from running for political offices at the federal, state, or local level, but does permit most federal civil servants to hold party positions and involve themselves in party fundraising and campaigning. Many advocates of this policy change argued that the old act discouraged political participation by two million people who might otherwise be vigorous political activists.7

But the new Hatch Act also contained many restrictions on federal employees: they still cannot raise money for candidates when they are at work, and those employed in highly sensitive federal agencies such as the Central Intelligence Agency, the Federal Bureau of Investigation, and certain divisions of the Internal Revenue Service are specifically barred from nearly all political activity on behalf of a candidate or party. In August 2012, for example, two senior managers at the Federal Aviation Administration were disciplined for telling their employees that Mitt Romney would cut their jobs, while Obama would not. These messages clearly violated the Hatch Act’s rules against campaign activity.

The Job of the Federal Bureaucracy

• 12.2 Analyze the bureaucracy’s implementation options and its effectiveness.

Whatever their size or specialty, all federal organizations share one constitutionally mandated job: to faithfully execute, or implement, the laws, which is part of the overall process for implementing the public policies discussed later in this chapter.

Implementation is the act of converting a policy into action. It covers a broad range of activities, such as writing checks at the Social Security Administration, inspecting job sites for the Occupational Safety and Health Administration, swearing in new citizens at the Immigration and Naturalization Service, or monitoring airline traffic for the Federal Aviation Administration.

implementation

The process of putting a law into practice through bureaucratic regulations or spending.

Because Congress and the president could never pass laws detailed enough to deal with every aspect of their administration, they give federal departments and agencies administrative discretion to implement the laws in the most efficient and effective manner possible. This freedom varies from agency to agency, depending on both past performance and congressional politics. Political scientist Theodore Lowi believes that Congress often gives the federal bureaucracy vague directions because it is unable or unwilling to make the tough choices needed to resolve conflicts that arise in the legislative process. Congress gets the credit for passing a law, but the federal workforce gets the challenge of implementing it.

administrative discretion

Authority given by Congress to the federal bureaucracy to use reasonable judgment in implementing the laws.

Whether a law is clear or ambiguous, most agencies implement its provisions through three means: (1) writing administrative regulations for enforcing the laws, which are produced through the rule-making process, (2) collecting revenues from individuals and corporations through taxes and achieving national goals by rewarding specific activities such as giving to charity and buying a home, and (3) spending money for specific programs such as benefits to individuals through Social Security and Medicare, and hiring employees such as military personnel.

regulation

A precise statement of how a law is implemented.

rule-making process

The detailed process for drafting a regulation.

Making Regulations

Regulations are designed to convert policies into action by providing detailed instructions to government and the nation. These regulations tell citizens, corporations, and government itself what they can and cannot do, as well as what they must or must not do. An Agriculture Department rule tells meat and poultry processors how to handle food; an Environmental Protection Agency rule tells automobile makers how much gasoline mileage their cars must get; a Social Security Administration rule tells workers how long they must work before they are eligible for a federal retirement check; a Citizenship and Immigration Service rule tells citizens of other nations how long they can stay on a student visa; and a Justice Department rule tells states what they must do to ensure that every eligible citizen can vote.

FIGURE 12.3 PAGES IN THE FEDERAL REGISTER

• ■ Why does the Federal Register grow over time?

SOURCE: U.S. Office of the Federal Register, “Federal Register Pages Published Annually.” The 2013 number is based on the length of the Federal Register on December 31, 2013.

Regulations are drafted and reviewed under the Administrative Procedure Act of 1946, which is widely considered to be one of the most important laws regulating the bureaucracy in U.S. history. The act requires that all proposed regulations be published in the Federal Register. Publication marks the beginning of the “notice and comment” period, during which all parties affected by the proposed regulation are encouraged to make their opinions known to the agency. As we will discuss later in the public policy section of the chapter, the process can take years from start to finish and consume thousands of pages of records. Some agencies even hold hearings and take testimony from witnesses in the effort to build a strong case for a particularly controversial rule.

Federal Register

An official document, published every weekday, that lists the new and proposed regulations of executive departments and regulatory agencies.

The rule-making process does not end with final publication and enforcement. All regulations are subject to the same judicial review that governs formal laws, thereby creating a check against potential abuse of power when agencies exceed their authority to faithfully execute the laws. As Figure 12.3 shows, the number of pages in the Federal Register has increased dramatically since the 1930s.

Raising Revenue

The federal bureaucracy is responsible for collecting all revenue, including individual and corporate income taxes, payroll taxes for Social Security, Medicare, disability programs, and unemployment insurance, leases on federal lands, fees on exports and imports, and even camping permits at national parks and forests. The vast majority of federal tax revenues are collected by the Internal Revenue Service, which is housed within the Treasury Department. The federal government uses four major taxes to collect its revenue:

• 1. Individual income taxes. Taxes on individuals account for the largest share of the federal government’s tax revenue. The income tax was prohibited under the Constitution until the Sixteenth Amendment was ratified in 1913.

• 2. Payroll taxes. Payroll taxes to pay for social insurance (Social Security and Medicare) are the second-largest and fastest-rising source of federal revenue. Most workers pay more in Social Security taxes than in federal income taxes.

• 3. Corporate income taxes. Corporate income taxes have fallen steadily from their historic high of two-fifths of all federal revenues during World War II. Due to tax cuts and special deductions, today they account for one-tenth of federal revenues, only one-fourth as much as the individual income tax.

• 4. Excise taxes. Federal excise taxes on the sale of liquor, tobacco, gasoline, telephones, air travel, and other so-called luxury items account for a very small percentage of the federal budget.

The federal government can also borrow money by selling Treasury notes, or T-bills, that provide relatively small amounts of interest to the citizens, investment companies, banks, and even foreign nations such as China that buy them. Foreign nations currently own about half of the federal government’s debt. Treasury notes are best viewed as an “I-Owe-You” revenue source—the federal government borrows money in the short term, but must repay the buyer when the notes come due. Interest rates on these notes are set by the Federal Reserve Board, an independent regulatory agency often called the Fed.

Federal Reserve Board

A variation of an independent regulatory agency with a chairman and board that controls the supply of money that flows through the U.S. economy.

Spending money

The federal bureaucracy also implements policy by spending money, whether by writing checks to millions of Social Security recipients, buying billions of dollars’ worth of military equipment, or making grants to state governments and research universities.

Most government spending is uncontrollable, or nondiscretionary, which means it is not subject to congressional or presidential control without substantial and often unpopular changes in the law. The bulk of mandatory, uncontrollable spending goes to entitlement programs such as Social Security and Medicare for older citizens, college loans, and help for the victims of natural disasters such as floods and hurricanes. Everyone eligible for these programs is entitled to benefits—hence, spending often rises automatically. (The amount of this uncontrollable spending in the 1962 and 2014 federal budgets is shown in Figure 12.4.) The president’s Office of Management and Budget estimates that the net interest on the national debt will rise to 10 percent by 2018 unless Congress and the president agree to deep cuts in federal spending to reduce borrowing.

uncontrollable spending

The portion of the federal budget that is spent on previously enacted programs, such as Social Security, that the president and Congress are unwilling to cut.

entitlement program

Program such as unemployment insurance, disaster relief, or disability payments that provides benefits to all eligible citizens.

Social Security and Medicare spending shows dramatic increases between 1962 and 2012 as the federal government increased benefits for older Americans. The two programs are already the largest in the federal budget and will eventually account for more than half of all federal spending. The past four years of economic stagnation have also increased mandatory spending for unemployment insurance and other income support programs.

The discretionary budget includes spending for programs such as health research, highway construction, student loans, and defense, all of which are subject to yearly increases or cuts by Congress and the president.

FIGURE 12.4 UNCONTROLLABLE SPENDING IN 1962 AND 2014

• ■ Why do you think there are so many federal programs today with uncontrollable spending?

SOURCE: Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2015, Historical Tables (U.S. Government Printing Office, February 2014).

Controlling the Federal Bureaucracy

• 12.3 Assess presidential and congressional tools for controlling the federal bureaucracy.

Every president enters office promising to make federal agencies work better. Jimmy Carter, Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama all made bureaucratic reform a central part of their presidential campaigns. Carter promised to create a government as good as the U.S. people, Reagan promised to reduce waste in government, Clinton promised to reinvent government, Bush promised to make government friendlier to citizens, and Obama promised to reduce duplication and overlap across dozens of federal programs that serve the same purpose. As Obama said in his 2011 State of the Union Address, two federal departments are responsible for regulating the salmon industry—Commerce oversees salmon caught in salt water, while Interior regulates salmon caught in fresh water.

Separate Controls

Modern presidents invariably contend that they should be firmly in charge of federal employees because the chief executive is responsive to the broadest constituency. The Constitution clearly states that presidents are responsible for faithfully executing the laws, which presidents interpret as full control over the basic decisions of government organizations.

However, under the system of checks and balances, the party that wins the presidency does not acquire total control of the national government. The president is not even the undisputed master of the executive structure. Presidents come into an ongoing system over which they have little control and in which they have little leeway to make the bureaucracy responsive.

Nevertheless, presidents have significant control over the bureaucracy through the powers of appointment, reorganization, and budgeting. Presidents can attempt to control the federal system by appointing or promoting sympathetic personnel, mobilizing public opinion and congressional pressure, changing the administrative apparatus, influencing budget decisions, using extensive personal persuasion, and if all else fails, shifting an agency’s assignment to another department or agency (although such a shift requires tacit if not explicit congressional approval).8

Congress also has strong control over the bureaucracy, whether by establishing agencies, formulating budgets, appropriating funds, confirming personnel, authorizing new programs or new shifts in direction, conducting investigations and hearings, or even terminating agencies. Much of this authority is used to help constituents as they battle federal red tape. Members of Congress earn political credit by influencing federal agencies on behalf of their constituents.

Shared Oversight

Congress and the president spend a great deal of time and energy monitoring the federal bureaucracy through oversight, the technical term for their ongoing efforts to assure faithful execution of the laws.

oversight

Legislative or executive review of a particular government program or organization that can be in response to a crisis of some kind or part of routine review.

PRESIDENTIAL CONTROLS

Presidents use a number of tools for creating what political scientist Joel Aberbach calls the “watchful eye.” They can put loyal appointees into the top jobs at key agencies; they can direct White House aides to oversee the work of certain agencies; and they can always call cabinet meetings to learn more about what is happening in the various departments.9

However, presidents tend to use the Office of Management and Budget (OMB) for most routine oversight. Departments and agencies must get the president’s approval before testifying before Congress on pending legislation, making legislative proposals, or answering congressional inquiries about their activities. Under this central clearance system, OMB tells Congress whether the bureaucracy’s requests for legislation are “in accordance” with the president’s program (indicating the highest presidential support), “consistent with” the president’s program (indicating at least moderate presidential support), or without objection (indicating little or no presidential interest).

central clearance

Review of all executive branch testimony, reports, and draft legislation by the Office of Management and Budget (OMB) to ensure that each communication to Congress is in accordance with the president’s program.

CONGRESSIONAL CONTROLS

Congress also has a number of tools for overseeing the federal bureaucracy, not least of which are the individual members of Congress themselves, who are free to ask agencies for detailed information on just about any issue. However, most members and committees tend to use the Government Accountability Office or the Congressional Budget Office to conduct a study or investigation of a particular program.

Together, Congress and the president conduct two basic types of oversight.10 One is “police patrol” oversight, in which the two branches watch the bureaucracy through a routine pattern. They read key reports, monitor the budget, and generally pay attention to the way the departments and agencies are running. The goal is to deter problems before they arise.

The other form of oversight is “fire alarm” oversight, in which the two branches wait for citizens, interest groups, or the press to find a major problem and pull the alarm. The media play a particularly important role in such oversight; using the Freedom of Information Act to gain access to documents the federal bureaucracy keeps secret, they often uncover a scandal before a routine “police patrol” reveals an urgent problem.

Does the Federal Bureaucracy Work?

Despite their complaints about big government today, most Americans are reluctant to support cutbacks in what government does. At the same time, they wonder what can be done to improve the bureaucracy’s performance, especially in the wake of recent breakdowns in important programs involving events such as Hurricane Katrina, the Gulf Oil spill, and the barriers to medical care at the Department of Veterans Affairs.

This is not to argue that the federal bureaucracy is a wasteland of failure. To the contrary, the federal government accomplishes the impossible every day. And over time, the federal bureaucracy has accomplished much for betterment of society, including reducing diseases, building a strong national defense, and increasing access to education.

In his 2011 State of the Union address, President Obama argued that the federal bureaucracy is filled with duplication and overlap among its many programs. He mentioned salmon as an example: the Interior Department is responsible for regulating salmon when they swim in fresh water, while the Commerce Department is responsible for salmon when they are in salt water. “I hear it gets even more complicated once they’re smoked,” Obama said.

Nevertheless, there is cause for complaint. The bureaucracy’s missions are critically important, but its organizations are dense with layer upon layer of management and red tape; its personnel systems are out of date; the presidential appointments process is needlessly complex and slow; many civil servants believe their pay and promotions are based more on favoritism than performance; and duplication and overlap among programs strangle citizen satisfaction.11Moreover, as of 2014 the Obama administration has yet to produce its promised overhaul of the bureaucracy.

FIGURE 12.5 FAVORABILITY TOWARD THE EXECUTIVE BRANCH

Is your overall opinion of the federal government in Washington very favorable, mostly favorable, mostly unfavorable, or very unfavorable?

• ■ What might explain the long-term decline in confidence in the federal bureaucracy? Why did confidence rise in 2001 and begin to fall in 2004?

SOURCE: Pew Research Center, “Growing Gap in Favorable Views of Federal, State Governments,” April 12, 2012.

It is not surprising, therefore, that the public has serious doubts about the federal bureaucracy’s performance, too. As Figure 12.5 shows, public confidence in the executive branch of government has generally declined over the past 15 years, and is now far below the high point set after the September 11 terrorist attacks.

Improving public confidence in the bureaucracy depends in large part on the public itself. Citizens can make a great difference in shaping regulations, monitoring bureaucratic performance, and prompting Congress and the president to adopt needed reforms to prevent government breakdowns. Citizens can also support the many interest groups that lobby for good government and can now keep their own watchful eye over government by visiting government Web sites and collecting information. There is an old saying in politics that Americans get the government they deserve. The more that citizens demand better government, the better government they get.

Defining Public Policy

• 12.4 Relate politics and public policy, and differentiate the three types of public policy.

When government decides to solve a problem, it does so through a public policy, a specific course of action that government takes to address a challenge such as global warming, health care, or unemployment. Government sets public policy through laws, judicial decisions, and more detailed regulations issued by the bureaucracy. Congress and the president enact the laws, while the bureaucracy puts the laws into effect through implementation.

public policy

A specific course of action that government takes to address a problem.

BY the People: Making a Difference: Join the “Distributed Reporting Network”

Under pressure from leading interest groups such as the Project on Government Oversight (www.pogo.org), OMB Watch (ombwatch.org), and the Sunlight Foundation (sunlightfoundation.com), the federal bureaucracy is releasing massive amounts of information to citizens. As the list of sources at www.data.gov shows, citizens can inspect virtually every corner of the bureaucracy except for national security and defense, which have tightly guarded Web sites.

There is also an enormous amount of information at company and interest group Web sites, including detailed information on congressional lobbying and fundraising at the Center for Responsive Politics (www.opensecrets.org), lists of wasteful government programs at Citizens Against Government Waste (www.cagw.org), and detailed biographies of every Obama administration appointee on the White House Web site (www.whitehouse.gov).

The problem in monitoring the bureaucracy and public policy is no longer too little public information, however, but perhaps too much. There is so much information that citizens simply cannot put it together. ProPublica is trying to solve the problem by asking ordinary citizens to join its Distributed Report Network. As contributors to ProPublica’s news stream, ordinary citizens have the chance to tell their own stories about the real impact of urgent problems such as home foreclosures and student loan debt. ProPublica views the stories as a form of “crowd-sourcing” that enrich its stories. Its reporters use the stories to build award-winning articles that end up in the New York Times and on the CBS news program, 60 Minutes.

The ProPublica network is only one way citizens can monitor government. The more they do to make sense of government information, the more they can contribute to the information that experts read for input to major policy debates.

QUESTIONS

• 1. Is there too much information now flowing from Washington?

• 2. Why does the concept of the Distributed Reporting Network give citizens a voice in shaping the news?

• 3. Which citizens are most likely to share their stories, and how might crowd-sourcing improve the quality of reporting?

This rest of this chapter will explore the various ways in which citizens and government both work to design, enact, and implement public policy. We will start with some simple definitions of public policy. We will then examine the process for making public policy. Laws do not implement themselves: they must be converted into action. The public policy process is the method for making laws a reality in American life.

But whatever its form, a public policy tells the nation and the world who is about to get what, when, and how from the federal government. As Table 12.1 shows, we can define politics as the interaction of the people and their government, whereas public policy is the product of that give and take. If politics is a question of who gets what, when, where, and how from government, then policy is a formal statement of who has the greater power and what compromises have been reached. We define policy makers as the individuals and groups that make the actual choices to create a public policy—some policy makers are elected officials or government employees, whereas others are lobbyists and interest groups. Citizens are rarely considered to be policy makers.

politics

The interaction of the people and their government, including citizens, interest groups, political parties, and the institutions of government at all levels. Politics is concerned with who gets what, when, where, and how from government.

policy maker

An individuals or group that makes the actual choices to create a public policy.

TABLE 12.1 POLITICS AND POLICY

Types of Public Policy

Public policies do not all have the same impact on society. Some public policies benefit all groups of citizens, others benefit one group of citizens by taking something away from another, and still others take resources from all groups in an effort to create a better society for everyone. These choices create three specific types of public policy.12

Federal policies that provide new benefits to all citizens are called distributive policy. National parks, air traffic control, the interstate highway system, education funding, national defense, and Social Security are all distributive. They help all groups at some level, whether rich or poor. Although some may get more benefit than others from a particular program such as Social Security, which reduces poverty among low-income beneficiaries, every group receives at least something through distributive policy.

distributive policy

A public policy such as Social Security that provides benefits to all groups in society.

In contrast, federal policies that take resources away from one group in society (usually through a tax increase) to provide benefits to another group (usually through a spending program) are called redistributive policy. Most redistributive policy involves help for lower-income citizens through job training, nutrition assistance, and subsidized housing. Some political scientists describe the design of such policies as zero-sum games, meaning one group’s gain is another group’s loss.

redistributive policy

A policy that provides to one group of society while taking away benefits from another through policy solutions such as tax increases to pay for job training.

zero-sum game

A policy that takes away benefits or money from one group to give to another.

Finally, federal policies that take resources away from all groups in society to solve a common problem are a form of what Paul C. Light calls reverse distributive policy.13 The government cannot address oversized problems such as global climate change, rising health care costs, equal access to college, or the nation’s aging roads and bridges without reversing some of the benefits it has already distributed. But it cannot build the political support for such tough choices without asking all citizens to give their fair share.

reverse distributive policy

A policy that reduces benefits for all groups, often by imposing regulations or taxes that govern everyone, rich or poor.

Rule makers often use tools such cost/benefit analysis to compare and contrast policy proposals. For example, electric cars reduce the nation’s need for oil (benefit) but increase the demand for the electricity produced by coal-fired plants (cost). Similarly, new restrictions on carbon emissions from power plants approved in 2012 reduce global warming (benefit) but also increase the cost of electricity (cost) and may even weaken the economy (another cost).

The Public Policy Process

• 12.5 Outline the key steps in making public policy, and assess the different types of policy.

Every public policy reflects a series of separate decisions leading to its creation. The process can be viewed as a staircase that moves upward toward final implementation. But like any very long staircase, there are times when policy makers simply run out of energy to keep going. The process can even go back down the staircase in reverse as new ideas are introduced and Congress and the president go back down to revisit their earlier decisions. When the Obama administration entered office in 2009, for example, it reversed direction on many of the Bush administration’s policies on issues such as global warming. Whereas the Bush administration had long argued that global warming was not a national threat, the Obama administration moved quickly to push for stricter limits on carbon emissions by automobiles and power plants.

The public policy process has eight steps: (1) making assumptions about the problem at the beginning, (2) setting the agenda of problems to be addressed, (3) deciding to act, (4) deciding how much to do, (5) choosing a solution to the problem, (6) deciding who will deliver the goods or services, (7) passing a law and making regulations for implementation, and (8) final implementation as an ongoing policy. Figure 12.6 presents the process.

We will discuss each step, but note that by its very nature, the choice to move forward (in step 3) is the most difficult, largely because of the complexity of passing a bill, issuing an executive order, or making a Supreme Court decision. It is often far easier to make what political scientists call a nondecision, which means the policy process stops before final action. A nondecision can take place at any step.

nondecision

A decision not to move ahead with the policy process. In short, it is a decision not to decide.

FIGURE 12.6 THE EIGHT STEPS IN MAKING PUBLIC POLICY

• ■ Why is step three the most difficult step?

It is useful to note that the policy process does not vary greatly throughout the world. Virtually all policies are the product of making assumptions, setting the agenda, deciding to act, and so forth. However, other nations give their citizens different levels of influence in making policy decisions. In Great Britain, policy decisions are shaped by a tight bond between the administrative agencies of government and Parliament. Indeed, it is said that the agenda is never set until a decision has already been made. “It’s carrying democracy too far if you don’t know the result of the vote before the meeting.”14 Even in nondemocratic countries the bureaucracy is involved in proposing and implementing policy. What is missing in such nations is any meaningful role for the people.

Making Assumptions About the Problem

Every government decision starts with assumptions about the future. Is the economy going to get stronger? If so, perhaps employment will go up and the costs of supporting the unemployed will go down. Is terrorism going to increase? If so, perhaps the federal government needs to inspect more cargo ships in search of bombs and other threats. Answers to questions about the future shape decisions about what the federal government might do.

Making even short-term assumptions about how the world will change is difficult, however. As one senior Reagan administration official once remarked, “I’m beginning to believe that history is a lot shakier than I thought it was. In other words, I think there are random elements, less determinism, and more discretion in the course of history that I ever believed before.”15 For example, the economy can change very quickly, which can increase joblessness overnight, which can put more pressure on the social safety net, which can demand higher taxes, and so on. Many experts were completely surprised in 2007–2008 when the mortgage market collapsed in the wake of billions of dollars of bad loans. They simply had not predicted it could happen.

Setting the Agenda

Choosing the problem to be solved is the essential decision in setting the policy agenda. The policy agenda, as political scientist John W. Kingdon defines it, “is the list of subjects or problems to which governmental officials, and people outside of government closely associated with those officials, are paying some serious attention at any given time.”16

policy agenda

The list of issues that the federal government pays attention to.

Defined this way, the agenda is a direct product of politics and reflects broad social goals embraced by the people and their government, such as liberty, equality, individualism, and respect for the common person. These values are core to the ideology that shapes the policy agenda, but they often conflict with each other as ideas move toward public policies. Everyone wants the American dream, for example, but we often disagree on how to get it. Politics affects the rise and fall of these ideologies through elections, party identification, interest group pressure, and a variety of other political expressions.

Problems are distinct from politics and reach the list of possible agenda items from a variety of sources. Some arise from events such as the September 11, 2001, terrorist attacks or Hurricane Katrina. Others become prominent through newspaper or television stories about a controversial issue such as gay marriage, and still others because of interest group pressure for benefits such as prescription drug coverage for older citizens. Some emerge from congressional investigations of issues such as cigarette smoking, drilling accidents, hurricane damage, car safety, or government fraud.

The Global Community: Does Hard Work Pay Off?

Views about the individual’s ability to determine life’s success have an important role in shaping public policies designed to help the poor. The Pew Research Center’s Spring 2012 Global Attitudes Survey asked which of the following statements came closer to each respondent’s own views: “Most people can succeed if they are willing to work hard or hard work is no guarantee of success for most people.” According to the survey, there is enormous variation throughout the world regarding the belief that hard work pays off.

At one end of the spectrum, citizens of Russia and Japan were the least hopeful that hard work pays off, in part because both nations have experienced long periods of economic distress that continue to this day. At the other end of the spectrum, citizens of the United States, India, and Britain were the most confident that people can succeed if they just work hard.

These views affect government policy in many ways, including support for education, job training, and help for the poor. If citizens believe that hard work pays off, they may be less willing to help fellow citizens who cannot find work; if they believe that hard work is not a enough to create success, they may be more willing to endorse programs that even the economic playing field. These views also shape how citizens view the role of government in regulating the economy. Citizens who have faith in hard work are also more likely to believe that people are better off in a free market economy that allows individuals to rise and fall on their own, even if some citizens are very rich and others poor.

SOURCE: Pew Research Center, Pervasive Gloom About the World economy: Faith in Hard Work, Capitalism Falter But Emerging Markets Upbeat (Pew Research Center, 2012).

CRITICAL THINKING QUESTIONS

• 1. What factors might contribute to beliefs that hard work does not pay off?

• 2. Why does faith in hard work create support for a free-market economy?

• 3. How does faith in hard work affect what government does to help poor people?

Other possible problems are the subject of ongoing government monitoring. For example, the government regularly reports data on the state of the economy as measured by unemployment, inflation, or new housing starts. These markers can show the beginnings of an economic slowdown or of an improving economy. Readers need only visit a government Web site (see the list at the end of the chapter) to see the range of information government provides to policy makers, investors, and the public. Through these different venues, policy makers latch on to particular problems or solutions depending on the readiness for action.

Nevertheless, the public’s attention span can be very short. Problems identified through scientific research such as global warming may be the easiest to ignore, partly because there always seem to be numbers to refute a given analysis. Even as former Vice President Al Gore was accepting the Nobel Peace Prize in 2007 for his work on global warming, a group of scientists challenged much of the evidence on which his work was based. Once the economy collapsed and Americans were faced with a tradeoff between jobs and environmental protection, the global warming debate cooled off and has only recently started to heat up again.

Policy makers set the agenda using many of the same criteria they apply to other political decisions—public opinion, interest group pressure, their own beliefs, ideology, party affiliation, and loyalty to their institution. In recent years, they have also come to rely on a small number of think tanks to help them sort through the stream of possible problems. A think tank is an organization composed of scholars who study public policy. Many are located in Washington, D.C., so that they can be closer to the national political process. Unlike a college or university, which also produces policy research, a think tank exists almost entirely to influence the immediate agenda. Thus, many are described as either liberal or conservative.

think tank

A nongovernmental organization that seeks to influence public policy through research and education.

Deciding to Act

The fact that a problem exists does not automatically mean that Congress, the president, or the courts will try to solve it. Some problems help policy makers achieve their personal or political goals, such as reelection or a place in history, in which case they decide to act, whereas others do not, in which case they pick other problems to solve. Although these decisions are largely hidden from view and therefore difficult to influence, they are the most important step in the policy process.

Policy makers also clearly understand that public pressure for action ebbs and flows over time. In fact, writes political scientist Anthony Downs, “American public attention rarely remains sharply focused upon any one domestic issue for very long—even if it involves a continuing problem of crucial importance to society.” According to Downs, the public follows an issue-attention cycle in which each problem “suddenly leaps into prominence, remains there for a short time, and then—although still largely unresolved—gradually fades from the center of public attention.”17

issue-attention cycle

The movement of public opinion toward public policy from initial enthusiasm for action to realization of costs and a decline in interest.

Think about global warming again. As noted above, public support for policy decisions has gone up and down throughout the years, reflecting the long-standing issue-attention cycle on environmental protection. Figure 12.7 illustrates the cycle by comparing public opinion about the difficulty of finding a job with support for making environmental protection a priority despite the economic costs. Citizens want government to act even when policy affects economic growth but not when the economy is in trouble. Although global warming is still an important issue for most Americans, it has been sliding somewhat throughout the past few years, suggesting that the issue-attention cycle is at work.

• • This cycle starts with what Downs described as the “pre-problem stage,” the rise of some “highly undesirable social condition” such as global warming that has yet to capture public attention.

• • The issue-attention cycle continues with “alarmed discovery and euphoric enthusiasm,” the sudden emergence of an issue as a topic for public debate. Books are written, documentaries made, speeches retooled, and campaigns rebuilt, all based on the sudden passion that generates public concern.

FIGURE 12.7 CONCERNS ABOUT THE ENVIRONMENT, 2000–2014

What percentage of Americans agree with the following two statements? (1) Protection of the environment should be given priority, even at the risk of curbing economic growth. (2) Jobs are difficult to find in my community.

• • ■ What is one important reason why support for environmental action started to fall in 2008? And why did support begin to rise in 2011?

SOURCE: Polls on environmental protection and job availability are available using the search engine at http://www.polling-report.com.

• • The cycle moves onward with the realization that change will incur significant cost. It is one thing to worry about greenhouse gases and quite another to pay more for clean electricity or buy smaller, more efficient cars. The greater the cost of solving a problem, especially if it means tax increases or benefit cuts, the more strongly people pull back from their euphoric view of change.

• • The cycle continues with the “gradual decline of intense public interest.” Having pressed hard for action on an issue such as universal health insurance, the public may begin to realize that change is nearly impossible given the array of political forces fighting for a nondecision.

• • The cycle ends with what Downs calls the “post-problem stage.” The problem moves into “prolonged limbo—a twilight realm of lesser attention or spasmodic recurrences of interest.”

The ultimate decline of public interest is not inevitable. But if citizens expect big problems to be solved immediately, they will only be disappointed. Although issues such as global warming seem to demand that we take immediate action before the damage is beyond repair, we must acquire enough understanding of the problem, and of the policy process, to stay actively engaged for the long term.

Deciding How Much to Do

Once the federal government decides it wants to do something about a problem, the next difficult decision is how much to do. Government can launch a comprehensive program such as Social Security or Medicare, or it can expand a smaller program bit by bit over time.

INCREMENTAL OR COMPREHENSIVE POLICY

An incremental policy makes a small-scale adjustment in an existing program, whereas a punctuating policy creates a dramatic change in the government’s role. Incremental policies are generally the easiest to create, if only because they build on past decisions in very small ways, such as increasing the amount of federal support for colleges by a few hundred dollars. Punctuating policies, such as providing national prescription drug coverage for older adults, often require citizens, interest groups, political parties, and policy makers to mobilize in a broad movement for change.

incremental policy

Small adjustments to existing public policies.

punctuating policy

Radical changes to public policy that occur only after the mobilization of large segments of society to demand action.

Incremental policy is the most frequent response to calls for change. According to James L. True, Bryan D. Jones, and Frank R. Baumgartner, “American political institutions were conservatively designed to resist many efforts at change and thus to make mobilization necessary if established interests are to be overcome.”18 Because of constitutional protections such as separation of powers and checks and balances, incremental policy often becomes the easiest way to advance an idea.

Punctuating policy often depends on alliances of citizens, interest groups, political parties, private businesses, government agencies, congressional committees, and others who come together to place an issue on the agenda and push for or against change. Alliances called iron triangles exist for decades; issue networks cooperate for a specific cause and then disband.

iron triangle

A policy-making instrument composed of a tightly related alliance of a congressional committee, interest groups, and a federal department or agency.

issue network

A policy-making instrument composed of loosely related interest groups, congressional committee, presidential aides, and other parties.

An iron triangle has three sides that hold together for long periods of time: (1) a federal department or agency, (2) a set of loyal interest groups, and (3) a House and/or Senate committee. Each side supports the other two. Loyal members of Congress work to protect or increase the agency’s budget, allowing the agency to flourish, and pass legislation to support the interest groups, providing benefits for its members. Agencies give special services to the interest groups, keeping their members happy, and ensure the constituencies of members of Congress are provided for, aiding in congressional approval ratings. Interest groups give contributions and endorsements to loyal members of Congress, aiding in their reelection, and support the activities and requests of the agency, enhancing their legitimacy. Policy making for veterans, for example, is achieved through an iron triangle composed of the Department of Veterans Affairs, the House and Senate Veterans Committees, and a long list of interest groups that represent veterans, such as the American Legion and Veterans of Foreign Wars.

Iron triangles have been largely replaced by much looser collections of participants in issue networks. As political scientist Hugh Heclo has argued, the notion that iron triangles make all policy was “not so much wrong as it was disastrously incomplete” in today’s complicated policy environment.19 The increasing number of small, highly specialized interest groups makes an iron triangle nearly impossible to create, if only because Congress and federal agencies can no longer identify a steady occupant for the third corner of the triangle. They have to find temporary allies, depending on the issue. There is nothing “iron” about such coalitions: they last only as long as an issue is hot.

Issue networks concentrate power in the relatively small number of individuals who organize and maintain them as the issue-attention cycle moves forward. These networks are composed of interest groups, members of Congress, and outside lobbyists, pollsters, and organizers. Some political scientists thus refer to the rise of well-financed issue networks—such as those that promote prescription drug coverage for older consumers or tax cuts for business—as a form of elitism, not pluralism, in which a very small number of actors accelerate or delay action. Medicare prescription drug coverage, for example, engaged an issue network of drug companies, the AARP, and hospitals.

Choosing a Solution

As noted, the federal government generally uses three tools to solve most public problems: (1) making regulations to encourage or prohibit behavior through standards, incentives, or penalties, (2) using taxes both to raise money and encourage certain behaviors, and (3) spending money to purchase goods and services or provide benefits to the public as a whole or specific populations such as the elderly or children.20

These three solutions are designed to produce material benefits for society. Some benefits are tangible, such as new roads, bridges, schools, and hospitals; others, such as higher pay, greater safety, better education, and cleaner air and water, can only be felt. In theory, action to increase education loans should produce more educated workers who can fill the jobs created in the growing technology sector.

Other solutions produce symbolic benefits, such as efforts to educate the public, study an issue, appoint a blue-ribbon commission, or highlight the need for future action. In theory, symbolic benefits highlight an emerging issue and create citizen action. In reality, they are sometimes a way to make a nondecision as policy makers merely express their concern and move to other tangible policies. It is not yet clear, for example, just how much global warming is caused by sources beyond government’s control, but action to reduce global warming through international treaties can give the public a sense that the world is getting better.

Private firms provided most security services to protect U.S. diplomats during the Iraq War. In 2007, employees of Blackwater, Inc., were accused of allegedly killing innocent Iraqi citizens during a patrol. Blackwater later changed its name first to Xe Services then to Academi in an effort to improve its reputation.

Deciding Who Will Deliver the Solution

Part of selecting a solution to implement a policy is deciding who will actually implement the program. The answer is not always a federal employee.21 Although federal employment has been steady at roughly 2 million workers since the early 1990s, the federal agenda has continued to grow. As a result, in addition to the work of departments and agencies discussed earlier in the chapter, the government often depends on a largely hidden workforce of contractors, institutions of higher education, state and local employees, and charities to achieve its policy goals.

Passing a Law and Making Regulations

Once Congress and the president have decided to act and constructed a policy proposal, they must pass the proposal into law. Although presidents are also allowed to create some policies through executive order, those decisions are easy for the next president to overturn. Therefore, the best way to pass a policy is through legislation. Rule-making, the process for creating regulations, comes near the end of the policy-making process and is virtually invisible to most citizens. Nevertheless, it is the essential step in converting the abstract ideas and language of laws, presidential orders, and court rulings into precise regulations governing what individual members of the public, companies, government, states, and localities must do to achieve the goals of a specific policy.

Regulations can be extraordinarily detailed and are sometimes difficult for even regulated parties to understand. Because they are so complicated, interest groups have much greater influence over their construction than citizens and even members of Congress.

Although the federal government has been issuing regulations since 1789, the number of pages of regulations jumped dramatically during World War II and again in the 1970s.22 As shown earlier in Figure 12.3, we can see the growth of regulation in the pages in the Federal Register, which provides a daily record of new and proposed regulations.

The process starts when a bill is passed and signed into law, which is sent to the appropriate department or agency for “faithful execution” of a policy. With the legislative history as a guide to what Congress and the president want, the department or agency then drafts a proposed rule. The rule itself generally consists of a statement of purpose, the actual rule, and a review of any research or legislative language that shaped it. (The rule-making process is discussed in the first section of this chapter.)

A large solar array atop the Department of Energy building. As the federal government has tightened its regulations on the use of dirty fuels in electric plants, it has increased grants and loans for the development of solar power. The effort reflects a blend of regulation and spending as solutions to global climate change and air pollution.

Although this process seems straightforward, it includes a number of leverage points for lobbying. The process can also be delayed—nothing in the Constitution or the laws regulating the rule-making process says that a department or agency must propose a rule within a specific amount of time. Moreover, the department or agency retains great discretion to interpret information generated during the notice-and-comment period.

Regulations are particularly important because Congress often leaves the details to the federal bureaucracy. Passing legislation requires many compromises, some of which are so vague that the bureaucracy can only act if it provides the details. In this regard, the bureaucracy has enormous administrative discretion.

Running the Program Day to Day

Implementation does not end with release of a final rule. It continues with the day-to-day tasks of actually running a federal department or agency, making regulations, supervising contractors, and evaluating impact. And as assumptions change and the issue-attention cycle takes hold, the policy-making process can begin again. Public interest in global warming faded with the onset of the economic crisis, but it is likely to rebound once the economy recovers.

The Order of Action

Making public policy is an often-unpredictable process. It can start with any step and skip back and forth as politics shapes everything from the decision to act to running the program. The result is a policy-making process that is almost always in flux.

Some political scientists such as Kingdon even think of this process as taking place in a “primordial swamp” of competing problems, solutions, political actors, citizens, pressure, and resources such as dollars, public support, and administrative energy.

These policy “streams” are shaped by citizens, interest groups, presidents, and members of Congress and move through the institutions in search of each other. Thus, an idea for solving a problem such as a new weapons system or an increase in the minimum wage may linger in waiting for a specific problem such as terrorism or an increase in unemployment. Politics ties these various streams together into a public policy. According to this view, one reason immigration reform has not yet passed is that the streams of problems, solutions, and interests have yet to come together, in part because the political stream is so divided.

FOR the People: Government’s Greatest Endeavors: Reducing Disease

Protecting the nation from foreign and domestic threats involves more than fighting wars and enforcing laws. It also involves protecting Americans from hidden threats such as disease, pollution, and unsafe foods. As we have learned more about preventing disease, the federal government’s role has grown, whether through funding for advanced scientific research or programs to make sure all Americans are vaccinated against life-threatening disease.

Much of the federal government’s progress against disease has been through incremental programs that have added up to very significant impacts. Much of the progress has occurred at colleges and universities like yours, which have mapped the human genome, created new vaccines, and developed treatments for life-threatening diseases such as cancer.

The federal government’s most impressive successes over the past seventy years have involved vaccinations against diseases such as polio, diphtheria, whooping cough, and tetanus by the age of five.

As the inventory of infectious diseases has grown, so has the federal government’s involvement in health care research. Congress created the National Institute of Health (NIH) in 1930; added the National Cancer Institute in 1937; created a division of research grants to promote university research in 1946; added new institutes for dental research, experimental biology, health disease, mental health, and microbiology in 1948; and expanded the federal government’s health budget. Congress continued to create new research programs year after year. By 2001, the NIH had 27 separate institutes housed in its 75 buildings on a 300-acre campus in Bethesda, Maryland.

This investment has made a dramatic difference in the quality of life for most Americans. Deaths from heart disease is down by more than a third since the mid-1970s, five-year cancer survival rates are up by 60 percent, schizophrenia and depression are much more treatable, and dental sealants now prevent nearly 100 percent of cavities in children. Although there are still significant differences in disease rates between the rich and poor and among African Americans, Native Americans, and whites, Americans are living longer, healthier lives because of the federal effort to reduce disease.

QUESTIONS

• 1. How does a longer lifespan affect federal policy? What are the costs and benefits?

• 2. Why hasn’t the number of deaths among infants decreased at the same time life span has increased?

• 3. Who do you think live the longest? Poor people? Whites? People with health care coverage?

Some policies are efforts to terminate a program. As opposed to a nondecision, which stops a policy before it can be made, termination stops a policy that is already running. Because members of Congress, interest groups, citizens and agencies often benefit from a program’s existence, even one that is no longer necessary, termination is typically very difficult. The federal government once maintained a helium reserve in Texas to ensure a reliable supply of the gas for its military blimps. Even through the military stopped using blimps after World War II ended in 1945, it took 50 years for Congress and the president to halt the helium reserve program.

Citizens and Public Policy

• 12.6 Assess ways in which citizens can influence the public policy process.

Public policy is not made in a vacuum. Rather, it takes place in a complicated political process that engages citizens, interest groups, political parties, legislators, judges, and government institutions.

Citizens are often anxious about participating in this process, not only because it can be complex, but also because they have many levers that give them influence. They can certainly vote—the higher the participation, the more the process will heed their voice.

Ralph Nader was a major force in creating pressure for consumer protection. He created many of the tactics used to achieve public policy impact during his 40 years of public service.

But voting is not enough. Citizens cannot vote on the basis of their policy positions if they do not have an opinion or if candidates do not tell the electorate where they stand. And because voting is a blunt instrument of participation that does not convey precise information about what they want, citizens must also find other pathways to influence, including joining interest groups, writing letters, sending e-mails, confronting legislators at community meetings, and even running for office themselves.

They can also join public interest groups that support or oppose government policy action. In this regard, Ralph Nader may have done more than any other person to influence the policy process on behalf of consumers.

Nader started his journey in 1965 with the publication of Unsafe at Any Speed, a damning attack on the poor state of automobile safety in the United States. Targeting General Motors and its Chevrolet Corvair, Nader demanded congressional action and got it. Today’s airbags are directly traceable to Nader’s early pressure for mandatory seat belts and crash-resistant passenger compartments. “You’ve got to keep the pressure on, even if you lose,” he says about representing the public interest. “The essence of the citizen’s movement is persistence.” Nader went on to create the Center for Study of Responsive Law, the Freedom of Information Clearinghouse, and dozens of other Public Interest Research Groups (PIRGs).

There is no question that citizens want action on the big problems highlighted in this chapter. They know that safeguarding Social Security, reducing global warming, and fixing the economy so that everyone rises on the basis of merit will not happen without pressure. No citizen gets what he or she does not ask for. And asking is part of the politics that leads to ultimate action.

Citizen action is more successful when it involves clear ideas for an alternative policy. It is rarely enough to merely demand that government act. It is also important to tell government what to do. This means thinking through the options and making a clear, well-developed argument for change and pursuing it aggressively through our complicated policy process.

You Will Decide: Should You Join AmeriCorps After You Graduate?

Americans help shape and carry out public policy in many ways, but one of the most meaningful ways they can help influence and implement public policy is by volunteering. More than 60 million Americans volunteered in 2014. They served soup to the hungry, tutored children, worked for advocacy organizations such as the American Civil Liberties Union (ACLU) and Americans for Tax Justice, and organized campus meetings on big issues such as health care reform.

The Serve America Act, which was a top Obama administration priority in 2009, has encouraged more volunteerism at just the right time in the economic downfall. Following unanimous passage in Congress, the Act, which was signed by President Barack Obama on April 21, 2009, Americans were given a variety of new ways to volunteer. For example, the Act designated September 11th as a day of service to commemorate the heroism of those who gave their lives in response to the terrorist acts on New York City and the Pentagon in Washington, D.C. Students on every campus will be asked to participate in this annual event, from cleaning up parks to repainting schools.

In signing the law, Obama emphasized the importance of volunteering to the quality of life in the United States: “I’ve met countless people of all ages and walks of life who want nothing more than to do their part. I’ve seen a rising generation of young people work and volunteer and turn out in record numbers. They’re a generation that came of age amidst the horrors of 9/11 and Katrina; the wars in Iraq and Afghanistan; an economic crisis without precedent. And yet despite all this, or more likely because of it, they have become a generation of activists possessed with that most American of ideas—that people who love their country can change it.”*

What do you think? Is AmeriCorps an option for you after graduation?

Thinking It Through

Volunteering is a form of civic engagement. The more that citizens give, the more they get. And their work is essential to public policy. The federal government often provides grants to charitable organizations such as Habitat for Humanity, Youth Build, and Teach for America to further its goals.

The Serve America Act also expanded AmeriCorps, the national program created in 1993 to provide volunteer opportunities for students both before and immediately after college. Approximately 80,000 Americans will join the program in 2015, adding to the 900,000 who have served since 1993. Although the pay is low—only $14,000 or so per year depending on local costs—the rewards are enormous. Participants report that their two years as volunteers were the most important of their lives.

Most AmeriCorps volunteers serve for one or two years, often in poor communities. Many work in tough schools with few resources, while others provide desperately needed services to the homeless, hungry, and unemployed.

AmeriCorps is not an option for many graduates, however. It pays very little, and involves at least one year of service. Some graduates simply do not have the resources to delay their job searches. Equally important, AmeriCorps members may not have the expertise to do their jobs, and often need extensive training that may not be useful for their future careers.

CRITICAL THINKING QUESTIONS

• 1. How do AmeriCorps volunteers help make public policy? Which step of the policymaking process do they affect most?

• 2. Is a volunteer program that pays people for their time a form of volunteering or a job?

• 3. What are the negatives of sending recent college graduates into community organizations? What happens when an AmeriCorps volunteer finishes his or her service?

*Remarks by President Obama on signing the Serve America Act, April 21, 2009,http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-at-Signing-of-the-Edward-M-Kennedy-Serve-America-Act

Review the Chapter

Understanding the Federal Bureaucracy: Constitutional Origins, Organizations, and Employees

• 12.1 Outline the constitutional roots of the federal bureaucracy, its organizations, and its employees, p. 358.

The Framers assumed there would be a federal bureaucracy but that it would be small. Therefore, they left many of the details of the bureaucracy to the responsibility of future presidents. Over time, Congress and the president created four types of government organizations: (1) departments, (2) independent stand-alone agencies, (3) independent regulatory commissions, and (4) government corporations. Congress and the president also created three different types of federal employees: (1) presidential appointees usually selected for their loyalty to the president, (2) senior executives selected for their expertise, and (3) civil servants selected on the basis of merit.

The Job of the Federal Bureaucracy

• 12.2 Analyze the bureaucracy’s implementation options and its effectiveness, p. 365.

The federal bureaucracy generally makes regulations, raises revenues, or spends money to implement the laws. Regulations tell citizens what they can and cannot do and are enforced by the federal bureaucracy, taxes generate revenues and reward certain activities such as home ownership, while spending supports the purchase of goods and services or provides benefits to the citizenry. Most of the federal budget is uncontrollable, meaning that anyone who qualifies for programs such as Social Security, unemployment insurance, health care for the poor, and Medicare must be given benefits regardless of the impact on the federal budget.

Controlling the Federal Bureaucracy

• 12.3 Assess presidential and congressional tools for controlling the federal bureaucracy, p. 368.

The federal bureaucracy has at least two immediate supervisors: Congress and the president. It must pay considerable attention as well to the courts and their rulings and to well-organized interest groups and public opinion. Despite their efforts to ensure accountability, Congress and the president often give vague instructions to the administrative system, which gives the system significant discretion in implementing the laws.

Defining Public Policy

• 12.4 Relate politics and public policy, and differentiate the three types of public policy, p. 370.

Public policy is the product of politics, which resolves the question of who gets what, when, where, and how from government. Politics involves the interaction of the people and their government.

There are three types of policy: distributive (which provides benefits to all groups in society), redistributive (which provides benefits to one group in society at the expense of another), and reverse distributive (which eliminates benefits to all groups in society).

The Public Policy Process

• 12.5 Outline the key steps in making public policy, and assess the different types of policy, p. 372.

Every public policy emerges from a process that includes eight steps: (1) making assumptions about the problem, (2) setting the agenda, (3) deciding to act, which can involve nondecisions, (4) deciding how much to do, (5) choosing a solution to the problem, (6) deciding who will deliver the goods or services, (7) passing a law and making regulations for implementation, and (8) running the program itself. The steps do not always occur in order. Some political scientists see problems, solutions, political actors, and so forth as “streams” that flow through the institutions of government and only occasionally come together.

Citizens and Public Policy

• 12.6 Assess ways in which citizens can influence the public policy process, p. 380.

Citizens face significant obstacles to being heard in the policy process. But they may have more influence at certain stages of the process, and they can make their voices heard through both traditional and nontraditional means, including voting, joining interest groups, writing letters, sending e-mails, confronting legislators at community meetings, and even running for office themselves.

16 Making Economic Policy

Economic policy is designed to keep the economy from either growing too fast, which usually increases prices, or too slowly, which usually increases unemployment. This effort to forge a steady economic climate often requires tough decisions between how much the federal government should spend, when to borrow more money to get the economy afloat, and where it should get its revenues.

Democrats and Republicans faced just these kinds of choices in 2014 as growth continued to sag across the economy and the national debt ballooned to more than $18 trillion. Democrats wanted more government spending to support the poor and stimulate the economy, while Republicans wanted tax cuts to free up money that consumers could spend for new products and services.

This debate was at the center of President Barack Obama’s reelection campaign. Having been in office a full term after the great economic collapse of 2008, Obama’s economic policies were then in place, and he had to run on his own record. He began to blame the nation’s wealthy for the continued economic woes, and he asked voters to embrace his plans for giving all citizens a chance to reach the top of the economic ladder. Although he never used the word “inequality” in his campaign, Obama often spoke about “fairness,” and the need for every American, rich or poor, to sacrifice for the good of the nation.1

The U.S. public seemed to agree with Obama’s philosophy, if not his proposals for more federal spending and higher taxes on people earning more than $250,000 a year. According to a 2012 pre-election survey, about three-fourths of Americans went to the polls believing that the rich were getting richer and the poor were getting poorer. However, more than half of the respondents also said that income inequality is an acceptable part of the economic system. Most citizens wanted a fair shot at the top, and they wanted government to do something about leveling the playing field.2 By 2014, however, 60 percent of Americans had come to believe that the economic system unfairly favored the richest Americans.3

At the same time, many Americans also said they wanted government to reward hard work, and they said that most needy Americans were in trouble because of their own failure to find jobs.

16.1 Describe the federal government’s role in making economic policy and how the economy’s performance is measured, p. 476.

16.2 Outline the tools and impact of fiscal policy on the economy, p. 480.

16.3 Outline the tools and impact of monetary policy on the economy, p. 484.

16.4 Identify ways in which the federal government seeks to promote economic growth, p. 487.

16.5 Categorize ways in which the federal government seeks to regulate the economy, p. 491.

16.6 Evaluate the advantages and disadvantages of the deregulation movement, p. 496.

The contrast between poverty and wealth was at the center of the 2012 campaign, although rarely talked about in stark terms. However, the poverty was always just below the surface in soup kitchens, homeless shelters, and unemployment lines during the continued economic crisis.

Although most Americans understood that the economy was producing fewer jobs, they still argued that the needy could pull themselves out of poverty on their own. Moreover, most Americans supported the general idea that individuals should keep as much of their paychecks as possible. They had concerns about the very rich, and wanted to know more about how much in taxes wealthy Republican candidate Mitt Romney had paid over the years, but were not angry toward people who earned reasonably large salaries.

Given these opinions, it is not surprising that Republicans and Democrats do not agree on the need for more government involvement in economic policy. Rather, many Republicans believe that the biggest barrier to a stronger economy is government itself. They maintain that government spends too much money, imposes too much regulation, and does too little to promote innovation. They also argue that high taxes discourage businesses from creating more jobs, investing in U.S. plants, and hiring new workers.

This debate shows just how complex economic policy can be, especially during periods of great turmoil. With the economy still mired in slow growth and high unemployment, Democrats and Republicans offered two very different visions of the future, one marked by increased government support for economic growth, and the other by a demand for less intervention. The two visions provided a stark choice of how to protect the nation’s capitalist system, which is built on free markets and innovation.

However, as the recent economic crisis suggests, there are times when government must play a strong role, whether by increasing its role in protecting free markets, or by reducing its size and spending. Although candidates often frame the choice as all-or-nothing, the federal government will always play a role in supporting a strong economy. It is up to citizens to decide how much the government should do, which is why the 2012 election was such an important referendum on the immediate future of economic policy.

This chapter will examine the many choices involved in supporting the economy through fiscal and monetary policy. We will also examine the government’s role in keeping the economy healthy and honest by promoting growth and regulating industries. We will end the chapter with a discussion of the recent deregulation movement.

An Introduction to Economic Policy

16.1 Describe the federal government’s role in making economic policy and how the economy’s performance is measured.

The federal government has been active in economic policy since the end of the Revolutionary War. The Framers wanted a government strong enough to promote free trade, protect patents and trademarks, and enforce contracts between individuals and businesses. And they wanted a government with enough funding to build the postal roads, bridges, railroads, and canals that would allow the young economy to grow.

In part because the economy is so important, the Framers did not concentrate economic policy in any one branch. Instead, they divided economic policy-making control between the legislative and executive branches and even between the House and the Senate.

This separation of economic powers can be found in the first two articles of the Constitution. Article I, Section 8, of the Constitution gives Congress the power to borrow, coin, and print money, while Article II, Section 2, gives the president the power to appoint the officers of government who administer economic policy.

Article I also gives Congress the power to regulate commerce among the states and with foreign nations, the power to “to lay and collect Taxes, Duties, Imposts, and Excises,” and the power to appropriate money and audit government spending, while Article II gives the president the power to negotiate treaties with other nations, which past presidents have used to create trade agreements to increase U.S. exports to other nations.

Finally, Article I gives Congress the power to establish post offices and build postal roads, which were just as important to commerce in the late 1700s as the Internet is today, while Article II gives the president significant discretion to execute economic policy as administrator-in-chief.

Moreover, the Framers were so concerned about taxation without representation, which was the rallying cry of the Revolutionary War, that they even divided the power to lay and collect taxes within Congress by giving the House sole authority to initiate all revenue legislation.

By creating a national government of limited powers and providing constitutional guarantees to protect property from excessive regulation, the Framers succeeded in protecting the nation’s capitalist economic system, which allows for free markets and private ownership of property, inventions, and wealth. At the same time, the Constitution is absolutely clear in its preamble that the government’s economic policy must be designed to “provide for the common Defense and promote the general welfare of the United States.”

As a result, the federal government has a dual role in making economic policy. It must give individuals and businesses the freedom to create and own wealth through new ideas and hard work, but must protect the nation from economic chaos through fiscal policy, which uses federal spending and taxation to stimulate or slow the economy, and monetary policy, which manipulates the supply of money and access to credit that individuals and businesses have in their hands to buy new houses, use their credit cards, and invest in their retirement accounts.

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending, which affect inflation through lower taxes and less government spending, and unemployment through more government spending.

monetary policy

Government policy that attempts to manage the economy by controlling the amount of money in circulation through interest rates.

Congress and the president use fiscal and monetary policy to address problems in what economists call the normal business cycle as it moves through four stages: (1) expansion, (2) contraction, (3) recession, which is often called contraction, and (4) recovery. The goal of effective economic policy today is to make sure the peaks of expansion and recovery are not too high and the troughs of contraction and recession are not too low.

Fiscal and monetary policies are designed to make sure the cycle is relatively stable. Here, unemployed workers during the Great Depression of the 1930s stand in line to apply for jobs and other assistance.

In an ideal world, the economy would always be expanding at a reasonable pace—not too fast, but not too slow either. But in the real world, the economy periodically enters slow-downs called recessions in which growth plummets and unemployment rises, then rebounds through recoveries, settles into periods of stability, and then enters recessions again. And in the worst of economic worlds, the economy can collapse into a depression, which is a particularly deep form of collapse that lasts much longer than the normal one-to-two-year recession and creates much greater unemployment. The U.S. economy entered what is now known as the Great Depression following the stock market crash on October 29, 1929, a day that is still remembered as Black Friday, and only began to rebound 10 years later at the start of World War II, which generated millions of war-time jobs.

The recent economic turmoil is not considered a depression, but is often referred to as the “Great Recession” because of its length and very high levels of unemployment. The current recession began in 2008 with the collapse of the U.S. housing market, which supports local government and is the source of wealth for many Americans. Although economic activity began to increase in 2011, the U.S. economy was still struggling in 2014 because the economic cycle was stuck in the recession phase.

Congress and the president generally focus on two highly visible measures of economic performance to guide their economic decisions. The first is inflation, which measures the rising price of goods and services such as gasoline, food, and housing over time. Increased inflation is the primary risk during expansion and recovery. The second measure is unemployment, or the number of people looking for work at any given time. Unemployment among the employable is the greatest problem during contraction and recession, and has hovered around 9 percent since 2008. (The end-of-year unemployment rate from 1970–2014 can be found in Figure 16.1.)

inflation

A rise in the general price level (and decrease in dollar value) owing to an increase in the volume of money and credit in relation to available goods.

unemployment

The number of Americans who are out of work but actively looking for a job. The number does not usually include those who have given up searching for a job.

In theory, inflation increases when unemployment drops as consumers begin to compete to buy more products and services, which raises prices. In theory again, inflation drops when unemployment increases as consumers pull back on demand for goods and services, which lowers prices. This balance between the demand and supply of goods and services drives the business cycle: When supply is low and demand is high, prices rise; when supply is high and demand is low, prices fall. In reality, inflation and unemployment can rise or fall at the same time, as they did at the start of 2008.

Economists measure inflation with the consumer price index (CPI), which shows how much more or how much less consumers are paying for the same “basket of goods” over time. The major components of the CPI basket are food, shelter, fuel, clothing, transportation, and medical care. In turn, economists measure unemployment by the percentage of able-bodied workers who are looking for jobs but cannot find them. This unemployment rate does not include able-bodied workers who have given up looking for work or taken jobs below their skill levels with lower pay. Recent estimates suggest that there are about as many people who have given up as the number who are listed in the unemployment figures.

FIGURE 16.1 THE U.S. UNEMPLOYMENT RATE, 1970–2014

■ Why has the unemployment rate fallen in recent years?

SOURCE: Bureau of Labor Statistics, June 2014, available at http://www.bls.gov/cps/.

More recently, economists have also used income inequality as a key measure of how an economy distributes good and services to different groups in society. Income inequality is one measure of wealth, or amount of economic power that individuals, corporations, or segments of society control. Income inequality is often measured by the amount of after-tax income that a family receives. The top 1 percent of U.S. families gained nearly 300 percent in income from 1979 to 2007, while the middle 60 percent reaped a much smaller increase of 40 percent. Speaking in early 2014, the president’s top economic adviser summarized the current state of income distribution in simple terms: “The magnitude of these shifts is mindboggling. The share of all income accruing to the top 1 percent increased by 13.5 percent. This is the equivalent of shifting $1.1 trillion of annual income to the top 1 percent of families.”4 The trends also suggest that the middle class is drifing downward.

income inequality

The amount of after-tax income that the richest individuals and families control when compared to the amount that the poorest control; often measured by growth in the gap between the two classes.

wealth

The total amount of economic assets such as income, property, and investments that individuals and families control.

There are many explanations for this shift, including the decline in the number of manufacturing jobs in the country, which were generally jobs with good pay, lower taxes for higher-income families following the 2001 tax cuts, basic changes in how money gets made in the United States through stock investments, and the deep impact of the 2008 financial collapse on lower-income Americans. But whatever the cause, economists agreed that the U.S. economy is producing more wealth for the richest families, and more poverty at the bottom of the income ladder.5

Experts also use a set of measures to show how much the federal government is spending and borrowing (as measured by the federal budget deficit and national debt), the amount of goods and services the U.S. economy is exporting or importing from other nations (as measured by the balance of trade), and how much the economy is growing in terms of goods and services produced from year to year (as measured by year-to-year comparisons of the gross domestic product, which is often abbreviated as GDP).

gross domestic product (GDP)

The value of all goods and services produced by an economy during a specific period of time such as a year.

The Global Community: Who Has the World’s Strongest Economy?

Nations compete against each other for economic growth and strength. Their overall reputations affect investment by other nations, the value of their currencies, the quality of the debt they sell, and their influence in international trade negotiations.

The United States was once perceived as the world’s leading economic power, in large part because it had the world’s highest gross domestic product. But other nations have moved up in the international ratings as having the most powerful economies during this period of slow growth across the world.

According to a spring 2013 Pew Global survey, most of the world still believes that the United States is the world’s leading economic power. However, China has been gaining ground in the ratings over the past five years. China’s rating as a global economic powerhouse rose from just 20 percent in 2008 to 38 percent in 2013, while the U.S. rating fell from 47 percent to 41 percent. And as China’s ratings rise, so do its hopes of winning new investments from other countries that are betting its economy will soon eclipse those of the United States, Europe, India, and Japan.

Ironically, however, the Chinese public rates the United States as number one by a 16 percentage point margin, while the U.S. public rates China as number one by a much tighter 5 percentage point gap. At least in global economic ratings, both publics see the competition as very tough, which may be part of each country’s effort to stimulate greater productivity and determination, and less a true assessment of reality.

However, this battle for international bragging rights may almost be over. When asked whether China will replace the United States as the world’s leading economic power in the future, 56 percent of Americans and 63 percent of Chinese say, “yes.” So do citizens in the other 37 countries that Pew interviewed, who are paying attention to China’s enormous growth in population, manufacturing, and technology.

SOURCE: Pew Research Center, “America’s Global Image Remains More Positive than China’s: But Many See China Becoming World’s Leading Power,” July 2013, available at http://www.pewglobal.org/files/2013/07/Pew-Research-Global-Attitudes-Project-Balance-of-Power-Report-FINAL-July-18-2013.pdf.

CRITICAL THINKING QUESTIONS

1. Why do Americans believe the Chinese economy is stronger than their own? Do you think they have changed their minds by now?

2. Do these ratings make any difference in the performance of an economy? If so, why?

3. Why do Americans and Chinese see China as eventually winning this competition?

Fiscal Policy

16.2 Outline the tools and impact of fiscal policy on the economy.

Congress and the president make fiscal policy by taxing, borrowing, and spending money. In general, lower taxes, higher borrowing, and increased spending are considered ways to stimulate employment during periods of sluggish economic performance, while higher taxes, lower borrowing, and decreased spending are considered ways to reduce inflation during periods of rapid economic growth. Lower taxes and more spending put more money in the pockets of consumers, which increases demand for goods and services, which in turn increases inflation and reduces unemployment. Conversely, higher taxes and lower spending take money away from consumers, which reduces demand for goods and services, which in turn reduces inflation and increases unemployment.

The Federal Budget

Today, federal, state, and local governments spend an amount equal to approximately one-third of the nation’s GDP. The federal government is the biggest spender of all—it spends more than all state and local governments combined. More importantly for raising revenue and borrowing money, federal spending has increased dramatically since the 1930s. Measured as a percent of GDP, the federal budget now accounts for 22 percent of all U.S. economic activity, up from just 4 percent in 1930.6

WHERE THE MONEY COMES FROM

Although the Framers clearly understood that their new government would need revenues to succeed, they might be surprised at the range of taxes and other revenue sources that Congress and the president now use to fund federal programs (see Figure 16.2 for the percentages from each source).

FIGURE 16.2 WHERE THE MONEY CAME FROM, 2014

■ Are the majority of taxes collected by the government progressive or regressive?

SOURCE: Budget of the United States, Fiscal Year 2014, Historical Table 3.1 (U.S. Government Printing Office, 2013).

1. Individual income taxes. Taxes on individuals account for the largest share of the federal government’s tax revenue. The income tax was prohibited under the Constitution until the Thirteenth Amendment was ratified in 1913.

2. Payroll taxes. Payroll taxes to pay for social insurance (Social Security and Medicare) are the fastest-rising source of federal revenue. Most workers pay more in Social Security taxes than in federal income taxes.

3. Corporate income taxes. Corporate income taxes have fallen steadily from their historic high of two-fifths of federal revenues during World War II. Due to tax cuts and special deductions, today they account for one-tenth of federal revenues, only one-fourth as much as the individual income tax.

4. Excise taxes. Federal excise taxes on the sale of liquor, tobacco, gasoline, telephones, air travel, and other so-called luxury items account for a very small percentage of the federal budget, and are often restricted to specific uses such as building highways and airports.

excise tax

A consumer tax on a specific kind of merchandise, such as tobacco.

5. Other sources. Smaller taxes and fees include admission to national parks and camping fees in national forests, taxes on large estates left behind after death, and interest payments on government loans to college students. The federal government also collects revenues from taxes called tariffs that are placed on imports such as cars, food, steel, raw minerals, and other products from other countries, which raise the price of these goods when they reach stores.

tariff

A tax levied on imports to help protect a nation’s industries, labor, or farmers from foreign competition. It can also be used to raise additional revenue.

6. Borrowing. When the federal government cannot raise enough revenue to cover all its services, the only way to cover the resulting budget deficit is to borrow money by selling Treasury notes and savings bonds to individual citizens, investment firms, banks, and even foreign governments. Borrowing adds to the national debt, which is the total amount of money the federal government owes at any given point in time. As of early autumn 2014, each American owed the nation’s creditors an average of $5,625.

budget deficit

The condition that exists when the federal government raises less revenue than it spends.

national debt

The total amount of money the federal government has borrowed to finance deficit spending throughout the years.

Congress and the president often mix and match revenue sources to achieve specific economic goals. Higher tariffs on specific imports can protect young industries from foreign competition long enough to gain a share of the international market, for example, while increased borrowing and lower taxes can push more money into the economy during slowdowns.

Congress and the president can also mix and match revenue sources to make sure all citizens and corporations pay a reasonable share of government costs. The federal income tax is considered a progressive tax that weighs more heavily on individuals with higher incomes, for example, while the federal payroll tax is considered a regressive tax that collects the same percentage on all individuals and corporations regardless of income.

progressive tax

A tax graduated so that people with higher incomes pay a larger fraction of their income than people with lower incomes.

regressive tax

A tax whereby people with lower incomes pay a higher fraction of their income than people with higher incomes.

As of 2014, more than half of all Americans were paying federal income taxes (a progressive tax), while another quarter were paying only payroll taxes (a regressive taxes). The rest of Americans did not pay any taxes at all, not because they were cheating, as some Americans believe, but because they were unemployed, college students, elderly, or poor.7

WHERE THE MONEY GOES

Much of the money the federal government takes in is spent on benefit payments to individuals and on national defense. Nearly half of federal spending in 2014 went to benefit programs for individuals, such as Social Security, Medicare, Medicaid, and other major social programs (see Figure 16.3 for the figures on where federal revenues were spent in 2014). About two-thirds of all federal spending in 2014 was mandatory, or uncontrollable, meaning that Congress and the president cannot use their discretion to change the spending rates. Mandatory programs include Social Security and Medicare for older people and other programs that pay any citizen who qualifies for support. The rest of the 2014 spending was discretionary, or controllable, meaning that Congress and the president can change the spending rates, which the two branches did in 2013 as part of the controversial budget deal discussed earlier.

mandatory spending

Required spending under the federal budget.

discretionary spending

Spending that can be altered by congressional and presidential action.

FIGURE 16.3 WHERE THE MONEY WENT, 2014

■ Why does so much of the government’s budget go to human resources?

SOURCE: Budget of the United States, Fiscal Year 2014, Historical Table 11.3 (U.S. Government Printing Office, 2013).

The Budget Process

Before Congress enacted the Budget and Accounting Act of 1921, each executive agency dealt with Congress on its own, requesting that the legislature appropriate funds for its activities with little or no presidential coordination. Today, the president is required by law to submit an annual budget proposal for all agencies together.

THE EXECUTIVE BRANCH

The federal government’s fiscal year (FY) begins every October 1, meaning that the FY 2015 budget covers all spending from October 1, 2014, through September 31, 2015. But the budget process begins nearly two years before it is presented for debate, when the various departments and agencies estimate their needs and propose their budgets to the president.8 (See Table 16.1 for the budget deadlines in designing the budget for FY 2015.) Agencies develop their specific requests based on federal laws, the president’s priorities, and congressional demands, and provide detailed figures for every cost.

The Office of Management and Budget (OMB) is responsible for overseeing the budget process on behalf of the president as part of the Executive Office of the President. Once the OMB receives each agency’s budget request, its examiners review each agency’s budget and reconcile it with the president’s overall plans. The OMB then holds informal hearings with every department and agency to give each one a chance to clarify and defend its estimates.

Office of Management and Budget (OMB)

The presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements for government agencies.

Once this give-and-take is over, the OMB director gives the president a single document that shows where the federal government’s money will come from and where it will go. The president reviews these figures and makes adjustments. The president must submit the budget recommendations and accompanying message to Congress between the first Monday in January and the first Monday in February.

THE LEGISLATIVE BRANCH

The president’s budget proposal is only the beginning of formal approval of the budget. Under the Constitution, Congress must appropriate the funds and raise the taxes. However, the White House also plays a role in all decisions, if only because all appropriations and tax proposals are subject to a presidential veto. Presidents often threaten to veto these bills as a way of winning passage of their priorities.

Congress acts on the budget in several steps. It starts its process by approving an initial budget resolution that sets the broad spending and revenue goals for the process. It then moves forward with hearings on the budget proposal.

TABLE 16.1 STEPS IN BUILDING THE 2015 FISCAL YEAR BUDGET

February–December 2013

Executive branch agencies develop requests for funds, which are reviewed by the Office of Management and Budget and forwarded to the president for final decision.

December 2013

The formal budget documents are prepared.

January–February 2014

The budget is transmitted to Congress as a formal message from the president.

March–September 2014

Congress reviews the president’s proposed budget, develops its own budget, and approves spending and revenue bills.

October 1, 2014

Fiscal year 2015 begins (fiscal year is identified by the year that it ends).

We plan and pass spending and revenue bills up to September 30, and start spending on October 1, 2014.

October 1, 2014–September 30, 2015

Executive branch agencies execute the budget provided in law.

October–November 2015

Figures on actual spending and receipts for the completed fiscal year become available.

■ Which step of the process is the most likely to produce budget cuts or increases? What conflicts would you anticipate at each of the steps?

Congress adopted the Budget and Impoundment Control Act of 1974 to strengthen its role in the budget process. This Act requires the president to include proposed changes in tax laws, estimates of amounts of revenue lost through existing preferential tax treatments, and five-year estimates of the costs of new and continuing federal programs. The Act also calls on the president to seek authorizing legislation for a program a year before asking Congress to fund it.

The 1974 Budget Act also created the Congressional Budget Office (CBO), an independent agency that prepares budget data on behalf of Congress, but the information is widely shared with the president and the public and is considered nonpartisan. By February 15 of each year, the CBO director presents an analysis of the president’s budget proposal to the House and Senate budget committees. The CBO director also provides Congress with biannual forecasts of the economy, analyzes alternative fiscal policies, prepares five-year cost estimates for bills proposed by congressional committees, and undertakes studies requested by committees.

Congressional Budget Office (CBO)

An agency of Congress that analyzes presidential budget recommendations and estimates the costs of proposed legislation.

Tax Expenditures

Tax expenditures are a final type of fiscal policy that uses the tax code to provide special tax exemptions to individuals and businesses for social goals such as homeownership, retirement savings, and college education. Under the president’s 2015 budget, these exemptions added up to more than $1.2 trillion in taxes forgiven that would otherwise have gone to the U.S. Treasury. Deductions for employer-paid medical insurance premiums and health care accounted for between $109 and $163 billion in the 2015 budget, while deductions for home mortgage interest cost between $72 and $78 billion.9

tax expenditure

A loss of tax revenue due to federal laws that provide special tax incentives or benefits to individuals or businesses.

Tax expenditures are one means by which the national government carries out public policy objectives. For example, instead of giving out federal grants for research and development (R&D), the government encourages investment in R&D by giving companies tax breaks to invest in innovation and expansion.

However, tax expenditures such as the home mortgage deduction do not help all levels of society, and may divert individuals and corporations toward investments with little yield for economic growth. In 2012, for example, the Obama administration charged that too many U.S. corporations were using a little-known federal tax break to purchase private airplanes for executive travel. Although the break helped U.S. airplane companies sell more planes, it became a symbol of corporate excess; but it was still in the tax code as of January 2015.

The Politics of Taxing and Spending

In addition to raising funds to run the government, taxes also promote economic growth and reward certain types of behavior, such as contributing to charities. Critics suggest that tax legislation helps individual members of Congress raise campaign funds—laws permitting several of the most popular corporate deductions must be renewed every year. This gives Congress a chance to show support for corporations regularly, and corporations a chance to show their support for Congress, too.10

As much as taxpayers complain about taxes, most want more of virtually everything the federal government provides. However, there is considerable disagreement about the best type of tax. Some experts argue that a progressive income tax (also called a graduated income tax) is best because it is relatively easy to collect, takes most from those who are most able to pay, and hardly touches those with little income.

The sales tax, which is used only at the state and local levels in the United States, is widely used in Europe in a slightly different version. Called the value-added tax (VAT), it applies to the increased value of a product at each stage of production and distribution rather than just at the point where it is sold to a customer. A loaf of bread would thus have added value at several steps along the way to the grocery store: The farmer would pay a value-added tax on the grain before selling to the flour maker, who would be taxed before selling the flower to the baker, who would be taxed before selling the bread to consumers, who would be taxed when they bought the bread to eat. Some see the value-added tax as a way to infuse a large amount of new revenue into the federal government. The idea has strong support from many economists, but has yet to gain much momentum as a way to increase revenues. However, it is very much under consideration as part of the broad debate about how to lower the national debt.

sales tax

A general tax on sales transactions, sometimes exempting such items as food and drugs.

value-added tax (VAT)

A tax on increased value of a product at each stage of production and distribution rather than just at the point of sale.

All individual income taxes are due on April 15 of each year. Here, cars line up as taxpayers drop their tax returns at the U.S. Postal Service to make sure they are postmarked on April 15. Failure to pay income taxes on time can result in a fine.

Monetary Policy

16.3 Outline the tools and impact of monetary policy on the economy.

Monetary policy is the second way the federal government manages the economy. The core element of monetary policy is the idea that prices, incomes, and economic stability reflect growth in the amount of money that circulates through the economy at any one time. More money in the economy means more credit available for investment at a lower cost—a greater supply of low-cost money eventually creates demand. Advocates of aggressive monetary policy contend that the money supply is the key factor affecting the economy’s performance. In theory, accelerating the circulation of money increases access to credit for creating jobs, buying homes, and saving for the future. In turn, slowing the circulation has the opposite effect.

Before turning to the specific tools of monetary policy, it is important to note that the United States is part of a much larger international economy in which the cost of money and the value of currencies such as the dollar, yen, euro, or pound is set by other governments and markets. Events in distant countries such as Greece, Ireland, Italy, Portugal, and Spain can have as much impact, if not more, on the U.S. economy today as decisions by Congress and the president. In 2012, for example, the threatened collapse of the Greek, Italian, Portuguese, and Spanish economies rocked the global finance markets, sending stock markets across the world falling, and raising the specter of an international depression. Working with its allies across the world, the United States continues to aid the three economies, which were forced to cut their government spending in return for international loans.

The Federal Reserve System

U.S. monetary policy is made by the Board of Governors of the Federal Reserve System (often simply called “the Fed”). As leaders of the nation’s, and perhaps the world’s, most important central bank, the Fed’s chair and six members of the Fed’s Board of Governors are appointed by the president with Senate consent to 14-year terms; a different member’s term expires every two years. As an independent regulatory commission, the Fed is effectively insulated from politics. The governors supervise 12 regional Federal Reserve banks located across the country, each headed by a president and run by a nine-member board of directors chosen from the private financial institutions in each region.

Federal Reserve System

The system created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available. It consists of 12 regional banks supervised by the Board of Governors. Often simply called “the Fed.”

Starting in 2010, Greek citizens began protesting their government’s multi-year plan for deep budget cuts, which is sometimes called fiscal austerity. The plan included caps on government wages, vacation days, and spending for social programs. Nevertheless, Greek leaders moved ahead on the cuts, and the protest continued into 2014.

The current Fed chair is Janet L. Yellen, who became the first woman to ever serve in the powerful post, and may have more say over economic performance than either the president or Congress. Although the chair is protected from politics and is not a visible national figure, she is nonetheless under constant scrutiny by Congress and the president. Her support for raising or lowering interest rates may lead to congressional investigations, cause a sharp drop in the stock market, and may even rekindle proposals to abolish the Fed as an unaccountable institution.

The Fed’s most important tool for monetary policy is its federal funds rate. The rate establishes the amount of interest the Fed charges banks to borrow money, which eventually determines the amount of interest banks charge their customers to borrow money for automobiles, homes, credit card balances, and that helps businesses hire new employees. Increasing the rate slows down the economy by increasing the cost of borrowing, while lowering the rate stimulates the economy by making more money available for investment and growth.

federal funds rate

The amount of interest banks charge for loans to each other.

The cost of borrowing money is linked to the interest rate a bank’s best customers receive on their short-term loans. In turn, this prime rate determines how much the federal government charges for many of its loans to new industries and college student loans, and flows down to bank home mortgages, car loans, and credit card debt. As Figure 16.4 shows, during the last several years, the Fed has swung between stimulating the economy, and slowing the economy again. In 2012, the Fed promised not to raise rates until the U.S. economy showed renewed strength, and has not yet done so.

The Fed has other tools at its disposal, but they are rarely used except in emergencies. In 2008, for example, the Fed began buying more than $3 trillion in mortgages and other forms of bank debts, thereby giving banks more freedom to make loans.11 Believing that the economy had recovered enough to stand on its own, the Fed began to put the debt back into circulation in 2013, but slowed down this “tapering” in 2014 as the economy continued to sag.

Janet Yellen became the first woman ever appointed as chair of the U.S. Federal Reserve Board. Here, she holds her first press conference in March 2014 to announce that the Federal Reserve Board will continue to do whatever is necessary to support economic growth.

Government and Economic Policy

The Great Depression pitted two groups of economists against each other in the effort to help the economy recover from its collapse. The first group urged the government to reduce spending, cut taxes, reduce regulation, and generally let the normal business cycle takes its course. These economists favored what is called laissez-faire economics. Republicans generally support this “light-hand” approach.

laissez-faire economics

A theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property.

The second group urged government to do the opposite. Influenced by English economist John Maynard Keynes,12 this group recommended that government must take a much more active role in stimulating the economy during desperate times. These economists favored what is called Keynesian economics. Democrats generally support this “aggressive-hand” approach.

Keynesian economics

An economic theory based on the principles of John Maynard Keynes stating that government spending should increase during business slumps and be curbed during booms.

FIGURE 16.4 EFFECTIVE FEDERAL FUNDS RATE, 1998–2014

■ Why did the Federal Reserve Board reduce interest rates so drastically in 2007? U.S. companies have offshored thousands of jobs, including service call centers, to India and other low-wage nations.

SOURCE: The Federal Reserve Board, Open Market Operations, http://federalreserve.gov/monetarypolicy/fomc.htm, December 2014.

As the growth in the federal budget suggests, Keynesians won the battle. The federal government injected vast amounts of money into the economy during the 1930s, created hundreds of new programs for creating new jobs, introduced new regulations to control the financial markets, and raised the national debt accordingly. Although there have been Democrats such as Bill Clinton who have worked with Republicans to balance the budget through budget cuts and tax increases, the United States has become accustomed to strong interventions during economic downturns, which is exactly what Congress and the Obama administration did by enacting the $800 billion American Recovery and Reinvestment Act in 2009. Between 2009 and 2012 when the program ended, the federal government spent almost $825 billion on a large number of relatively small projects spread out over every state in the Union.13

Although the Obama administration claimed that its stimulus package generated millions of jobs, the actual impacts are debatable. According to the Congressional Budget Office, the effect of the stimulus act peaked in late 2010, and has been diminishing ever since. Overall, the CBO estimates that the stimulus helped create between 3 and 6 million jobs between 2009 and 2012, but at a cost of nearly $290,000 per job. Moreover, there is no way of knowing whether the jobs were temporary and part time or turned into lasting employment.14

The Recovery Act may have been another victory for Keynesians, but has not gone unchallenged. As noted earlier, Republicans have become increasingly effective in challenging the role of government in economic life, and made the national debt and big government major issues in the 2010 and 2012 elections. Although it is unlikely that the United States will abandon Keynesian economics entirely, the nation is asking hard questions about whether government intervention works and at what cost. It is also asking just how much government should do in both promoting and regulating the economy.

Promoting the Economy

16.4 Identify ways in which the federal government seeks to promote economic growth.

Federal economic policy is designed to do more than smooth the ups and downs of the business cycle. It also tries to promote economic growth, often measured by the number of new jobs or businesses created. This effort involves two different strategies: (1) to support U.S. industries, and (2) to encourage international trade.

Supporting U.S. Industry

The Framers knew that building a strong economy was essential for securing the “blessings of liberty” for the nation, and paying off the debt created by the Revolutionary War. They created the navy in part to protect cargo ships from piracy, and built the postal roads to assure the easy movement of goods across the nation. They also gave Congress the power to impose taxes, and exercise control of interstate commerce.

During the decades that followed, Congress and the president created dozens of new departments and agencies to support specific industries such as mining, airlines, small business, energy, and science. These organizations promote the economy through loans, grants, special payments, and advice on how to start new businesses.

For example, the Department of Agriculture is a powerful advocate of the farming industry, supporting higher prices for basic products such as corn, barley, oats, wheat, soybeans, cotton, and rice. In 2014 alone, it spent more than $20 billion in subsidies to keep prices higher on crops such as corn and soybeans by either guaranteeing a minimum price or paying fees to farmers for not planting fields. By altering the supply and price of crops while promoting new products such as “biofuels” made from corn and sugar cane, these subsidies increased the cost of items such as cereal.

Not all U.S. industries receive this kind of support, however, and many business experts argue that government involvement in promoting specific industries gets in the way of the natural market forces that would help lower prices or produce jobs. The high-tech industry does not have its own agency or department, for example, nor does the nation’s charitable sector, which employs 11 million workers.

Many of the world’s leading technology companies buy computer components such as chips, screens, and cases for their phones and computers from foreign companies that pay very low wages. In 2012, Apple came under pressure for its iPad and iPhone 4S and iPhone contracts with a large Chinese firm called Foxconn. Under pressure from Apple, Foxconn promised to improve working conditions at its factories and raise wages.

However, the federal government does protect all new inventions through its U.S. Patent and Trademark Office. The office reviews applications for patents and trademarks to make sure that all new ideas are original. Once granted, a patent or trademark is protected by the federal courts. In September 2012, Apple won a $1 billion federal court judgment against Samsung Corporation for patent infringement. Apple argued that Samsung had copied many features of the iPhone in designing its Fascinate, Epic, and Galaxy products.

Promoting International Trade

Worries about international competition often lead domestic producers to call for protectionism, which can take the form of special taxes, or tariffs, placed on imported goods to make them more expensive. Most economists oppose protectionism because it prevents efficient use of resources and because consumers pay much more for protected products than they otherwise would in the world economy. Tariffs merely divert attention from real solutions such as increased productivity and capital investments, and they inevitably invite retaliation from foreign countries.

protectionism

A policy of erecting trade barriers to protect domestic industry.

Trade barriers are less severe today than they were in the 1930s. But restrictions still exist. Certain tariffs, limits on imported goods, and import regulations limit U.S. consumption of foreign products. Most exist to protect U.S. farmers, businesses, or workers in certain industries, but they often do more harm than good by leading other countries to put tariffs and other restrictions on U.S. goods. The result has been a persistent trade deficit in which the United States imports far more than it exports. The trade deficit is also caused by the low wages many foreign companies pay their workers.

trade deficit

An imbalance in international trade in which the value of imports exceeds the value of exports.

The United States experienced its first trade deficit in more than a century when the amount of imports exceeded the value of exports in 1971. In the 40 years since then, the nation has faced billions of dollars in ever-growing trade deficits. Congress and the president are under continuing pressure from industry, unions, and regional political leaders to protect U.S. jobs, companies, and communities from foreign competition. These pressures come from the textile and auto industries as well as from glass, steel, shoes, lumber, electronics, book publishing, aluminum, farming, and domestic wine and spirit coalitions, to name only a few. Their leaders claim that the trade deficit justifies the imposition of trade sanctions.

You Will Decide: Should Government Limit Offshoring?

In search of lower costs, many U.S. corporations have moved hundreds of thousands of jobs from inside the U.S. to other nations such as China, India, and the Philippines, and appear to be ready to move millions more.* This process, called offshoring or offshore outsourcing, creates wide swaths of unemployment in heavy industries such as steelmaking and customer service industries such as computer support. Most technology manufacturing jobs have been offshored to China, while many customer service telephone lines are staffed in India, the Philippines, and Indonesia. As Apple founder Steven Jobs told Obama at a White House dinner in late January, 2012, “those jobs are not coming back.”** As of 2015, Jobs was still right for almost all high-tech firms.

Although no one is certain how many jobs have left the United States, some estimates suggest more than one million U.S. jobs have been exported to Mexico, other Central American countries, and China. The number may seem high, but it amounts to a fraction of the U.S. workforce of more than 140 million. Nevertheless, opposition to job migration remains a highly divisive issue between labor and management.

This migration has been driven in part by the U.S. government’s economic policies, most notably in setting minimum wages and protecting workers from economic harm. Nevertheless, President Obama made an end to offshoring a major theme in his 2012 State of the Union Address by arguing that the United States should police the migration of jobs to other countries through tax breaks and other incentives for keeping the jobs home.

What do you think? Should the federal government do more to protect U.S. jobs? What arguments would you make for and against such an idea?

Thinking It Through

Most economists agree that efforts to stop the movement of jobs to other nations would hurt the U.S. economy in the longer term. U.S. jobs pay much higher wages than jobs in other countries such as China and India, for example, which lowers the price of U.S. goods that are made with foreign components.

However, Democrats and Republicans disagree on what might be done to keep jobs home. Democrats tend to argue that the United States should negotiate strong trade agreements that require better working conditions and pay for workers everywhere, which would make offshoring less attractive to U.S. companies. They also argue that the federal government should provide greater help for workers who lose their jobs to foreign nations. “The answer is not to try to stop outsourcing,” says former Clinton administration Secretary of Labor Robert Reich, using a popular term for offshoring, “but we do have to get serious about job retraining, lifetime learning, extended unemployment insurance, and wage insurance.”†

In contrast, Republicans tend to argue that the United States should make job creation its top priority and allow offshoring to occur as a natural product of a free market. They also argue that lower corporate taxes and less regulation would make doing business inside the United States more attractive, and, therefore, would keep more jobs home. As of 2015, there had been no movement to reconcile these two positions, although Obama repeatedly charged that Romney’s greatest achievement during his earlier business career was sending American jobs abroad.

Offshoring may be the inevitable long-term cost of doing global business, but it has very visible consequences in the short term. Workers whose jobs move abroad often face years of unemployment, which is why the issue has been so controversial.

The United States’ economic policy in the future will continue to combine free trade and selective protectionism. Although it shields highly visible industries from competition at home or abroad, protectionism often favors one industry over another, which reduces competition among those industries. In the short run, it helps protect U.S. jobs but may delay economic growth as companies spend more on pay than research and development.

CRITICAL THINKING QUESTIONS

1. Why should the United States protect its workers from offshoring?

2. Should workers be protected even if doing so results in higher prices for products such as clothing?

3. Do you know of any jobs that have been outsourced? Have you had any contact with a company that uses employees in other nations to deliver basic services?

*For a recent analysis of offshoring, see Linda Levine, “Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers” (Congressional Research Service, January 21, 2011), available at http://forbes.house.gov/UploadedFiles/CRS_-Offshoring_and_Job_Loss_Among_U_S__Workers.pdf.

**Charles Duhigg and Keith Bradsher, “How the U.S. Lost Out on iPhone Work,” New York Times, January 21, 2012. From http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all.

†Thottam, Jyoti, Barbara Kiviat, Sara Rajan, Cathy Thomas, and Karen Tumulty. 2004. “’04 The Issues: Is Your Job Going Abroad?” Time, March 1, 2004. From http://www.time.com/time/magazine/article/0,9171,993464,00.html.

Another unfair trade practice is dumping—selling products below the cost of manufacturing or below their domestic price with the intention of driving other producers out of the market and then raising prices to profitable levels. Governments might also subsidize certain industries. Some countries, for example, subsidize steel for export. Others require lengthy inspection procedures for imported goods. Japan has protected several of its industries—producers of automobiles, baseball bats, and even chopsticks, for example—by setting standards that are virtually impossible for U.S. manufacturers to meet. Japan also sets limits on rice imports. China has become the United States’ largest competitor by subsidizing key industries in the computer industry, prompting Obama to argue for tougher rules against such tactics in 2012.

THE WORLD TRADE ORGANIZATION

Recognizing the emergence of the international economy, in 1947 a group of countries began negotiating the pieces of what became known as the General Agreement on Tariffs and Trade (GATT). GATT was amended through seven rounds of intense negotiations over the decades that set the rules of free trade among what are now 155 member nations, which include China, India, Indonesia, Russia, the United States, and all economies in Western Europe, Latin America, South America, and most of Africa.

General Agreement on Tariffs and Trade (GATT)

An international trade agreement that seeks to lower the barriers to free trade.

GATT became part of the new World Trade Organization (WTO) in 1995. WTO provides a powerful international forum for reaching trade agreements and resolving disputes among its members. The United States has been particularly active in recent years in bringing complaints against China for restricting free trade, and has won a series of rulings penalizing the Chinese for protecting its own automobile, computer, and even motion picture industries from international competition. Despite these victories, China remains an aggressive defender of its young and growing economy.

World Trade Organization (WTO)

An international organization with more than 130 members that seeks to encourage free trade by setting rules for fair competition.

China came under fire for this protectionism in 2012 when the United States, Japan, and the members of the European Union accused the Chinese of manipulating prices on rare-earth metals such as scandium that are used in the manufacturing of computer chips, television monitors, and other high-tech products. After two years of review, the WTO ruled that China had violated the international trade agreement, and ordered an end to the practice. The case set a precedent for even more cases that challenged China’s trading practices in 2014.

Not everyone believes free trade should be unlimited, however. Labor unions, environmentalists, and human rights advocates argue that U.S. trade policies spur the creation of low-wage jobs abroad and encourage child labor, pollution, and worker abuse in countries such as China and India that export large quantities of goods to the United States.

THE NORTH AMERICAN FREE TRADE AGREEMENT

In 1992, the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA), which formed the largest geographical free trade zone in the world. Although President George H. W. Bush signed NAFTA near the end of his presidency, the agreement could not become law until ratified by Congress. President Bill Clinton promoted NAFTA, even though many members of his own party were its most vigorous opponents. Congress passed it by a thin margin in a bipartisan vote with Democrats in the minority.

North American Free Trade Agreement (NAFTA)

An agreement signed by the United States, Canada, and Mexico in 1992 to form the largest free trade zone in the world.

Though trade among the United States, Canada, and Mexico is not absolutely “free” or unimpeded, the agreement has had a tremendous impact on the economies of all three countries. Today, Mexico is the United States’ third most important trading partner, and the United States is Mexico’s most important. Critics remain concerned because Mexican antipollution laws are significantly less stringent than those in the United States, and Mexican workers receive considerably lower wages. Both these factors make relocation to Mexico attractive to many U.S. companies seeking to reduce labor and pollution control costs.

Regulating the Economy

16.5 Categorize ways in which the federal government seeks to regulate the economy.

Even as U.S. economic policy promotes growth, it also regulates business activities that may create unfair advantages for certain industries that try to gain control of their sector of the market. U.S. citizens believe in competition among businesses, but they also want a level playing field, meaning no industry or company cheats its way to the top or abuses its employees or the environment along the way.

The Constitution explicitly authorizes Congress to regulate commerce among the states and with foreign nations. In our earliest years, Congress used this regulatory power to impose or suspend tariffs on imports from other nations. In the nineteenth century, the federal government created a number of agencies to regulate the conduct of citizens and commercial enterprises with an eye toward promoting economic development. Among these were the Army Corps of Engineers (1824), the Patent and Trademark Office (1836), the Steamboat Inspection Service (1837), and the Copyright Office of the Library of Congress (1870). In 1887, Congress created the Interstate Commerce Commission to deal with widespread dissatisfaction over the practices of railroads.

All governments regulate their economies, but the amount of government regulation varies greatly across the world. Compared to other nations such as Russia and Sweden, the United States actually has fewer rules than many of its competitors. It generally allows wages, prices, and the allocation of goods and services to follow the laws of supply and demand, even when doing so angers environmentalists, labor unions, and public interest groups. The nation relies on private enterprise and market incentives to carry out most production and distribution.

In 2012, the Supreme Court decided that Congress and the president had acted within constitutional boundaries in creating a mandate, which the Court redefined as a tax, requiring citizens to purchase health insurance. This law is an example of regulating the insurance industry to make sure citizens have certain rights when they buy health care coverage.

Nevertheless, even opponents of regulation recognize that the market does not always solve every problem. Both political parties say regulatory overkill threatens to overwhelm entrepreneurs and divert them from building vital, innovative companies. The question is not whether there are both costs and benefits from regulation, however, but whether the balance is right. Conservatives tend to overstate the costs of many regulations and understate the benefits, whereas liberals tend to overstate the benefits and understate the costs.

In August 2010, the Food and Drug Administration ordered grocery stores to remove almost 25 million eggs from their shelves due to an outbreak of salmonella, a deadly disease.

Regulating Competition

Business regulation increased in three major waves during the past century. The first came in the 1910s, the second in the 1930s, and the third in the late 1960s through 1980. In each case, changing circumstances gave rise to the legislation.

Perhaps the most important responsibility of government regulation in a free market system is to maintain competition. When one company gains a monopoly, or several create an oligopoly, the market system operates ineffectively. The aim of antitrust legislation is to prevent monopolies, break up those that exist, and ensure competition. In the past, so-called natural monopolies, such as electric utilities and telephone companies, were protected by the government because it was assumed that in these fields, competition would be grossly inefficient.

monopoly

Domination of an industry by a single company; also the company that dominates the industry.

antitrust legislation

Federal laws (starting with the Sherman Antitrust Act of 1890) that try to prevent a monopoly from dominating an industry and restraining trade.

In the late nineteenth century, social critics and populist reformers believed that the oil, sugar, whiskey, and steel industries were deceiving consumers, in large part because of the rise of large monopolies called trusts. Once they became aware of abuses in these industries, citizens began to call for more government regulation. In 1890, Congress responded by passing the Sherman Antitrust Act, designed “to protect trade and commerce against unlawful restraints and monopolies.” However, the Sherman Antitrust Act had little immediate impact; presidents made few attempts to enforce it, and the Supreme Court’s early interpretation of the Act limited its scope.15

trust

A monopoly that controls goods and services, often in combinations that reduce competition.

Congress added the Clayton Act to the antitrust arsenal in 1914. This Act outlawed such specific abuses as charging different prices to different buyers in order to destroy a weaker competitor, granting rebates, making false statements about competitors and their products, buying up supplies to suppress competition, and bribing competitors’ employees. In addition, interlocking directorates (in which an officer or director in one corporation served on the board of a competitor) were banned, and corporations were prohibited from acquiring stock in competing companies if such acquisitions substantially lessened interstate competition. That same year, Congress established the Federal Trade Commission (FTC), run by a five-person board, to enforce the Clayton Act and prevent unfair competitive practices. The FTC was to be the “traffic cop” for competition.16 The FTC’s record has been mixed in large part because Congress has created so many exemptions protecting favored industries.

Regulating the Use of Labor

Most laws and rules curb business practices and steer private enterprise into socially useful channels. But regulation cuts two ways. In the case of U.S. workers, most laws in recent decades have tended not to restrict labor but to confer rights and opportunities on it. Actually, many labor laws do not touch labor directly; instead, they regulate labor’s relationship with employers.

Federal regulations protect workers in the following important areas, among others:

1. Public contracts. The Walsh-Healey Act of 1936, as amended, requires that most workers employed under contracts with the federal government be paid at least the average or prevailing wage for that job, and that they be paid overtime for all work in excess of 8 hours per day or 40 hours per week.

2. Wages and hours. The Fair Labor Standards Act of 1938 set a maximum workweek of 40 hours for all employees engaged in interstate commerce or in the production of goods for interstate commerce (with certain exemptions). Work beyond that amount must be paid for at one and a half times the regular rate.

3. Child labor. The Fair Labor Standards Act of 1938 prohibits children from working in any industry that engages in interstate commerce, which essentially means that all child labor is illegal.

4. Industrial safety and occupational health. The Occupational Safety and Health Act of 1970 created the first comprehensive federal industrial safety program. It gave the secretary of labor broad authority to set safety and health standards for companies engaged in interstate commerce.

Federal regulations also protect employees’ right to organize unions. Under the 1935 National Labor Relations Act (usually called the Wagner Act), for example, the federal government gave workers significant new rights to organize unions, while prohibiting businesses from discriminating against union members or refusing to bargain in good faith with union representatives.

Congress passed a major modification of the labor laws in 1947. Under the Labor-Management Relations Act, commonly called the Taft-Hartley Act, government outlawed the closed shop, which restricts the hiring of non-union employees; permitted the union shop, which allows unions to require new employees to join their unions within a stated period of time; prohibits businesses from refusing to bargain with employees; allowed courts to issue labor injunctions, which forbid specific individuals or groups from performing acts considered harmful to the rights or property of an employer or community; and structures collective bargaining, the process between unions and employers that sets wages, benefits, and working conditions.

closed shop

A company with a labor agreement under which union membership is a condition of employment.

union shop

A company in which new employees must join a union within a stated time period.

labor injunction

A court order forbidding specific individuals or groups from performing certain acts (such as striking) that the court considers harmful to the rights and property of an employer or a community.

collective bargaining

The process in which a union represents a group of employees in negotiations with the employer about wages, benefits, and workplace safety.

All of these rules still stand, but the percentage of labor union members in the United States has steadily declined over the past 100 years as the manufacturing industry has shrunk. Membership reached its 100-year peak at 35 percent during the Great Depression in the 1930s, but fell to just 11 percent by 2014 as manufacturing continued to decline.17

Regulating the Stock Markets

The stock market crash of 1929 did more than devastate the U.S. economy and usher in the Great Depression. It also revealed deep problems in the way companies sold their stock to investors. Millions of new investors entered the stock market in the 1920s, only to find that the companies in which they had invested were virtually worthless.

Before 1934, investors themselves had to determine whether a company was telling the truth about its stock. Since 1934, that responsibility has fallen to the Securities and Exchange Commission (SEC). Under the Securities Exchange Act of 1934, which established the SEC, and a long list of later laws, companies that offer their stock for sale to the public must tell the truth about their businesses, which means full disclosure of their financial condition.

The Act also required that anyone in the business of selling stocks, including brokers, dealers, and stock exchanges such as the New York Stock Exchange and NASDAQ, must treat investors fairly and honestly, putting investors’ interests first. That means, for example, that individuals who know about a new stock offering in advance, or who have other insider information on events that might increase or decrease the value of a given stock, are prohibited from using that information to benefit themselves. The SEC came under fire during a series of investigations of the 2008 financial collapse. Congress charged that the SEC had missed many of the key warning signals of the catastrophe, and passed legislation to strengthen the beleaguered agency.

OF the People: Diversity in America: Diversity in the Workforce

The United States has one of the most diverse workforces in the world, with large percentages of men and women, African Americans, and Asian Americans employed either full or part time. Although high unemployment has hit women and minorities hardest, large percentages still remain in the workforce.

Employment and unemployment are only part of the picture, however. According to information collected by the U.S. Bureau of Labor Statistics in 2013, men earned about $860 a week, compared with women at $706. Compared across race and gender combined, white men earned more than white women, African American men, and African American women.*

One reason for these differences is that men and women work in different occupations. Women are much more likely to work in sales, office, and service occupations than men, while men are more likely to work in construction and manufacturing jobs, which are more highly paid.

Some experts argue that women of all races work in the “pink ghetto,” meaning that their occupations have a very high ratio of women to men. As a result, women may face hidden sex discrimination in service industries such as nursing, childcare, social work, and administrative support, which offer more opportunities for advancement than industries such as banking. Although women and minorities have made progress moving into management and professional occupations, they are still highly unlikely to reach the top of their organizations.

According to the Alliance for Board Diversity, which is a public interest group located in Washington, D.C., women led only 2 percent of the 500 largest companies in the world, while minority women held even fewer at just 0.6 percent.** Minority men were also far behind white men at just 4 percent. Diversity is considered good for corporate profits, but not necessarily essential for high-level leadership posts as board chairman, board member, or chief executive officer.

QUESTIONS

1. What is your theory regarding the unemployment differences across sex and race?

2. Why do women and minorities receive less pay on average than men? What might the federal government do to even the pay rates, and should it act at all?

3. What can your college or university do to change these figures?

*Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” available at http://www.bls.gov/cps/cpsaat39.htm.

**Alliance for Board Diversity, Missing Pieces: Women and Minorities on Fortune 500 Boards—2012, August 2013, available at http://theabd.org/2012_ABD%20Missing_Pieces_Final_8_15_13.pdf.

Protecting the Environment

Until the 1960s, the United States did little to protect the environment, and the little that was done was by state and local governments. In the early 1970s, the federal government took on new responsibilities, starting with passage of the Clean Air and Water Acts. These put new limits on the amount of pollution companies could release into the environment and launched a long list of laws regulating environmental dangers, such as leaking underground storage tanks and garbage, and encouraging energy conservation and recycling. Congress also created the Environmental Protection Agency (EPA) to enforce the new laws.

Bernie Madoff pled guilty in 2009 to stealing billions of dollars through his stock market investment fund. Madoff was sentenced to 150 years in prison, which was the maximum sentence allowable under federal law and was effectively a life sentence.

Perhaps the most controversial environmental regulations are environmental impact statements, which assess the potential effects of new construction or development on the environment. Most projects using federal funds must prepare such statements, and since 1970, thousands have been filed. Supporters contend that the statements reveal major environmental risks in new construction projects and can lead to cost savings and greater environmental awareness. Critics claim that they represent more government interference, paperwork, and delays in the public and private sectors.

environmental impact statement

A statement required by federal law from all agencies for any project using federal funds to assess the potential effect of the new construction or development on the environment.

Environmental impact statements are only one form of environmental regulation, however. In 1990, Congress amended the Clean Air Act to tighten controls on automobiles and the fuel they use. Building on earlier mileage regulation, the 1990 amendments required automakers to install pollution controls to reduce emissions of hydrocarbons and nitrogen oxides and set stiff standards for the kinds of gasoline that can be sold. The 1990 Act also required power companies to cut pollution from coal-burning power plants, phased out the use of certain chemicals that harm the earth’s protective ozone layer and may contribute to global warming, and set new limits on a long list of cancer-causing pollutants. In 2005, the Bush administration implemented a new set of relatively loose regulations supporting its Clear Skies initiative, but most of these regulations were repealed and replaced by more stringent limits by the Obama administration. Despite its track record in improving air and water quality, Republicans have argued that the EPA impedes innovation and weakens U.S. competitiveness. Republican presidential candidate Mitt Romney promised that he would drastically cut EPA regulations if he became president.

Encouraging Corporate Social Responsibility

Many corporations have been dealing with the increased pressure to be more responsible by creating programs to give money and volunteer time to their communities. The Gap has pledged to provide a portion of every sale to charities through “Product Red,” and other corporations have promised to be more environmentally conscious. These efforts at corporate social responsibility have increased public confidence in big business.

corporate social responsibility

Efforts by corporations to improve their reputations by paying attention to their contributions to the social good.

There are three forms of corporate social responsibility. The first is corporate giving to charities. Many corporations have foundations that give 1 or 2 percent of their annual profits to specific causes. The second is free consulting and advertising to help charities become more effective in making their voices heard. The third pairs corporations and charities in partnership activities such as annual walks for cancer. Many corporations also encourage their employees to volunteer by giving them a day or two a month of paid leave.

FOR the People: Government’s Greatest Endeavors: Protecting the Air and Water

One of the most visible forms of economic regulation involves the federal government’s effort to protect the nation’s air and water from pollution. Although early laws such as the 1948 Water Pollution Act and the 1963 Clean Air Act established a federal role in protecting the environment, the 1970 Clean Air and 1972 Clean Water Acts provided much of the legal power to make progress in both areas.

During the past 30 years, the levels of most air pollution covered by the Clean Air Act have fallen dramatically as the U.S. Environmental Protection Agency has established ever-tighter rules promoting more efficient automobiles and cleaner-burning fuels. Although it is hard to find a single American city where the air quality has not improved, air pollution continues to spread to rural areas such as national parks where automobile pollution is concentrated as tourists arrive in record numbers.

Similarly, it is hard to find a single body of water or river that is not significantly cleaner because of the Clean Water Act. However, as the nation has learned more about pollutants such as arsenic, the pressure to improve water quality has increased. The Obama administration has been moving to expand both acts to cover new pollutants, while tightening limits on acceptable levels of exposure. It is also pushing for legislation to address the rising global temperature.

Despite these successes, there are many challenges ahead in keeping the air and water clean. The 2010 Gulf oil spill is a good example. As technology has become more sophisticated, the oil industry has been drilling at much greater depths below the water and in much more fragile environments. The Gulf oil spill shows how risky such drilling is, especially since the federal rules governing oil exploration were more than 30 years old when the spill occurred.

QUESTIONS

1. How clean should the air and water be in order to be declared “clean”?

2. How can the federal government protect the environment without hurting industry and creating unemployment when dirty factories must close?

3. What can citizens do to improve the environment through their own actions?

The Deregulation Movement

16.6 Evaluate the advantages and disadvantages of the deregulation movement.

There are two reasons that government regulation of the economy is often criticized.

First, government regulations impose heavy paperwork and reporting burdens on the economy. Corporations often complain that they have to fill out too many lengthy reports, hire too many lawyers to interpret the rules, conduct too many studies proving they are obeying the law, and spend too much time monitoring their actions. These tasks help reassure government that they comply with the laws, but cost money that could be used to create jobs, build plants, or develop new ideas for economic growth.

Second, the regulations themselves can raise the cost of economic activity, which are described as compliance costs. It costs money to build clean and safe power plants, for example, or manufacture high-mileage automobiles. It also costs money to pay workers a minimum wage, provide family leave for the birth of a child or care for an aging parent, prevent workplace accidents, provide benefits such as health care coverage for employees with preexisting medical conditions, and seek federal approval for mergers with other corporations.

compliance costs

The cost of meeting regulatory reporting requirements.

The U.S. government often helps business meet these requirements by providing tax breaks for new equipment, loans for specific activities such as the development of the solar power industry or creation of a small business, direct payments and subsidies for certain kinds of goods and services such as land conservation, and even insurance against failure, but many regulations still require significant investments that reduce profit and may increase the cost of developing the new products that create jobs. Even with this support, more than half of small businesses fail within the first five years of their lives, while many new ideas never reach the market.18

BY the People: Making a Difference: Join (PRODUCT)RED

Citizens can affect corporate behavior in many ways. They can boycott products that they think are dangerous to the environment, organize protests against companies that treat their employees unfairly, or purchase products such as a cup of fair-trade coffee that help citizens in other countries.

(PRODUCT)RED was launched in 2006 as a partnership between a group of artists, celebrities, and companies. With The GAP clothing stores in the lead, RED promised to give a portion of every purchase of a RED product such as a sweater, cell phone, laptop, or even a car (all colored red, of course) to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Thus far, more than 20 companies have joined the campaign, including The GAP, Converse Shoes, Motorola, Starbucks, and Apple. In late December 2011, Apple added its iPad Smart Cover Red Special Edition to the list of RED products.

Bono and Oprah Winfrey were the most visible celebrities leading (PRODUCT)RED.

Corporations clearly had ample incentives to participate, if only because it created greater consumer demand for their products. But they also participated because of a commitment to corporate social responsibility, which is a term that refers to the role that corporations play in improving the quality of life through their own behavior.

Citizens can be involved in RED in many ways. They can join the RED information stream for updates on the fight against AIDS, tuberculosis, and malaria; “brand” their own Web sites by adopting the free RED logo and color scheme; buy RED products; and give money directly to RED. The list of products can be found at http://www.joinred.com. All contributions to RED can be deducted from individual and corporate income taxes.

Although RED was designed as a way to raise money for the Global Fund, it has expanded throughout the past five years to make sure that corporations honor the commitments they make in adopting the RED logo. It also works to make sure the money raised is actually transferred to the Global Fund.

RED has its critics, however. Some argue that the effort is more about selling products and making money than addressing AIDS. Others suggest that RED spends more on advertising its products than needed.

Nevertheless, joining RED, buying TOMS shoes (which gives away a pair of shoes for every pair purchased), or even boycotting products is a tangible, and often successful way to influence the economy and spur corporate social responsibility.

QUESTIONS

1. Is RED a form of economic policy and, if so, why? Does it stimulate purchasing that would not have taken place otherwise?

2. Does it matter that corporations make profits by joining RED? Why would a corporation want to participate in the program, and does its motivation matter as long as it contributes its share to RED?

3. Is RED the best way that citizens can help the world fight AIDS, tuberculosis, and malaria?

More troubling, some loans, subsidies, and insurance reward the wrong goals, and are sometimes squandered. In late 2011, for example, the Solyndra Corporation defaulted on a $500 million federal loan after promising a great breakthrough in developing much less expensive power cells. Despite acclaim for its new technology, the corporation closed its doors and fired 1,100 workers. Congress began investigating the loan based on allegations that the Obama administration had asked the corporation to continue operations through the 2010 and 2012 elections before making its politically embarrassing decision.

Airline deregulation was the first major breakthrough in the deregulation movement. It sparked the rise of a number of low-cost airlines such as Southwest, but also produced mergers of giant airlines such as Delta and Northwest, and United and Continental, which raised prices in certain “hubs” dominated by a single airline.

These regulatory impacts have led to persistent calls for deregulation, which is a term that encompasses efforts to reduce or abolish federal regulation in either a particular sector of the economy or the economy as a whole. The deregulation movement has always existed to some extent, but achieved its greatest success in the late 1970s with deregulation of the airline, trucking, and railroad industries.

deregulation

A policy promoting cutbacks in the amount of federal regulation in specific areas of economic activity.

Even as the movement succeeded in deregulating certain industries, it has put pressure on government to limit its regulation on economic activity as a whole. In 1993, for example, President Clinton issued an executive order prohibiting agencies from issuing regulations unless the benefits of the regulations (in lives saved, for example) outweighed the costs. In 2001, President Bush followed suit by imposing a 60-day hold on all regulations published by the Clinton administration until his administration could ensure that they passed the benefit/cost test. And in 2012, President Obama called for further deregulation and a reduction in compliance costs.

Deregulating Transportation

No industry has undergone more extensive deregulation than the transportation industry. During the past generation, airlines, trucking, and railroads have been granted considerable freedom to conduct their businesses with minimal federal regulation.

Airline deregulation was the first major victory in the deregulation movement, and remains one of its most visible successes. The federal government began regulating aviation when it established the Civil Aeronautics Board (CAB) in 1938 to control rates and fares, and protect airlines from what it deemed as unreasonable competition. Critics charged that government regulation reduced the competition that leads to lower fares as airlines built the hub-and-spokes system that gives individual companies almost complete control of airport landing gates.

After years of debate, Congress abolished the CAB in 1978, allowing the market to set fares through competition. The end of airline regulation has created problems but has resulted in generally lower fares, greater choice of routes and fares in most markets, and more efficient use of assets by the industry.19 If an airline is overcharging passengers, or so the theory of deregulation argues, a competitor will win those travelers to their airline. Carriers have thus had to streamline their operations in order to survive in a competitive market. Southwest and JetBlue Airlines are examples of discount airlines that took advantage of deregulation to take on larger airlines.20

But recent mergers of major airlines have worsened the problems that deregulation and cancellation of service brought to small and medium-sized cities. Facing higher fuel costs and declining passenger loads, most airlines now charge baggage fees and no longer serve free meals. Some have also limited service to smaller markets, while raising fares during peak travel times. Although these are all examples of a free market at work, some of the changes have reduced passenger loyalty and may have compromised required safety checks. Moreover, deregulation has actually encouraged further expansion of the hub-and-spokes system as airlines have merged together to control certain airports and routes. Delta Airlines has most of the landing gates in Atlanta, United holds most of the gates in Chicago, and American controls most of the gates in Dallas. As a result, passengers often pay higher fares to fly in and out of those cities.

Deregulating Banking

Banking deregulation was also a great victory for the movement. Enacted in the 1990s when Congress repealed a long list of regulations that governed the amount of money banks could make and their use of sophisticated products such as mortgage-backed securities, the effort invited industry consolidation and the creation of banks that are still called “too big to fail.”21 Although the deregulation gave consumers new access to home loans, ATMs, and credit cards, it also exposed the economy to greater risk. Specifically, the increased access to home loans stimulated large increases in home values, which fueled more housing construction and a growing inventory of unsold properties.

Eventually, the “housing bubble” popped, and the industry collapsed like a row of dominoes. Many homeowners soon found that their houses were worth less than the amount of their loans, and stopped paying their mortgages. In turn, banks stopped making loans to hopeful home buyers and began foreclosing on homeowners who could not make their monthly payments. As a result, banks moved closer to failure because deregulation had loosened the rules on how much money they needed to keep in reserve to cover bad loans. Then the construction industry stopped building homes, state property tax revenues fell with home prices, and huge investment firms such as Lehman Brothers discovered that the packages of mortgages they had purchased as safe investments were now worthless. Although many factors led to the 2008 collapse, deregulation is often blamed for the spark that led the United States and the rest of the world into a long recession and prolonged high unemployment. Although Congress began reregulating the banking industry in 2010, the industry has fought hard to prevent tough new rules, and spent much of 2012 weakening the proposals for eliminating the risky behavior that led to the 2008 collapse.

A Continued Federal Role

Despite campaign promises to reduce the federal government’s economic role and give more money back to citizens and corporations, members of Congress and the president understand the federal government must be active in the economic life of the nation. It will continue to collect taxes, regulate the money supply, prevent monopolies that would hurt consumers, and promote free trade. It will do all this while trying to let the market, not government regulators, shape the demand for and the price of products and services. Nevertheless, regulation is making a comeback in the wake of the banking collapse and continued concerns about breakdowns in regulatory oversight of food and drugs, the airline industry, and oil drilling.

Most U.S. citizens want their government to play only a limited role in the economy, but competing values such as fairness, equality, protection of workers and the environment, and support of healthy competition inevitably encourage elected officials to take on referee responsibilities in order to promote the common good.

At the same time, many citizens blame their government for being too big to fail itself. As much as they want government to do something to create jobs and stimulate growth during difficult times, they also want it to let the free market work. Citizens exert a great deal of influence on economic policy, if only by purchasing goods and services. But they can also influence policy through pressure on their representatives, and by telling their own stories of economic success and frustration.

Review the Chapter

An Introduction to Economic Policy

16.1 Describe the federal government’s role in making economic policy and how the economy’s performance is measured, p. 476.

Inflation and unemployment are considered the two most important measures of economic performance. However, economists also monitor the size of the federal budget deficit, the balance of trade, income inequality, and gross domestic product (GDP). Inflation and unemployment tend to move together in opposite directions—inflation rises as unemployment drops, and it falls as unemployment rises.

Fiscal Policy

16.2 Outline the tools and impact of fiscal policy on the economy, p. 480.

Fiscal policy consists of economic policies made by Congress and the president. There are two basic tools of fiscal policy—collecting revenues through taxes and fees and spending money through the federal budget. Increasing government spending stimulates the economy, thereby reducing unemployment, whereas increasing taxes generally slows economic growth, thereby curtailing inflation. The federal government also spends money through tax expenditures hidden from public view.

Monetary Policy

16.3 Outline the tools and impact of monetary policy on the economy, p. 484.

Monetary policy is used by the Federal Reserve Board (the Fed) to affect the supply of money circulating through the economy. The federal funds rate is the Fed’s most important tool for making monetary policy. The rate establishes the amount of interest the Fed charges banks to borrow money, which eventually determines the amount of interest banks charge their customers to borrow money for automobiles, homes, and credit card balances. Raising the cost of money is generally a way to slow down the economy and reduce inflation; lowering the cost of money ignites the economy and reduces unemployment.

Promoting the Economy

16.4 Identify ways in which the federal government seeks to promote economic growth, p. 487.

The federal government has long promoted the economy and specific industries. It also promotes trade and commerce with other nations, including efforts to reduce barriers to imports and exports, stabilize prices of certain goods and services, and encourage innovation through patents and other protections.

Regulating the Economy

16.5 Categorize ways in which the federal government seeks to regulate the economy, p. 491.

Economic regulation is designed to control the behavior of the economy in a variety of ways such as preventing monopolies, reducing environmental pollution, and protecting workers. Many regulations were designed to curb specific abuses and promote competition.

The Deregulation Movement

16.6 Evaluate the advantages and disadvantages of the deregulation movement, p. 496.

The deregulation movement centers on the belief that the government’s economic regulations are too costly and often fail to achieve their desired ends. Democrats and Republicans have both supported deregulation of key industries during the past four decades, but it sometimes produces new problems that create a backlash in favor of reregulation.

17 Making Social Policy Social policy involves efforts to promote the general welfare of U.S. citizens through domestic programs. It is mostly composed of a long list of programs to help citizens through tough economic times and personal crises, but contains many other programs that benefit specific citizens such as children, unemployed people, and older Americans. The list of social and human resource programs has expanded greatly since the Great Depression, and accounted for almost $2.7 trillion of the federal government’s $3.8 trillion 2014 budget.1 January 2014 not only marked yet another record in federal spending, but also marked the fiftieth anniversary of President Lyndon Johnson’s “War on Poverty.” Delivering his annual State of the Union Address before a joint session of Congress on January 8, 1964, Johnson declared an unconditional war on poverty in America. “It will not be a short or easy struggle,” he said. “No single weapon or strategy will suffice, but we shall not rest until that war is won. The richest nation on earth can afford to win it. We cannot afford to lose it.”2 Johnson soon created a broad “Great Society” agenda containing dozens of new programs. All told, it was the largest expansion of social policy since Franklin Delano Roosevelt’s “New Deal” agenda in the 1930s, and provided funding for a host of new initiatives such as a “Head Start” education program for young children; Medicare health coverage for older Americans; Medicaid health insurance for the poor; the Supplemental Security Income program for the poor, blind and disabled, and elderly; Food Stamps for the hungry; and housing assistance for the homeless. Congress has been adding programs to the war on poverty efforts ever since. It added the Earned Income Tax Credit (EITC) to the list in 1975, health care coverage for children in 1997, prescription drug coverage for older Americans in 2003, and the Affordable Care Act, which is often called Obamacare, in 2009. 17.1 Outline the goals of the federal government’s social policy and the forms of protection it provides, p. 506. 17.2 Outline the evolution of social policy throughout the twentieth century, p. 510. 17.3 Evaluate the current status of and challenges for federal government policy in the areas of health care, education, and crime, p. 517. The EITC may be the most important program in waging the war on poverty. Often described as the most effective antipoverty program in the federal government’s arsenal, the EITC allows poor families to recover some of the money they contributed to Social Security, Medicare, and unemployment insurance when they file their taxes.3 President Reagan once called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress,” and he was hardly a fan of the War on Poverty.4 Johnson’s War on Poverty was designed to help all low-income Americans, including poor families in rural states. Here, Johnson talks with members of a family trapped in poverty in rural Kentucky. The fiftieth anniversary of this legislative watershed sparked both accolades and criticism. Liberals argued that the programs had worked in spite of budget cuts and the 2008 economic collapse, and that poverty was solvable. In turn, conservatives argued that the war had failed, and pointed to the recent poverty rates as evidence.5 No one was more critical of the War on Poverty than Rep. Paul Ryan (D-WI), the 2012 Republican vice presidential candidate. Citing the 15 percent of Americans who still live in poverty 50 years after Johnson’s declaration, Ryan argued that low tax rates on rich Americans was not the problem: “The problem is that Washington is holding too many people back. The problem is that they’re cut off from three crucial sources of support: education, work, and family.” Ryan acknowledged the massive expansion in government programs, but argued that the Great Society had created “a hodgepodge of programs that are so disorganized and dysfunctional, they pull families closer to government and away from society.”6 Some states had experimented with parts of the War on Poverty, but the actions taken by Congress and the president five decades ago were national in scope. Their legal foundation could be traced to constitutional powers, but critics of the programs have long claimed they were a power grab by the federal government not authorized by the Constitution. Similar arguments were made against Franklin Roosevelt’s New Deal until the Supreme Court finally declared the laws constitutional. The debate over the impact of government on the economy and poverty will continue, but it may never be clear what would have happened during the past 50 years if the War on Poverty had never been launched. The rest of this chapter will examine the economic and social policies that help the government promote the general welfare. It will look at the constitutional powers and philosophies that shape economic and social policies, and the measures that Congress and presidents use to assess the nation’s condition. It will then turn to the evolution and goals of both economic and social policies. The chapter ends with a discussion about whether and how government can affect social and economic policy, especially given troubling forecasts of problems ahead. The Role of the Federal Government in Social Policy 17.1 Outline the goals of the federal government’s social policy and the forms of protection it provides. Most Western governments expanded their social programs long before the United States did. American adults generally believed that people who could not succeed in a nation as big, rich, and open as the United States simply weren’t working hard enough. This commitment to rugged individualism meant that government, whether local, state, or federal, played only a limited role in people’s lives. Governments began expanding aid in the early twentieth century, starting with state programs to help older citizens and orphaned children. But government aid was limited, and most low-income people relied on charity for help, as many still do.7 This is not to suggest that the new federal government did not embrace at least some forms of social policy, however. From its founding, the government took care of its military veterans. Indeed, with the Revolutionary War barely over, the Continental Congress established the nation’s first programs to help soldiers disabled in battle and to provide retirement pensions for officers. The financial security system for veterans expanded slowly but steadily as the soldiers aged into disability and poverty.8 In 1818, for example, Congress expanded retirement benefits to cover all veterans of the Revolutionary War, whether officers or not, and created the first old soldiers’ homes for poor veterans. In 1840, Congress expanded the veterans program again to provide financial relief to the widows of soldiers killed in battle. The Global Community: The Social Safety Net The social safety net comprises all government responses to continuing problems such as hunger, disease, and poverty. Although countries vary greatly in the amount of need, the Pew Research Center’s 2013 Global Attitudes Survey shows that significant percentages of citizens go without access to basic human needs every year. The survey asked respondents, “Have there been times during the last year when you did not have enough money to (a) buy food your family needed, (b) pay for medical care your family needed, (c) and buy clothing your family needed?” These answers provide a barometer of economic and social progress. Most of the world was hard hit by the 2008 recession, but citizens of Britain, China, and Japan said the safety nets in their nations were stronger than their fellow citizens in Mexico, Nigeria, and the United States. Even stronger nations showed weaknesses in some parts of their safety nets than others. In China, for example, citizens reported fewer problems buying food and clothing, but a third said they had problems with access to health care. The problem lies in the rapid expansion of the Chinese population, which is putting pressure on the health system. Although the Chinese economy is growing rapidly too, the country has faced difficulty converting its growth into health care access. SOURCE: Pew Research Center, “Economies of Emerging Markets Better Rated During Difficult Times: Global Downturn Takes Heavy Toll; Inequality Seen as Rising,” May 23, 2013, available at http://www.pewglobal.org/2013/05/23/economies-of-emerging-markets-better-rated-during-difficult-times/.

CRITICAL THINKING QUESTIONS 1. Besides the economy, why might citizens in some countries have greater problems getting access to basic necessities such as food, health care, and clothing? 2. Does this lack of access have an impact on trust in government and other measures of citizen participation? What is the effect of hunger and poverty on how citizens think of other freedoms? 3. Why do so many Americans lack access to basic necessities? Are you surprised? These early programs set two important precedents for contemporary domestic policy. First, they established the notion that some people would be automatically entitled to certain government benefits on the basis of an eligibility requirement such as service in the nation’s armed forces. Thus, veterans’ relief was the nation’s first entitlement program. An entitlement program provides benefits to any citizen who is eligible for support regardless of need, and is considered an uncontrollable part of the federal budget. In the following 230 years, Congress and the president have created dozens of entitlement programs, including Social Security and Medicare. entitlement A program such as unemployment insurance, disaster relief, or disability payments that provides benefits to all eligible citizens. Second, as discussed later in this chapter, these early programs also established government’s right to restrict some benefits to only those citizens who could actually prove their need for help. These were early examples of what we now call means-tested entitlements, which are programs that require individual citizens to prove that they do not exceed certain income and asset levels before they can receive benefits. In most cases, entitlements are available only to low-income citizens, the unemployed, or groups such as older Americans. During and after the Great Depression of the 1930s, Congress and the president created dozens of means-tested entitlement programs, including food stamps for individuals and families that do not make enough money to buy nutritious food. Although the food stamp program was renamed as the Supplemental Nutrition Assistance Program (SNAP) in 2009, is still called food stamps by many beneficiaries. The program currently provides benefits to individuals with less than $1,500 in monthly income, and families of four with less than $2,552.9 Individuals and families must count other resources such as bank accounts and the values of their cars in making the eligibility assessment. means-tested entitlement A program such as Medicaid or welfare under which applicants must meet eligibility requirements based on need. Having entered the twentieth century with only a handful of domestic programs, most of which were built around helping veterans, the federal government left the century with a deep inventory of such programs. According to the June 2014 Catalog of Federal Domestic Assistance, which lists every one of the federal government’s 2,280 domestic funding programs in a searchable database (www.cfda.gov), the Department of Health and Human Services had 497 programs, followed by the Department of the Interior at 271, Agriculture at 215, Justice at 136, and Housing and Urban Development at 124.10 The Goals of Social Policy Because most of these programs are restricted to one group of citizens only, they are often described as categorical aid. Simply typing a search term online such as “students,” “elderly,” “children,” “disabled,” “workers,” “farmers,” “women,” or “veterans” reveals just how much help the federal government provides in each category. But regardless of category, federal domestic policy focuses on two broad goals. The first is to protect citizens against social and economic problems by creating a social safety net, whether through relief for unemployed workers, health care for the elderly, emergency shelter for the homeless, or school lunches for poor children, most of which are available to citizens only on the basis of a means test. Although almost all citizens are covered by federal unemployment insurance through a payroll tax, only workers who have been laid off from their jobs through no fault of their own can qualify for benefits, and then only for a relatively brief period of time. social safety net The many programs that the federal government provides to protect Americans against economic and social misfortune. The second goal of federal social policy is to raise the quality of life for all citizens, whether by improving air and water quality, building roads and bridges, regulating air traffic, fighting crime, or strengthening local schools through federal aid. Nearly all federal aid to the states for these purposes is distributed by formula on the basis of population, not need. Types of Protection Most scholars trace the federal government’s effort to protect citizens against economic and personal hard times to the Great Depression and the Social Security Act of 1935. Although Franklin Roosevelt’s New Deal agenda stimulated a remarkable expansion in the federal government’s domestic policy role, federal, state, and local governments were helping citizens long before the Depression hit. However, as the nation sank deeper into economic distress, Congress and the president invented two very different types of federal programs to protect citizens against hardship, both of which continue today. The collapse of the economy in 2008 meant that millions of people lost their homes because they could not pay their mortgages. Here, members of a public interest group called ACORN called on Congress to enact legislation to cap foreclosures by banks. ACORN was disbanded in 2010 after a scandal involving misconduct by several of its employees.

PUBLIC ASSISTANCE One type of help for the poor is called public assistance, commonly known as welfare. The first public assistance programs were actually created in the late 1800s, when states established aid programs to help poor single mothers and their children. Although these programs were often described as “mothers’ pensions” to create the impression that the beneficiaries had earned the benefits through some contribution, they created a precedent for many of the federal government’s later antipoverty programs. public assistance Aid to the poor; “welfare.” Most of these programs are means-tested entitlement programs. Such programs require applicants to disclose all financial assets and income to prove they fall below the poverty line, generally calculated as three times the amount of money an individual or family needs to purchase the food for a nutritious diet. This poverty level changes with the size of the family and the cost of living. In 2014, this level was set at $11,670 a year for an individual, and $23,850 for a family of four. Public assistance in the United States today incorporates elements of job training, transportation subsidies, housing subsidies, free school lunches, food aid for poor families and pregnant mothers with young children, and tax credits for low-income people. The federal government also provides what some critics label “corporate welfare” to favored industries such as agriculture and corporate bailouts to the financial industry, as well as “middle-class welfare” to college students, home buyers, and the citizenry as a whole in the form of college loans, tax deductions for home mortgages, and access to national parks and forests (supported by taxpayers but rarely used by poor people). However, the term “welfare” is generally reserved for public assistance to the low-income Americans. In absolute numbers, most poor people are white. As a percentage within their own group, however, a larger proportion of African Americans and Hispanics are poor. Moreover, in both absolute and proportional terms, more women than men are poor. Indeed, some scholars refer to the relatively recent rise in poverty among women as the “feminization of poverty.”

11 SOCIAL INSURANCE The second type of protection against hardship is social insurance, government programs that provide benefits to anyone who is eligible because of either past service (veterans, miners, merchant marines) or prepayments of some kind (payroll taxes for Social Security and Medicare or insurance premiums). social insurance Programs in which eligibility is based on prior contributions to government, usually in the form of payroll taxes. Many federal assistance programs are partnerships with state governments. There are two reasons for the connection. First, except for veterans’ policy, states have been responsible for protecting their citizens against hardship since the United States was formed. Second, state and local governments have the administrative agencies to stay in touch with recipients of aid, whether to make sure they are actually eligible for support or to provide services such as job training or school lunches. Because states vary greatly in their generosity and resources, most federal assistance is designed to set a minimum floor of support that individual states can raise on their own. The most generous states in the country tend to be located in the Northeast and West, where living costs tend to be higher and legislatures more liberal, whereas the least generous tend to be found in the South. In this way, states act as a check on the federal government’s ability to raise benefits too far, frustrating those who believe that the federal government should set a uniform level of benefits for all citizens. (Table 17.1 shows the amount of federal payments to individuals in 2014.) TABLE 17.1 LARGEST FEDERAL PROGRAMS FOR INDIVIDUALS, 2014 Public Assistance Programs 1. Medicaid: $303 billion 2. SNAP: $76 billion 3. Earned Income Tax Credit: $56 billion 4. Student Loans: $46 billion 5. Supplemental Security Income: $53 billion 6. Temporary Assistance to Needy Families: $21 billion 7. Child Nutrition and Milk: $21 billion Social Insurance Programs 1. Social Security: $713 billion 2. Medicare: $620 billion 3. Federal Employee and Military Retirement: $140 billion 4. Disability Insurance: $146 billion 5. Veterans Assistance: $65 billion 6. Unemployment Insurance: $55 billion 7. Children’s Health Insurance (CHIP): $10 billion Total Payments to Individuals 2014: $2.7 trillion* Total Federal Budget 2014: $3.8 trillion *Includes all public assistance and social insurance programs in the U.S. budget. ■ Which tools of social policy account for the greatest portion of grants to individuals, and what explains their popularity? SOURCE: Budget of the U.S. Government, Fiscal Year 2015, Historical Table 11.3 (U.S. Government Printing Office, February 2014), available at http://www.whitehouse.gov/omb/budget/Historicals. The Expansion of Social Policy in the Twentieth Century 17.2 Outline the evolution of social policy throughout the twentieth century. The federal government’s commitment to helping the poor and improving the quality of life expanded rapidly during the Great Depression, which followed the stock market crash of 1929. The social safety net built by state and local governments and private charities at that time simply could not meet the needs of the huge increase in the homeless, unemployed, and poor. The New Deal Franklin Roosevelt was responsible for the expansion of social programs during the 1930s. As part of his New Deal agenda, the federal government began making loans to states and localities to help the poor, and soon it launched a long list of programs to help older workers (Social Security), the jobless (unemployment insurance), and the poor (Aid to Families with Dependent Children). THE FIRST 100 DAYS Before creating these signature New Deal programs, however, the Roosevelt administration moved quickly to help low-income Americans. The first 100 days of 1933 produced the most significant list of legislation ever passed in U.S. history, including the Federal Emergency Relief Administration (FERA), which was established to give unemployed workers cash grants to get them through the summer. The list of “alphabet agencies” grew longer as the administration created a host of new programs to help the poor, including the Works Progress Administration (WPA), which was created in 1935 to provide work for millions of unemployed, and the Civilian Conservation Corps (CCC), which put millions of young people to work clearing trails and building roads in the national forests and parks. Between 1933 and 1945, for example, the WPA put 8.5 million people to work at a cost of $10 billion. All told, the WPA built 650,000 miles of roads, 125,000 public buildings, 8,200 parks, and 850 airports. Though the wages were hardly generous, these and other New Deal programs created a national safety net to catch those in need. It is little wonder that scholars describe the New Deal as the “big bang” of social policy.12 Although the distinction between the worthy and unworthy poor still remained, joblessness was no longer defined as merely a problem of individual idleness or the unwillingness to work.

HELP FOR OLDER CITIZENS The Civilian Conservation Corps employed young, unmarried men in conservation projects across the United States. More than 2 million young men participated in the program from 1933–1943, and many of their projects can still be seen in U.S. national parks and forests. Once past the immediate crisis, the Roosevelt administration began designing the flagship programs of the New Deal. First on the list was Social Security, enacted in 1935 and still the federal government’s most popular social program. Social Security was designed to meet two goals: (1) provide a minimum income for qualified low-income citizens, and (2) ensure that benefits bear a relationship to the amount of payroll taxes actually paid. Supported by equal contributions from employers and employees, the program now covers more than 90 percent of the U.S. workforce.13 Except for state and local government employees who are not usually covered by Social Security, employees pay half of the annual Social Security tax, and their employers pay the other half. The tax is identified on pay stubs as FICA, which stands for the Federal Insurance Contribution Act. Social Security A combination of entitlement programs, paid for by employer and employee taxes, that includes retirement benefits, health insurance, and support for disabled workers and the children of deceased or disabled workers. Social Security was expanded in 1939 to include financial support for survivors of workers covered by Social Security when the retired worker died, and in 1954, it was expanded again to include support for disabled workers and the children of deceased or disabled workers. Benefit levels were raised repeatedly during the first 40 years of the program, often just before an election. The increases became so frequent and so costly that in 1975, Congress indexed benefits to rise only with inflation. Under legislation enacted in 1983, the Social Security retirement age started to rise in 2003 and will reach 67 by the year 2027. Until the 1970s, steady growth in Social Security benefits was relatively uncontroversial, largely because “the costs were initially deceptively low,” making the system politically painless.14 It is now the world’s largest insurance program for retirees, survivors, and people with disabilities. In 2014, Social Security and Medicare expenditures totaled $991 billion.15 Employees now pay more in annual Social Security payroll taxes than in income tax. Employees paid a 6.2 percent FICA tax on the first $117,000 of their income in 2014, and an additional 1.45 percent on all of their wages for Medicare health coverage. All employee taxes are matched dollar for dollar by employers, but people who are self-employed pay both the employee and employer taxes for a total rate of more than 15 percent. As an entitlement program, the expected aging of the U.S. population will not affect Social Security and Medicare even if the payroll taxes used for the two programs falls below costs. However, Social Security and Medicare are both “pay-as-you-go” programs, which means that payments to individuals are generally funded by available taxes. When payroll taxes exceed benefits, the federal government holds the revenues in trust funds that can be used in the future; when payroll taxes fall below benefits, the federal government draws down the trust funds. And when the trust funds are gone, Congress and the president must raise taxes or reduce benefits to cover the pay-as-you-go costs. At least for now, however, Social Security has a large trust fund collected during the years when payroll taxes exceeded benefits. Medicare has a much smaller trust fund that will run out of money sometime in the next three to five years. Both programs have suffered during the economic downturn because unemployed workers do not have the income to pay any taxes at all.

16 HELP FOR THE POOR The federal government began protecting women and children against poverty when Congress passed the Infancy and Maternity Protection Act of 1921. Supported by many of the same women’s groups that had just won ratification of the Nineteenth Amendment, which gave women the right to vote, the Act gave the newly created federal Children’s Bureau funds to encourage states to create new maternal, infant, and early childhood health programs. This precedent eventually produced the Aid to Families with Dependent Children (AFDC) program in 1935.17 As its name suggests, AFDC tried to reduce public opposition to expanded benefits by shifting the focus away from what the mother had done or not done to deserve poverty, and onto the children, who suffered whatever the cause. Under the program, states were given federal money to establish cash grants for poor families under two conditions: states had to (1) match the federal funds with some contribution of their own and (2) establish a means-test for all families receiving benefits. Congress also established the school lunch program during the New Deal as a way to both feed the hungry and strengthen the ailing farm economy. The Federal Surplus Relief Corporation began purchasing surplus agriculture products for low-income families in 1935 and launched the nation’s first school lunch programs for poor children shortly thereafter. By 1941, more than 5 million children were receiving free school lunches, consuming more than 450 million pounds of surplus pork, dairy products, and bread. By 2013, more than 21 million children were participating in the program.18 FOR the People: Government’s Greatest Endeavors: Helping the Working Poor The federal government has passed many laws to help low-income workers make ends meet, including increasing the minimum wage, providing help for day care centers, and creating job-training programs. Since the end of World War II, the federal government has increased the minimum wage from 40 cents an hour to $4.25 in 1989, $5.15 in 1997, and $7.25 an hour in 2007. Twenty-one states, such as California ($8.00 an hour), Connecticut ($8.25), and Oregon ($8.95), pay higher minimum wages. Under the supremacy clause, states are free to pay more than the federal minimum wage, but not less. Congress has yet to pass Obama’s 2013 proposal for an increase to $10.10. The federal government’s greatest contribution to helping low-income workers came in 1975 with the creation of the Earned Income Tax Credit (EITC), which reduces or completely eliminates all taxes for the working poor. Under the EITC, low-income workers also receive money back from the federal government to help raise their income. Because the money comes in the form of a tax refund, not a welfare check, many experts believe that low-income workers are less embarrassed to take the federal support. The EITC has clearly reduced poverty rates among low-income workers. By 2014, for example, 26.2 million low-income workers received average credits of $2,359 through the program, which lifted more than 5  million Americans above the poverty line. The program has been particularly effective in helping unmarried working mothers, who often take minimum-wage jobs in the service industry (fast-food restaurants, dry cleaners, day care centers, grocery stores, and so forth). Recent research suggests that the national poverty rate would have been 3 percentage points higher than its current rate, and would have been 16.7 percentage points higher for the children who live in households that receive the credit. This research also shows that there are EITC recipients in every congressional district, Democratic and Republican.*

QUESTIONS 1. Besides raising the minimum wage and increasing the EITC, what other ways might the federal government help low-income workers? 2. Have you ever held a minimum-wage job? Was it enough to live on? Would it be enough for you in the future? 3. What would Americans think about the EITC if they knew how much it paid? *Jane R. Williams and Elizabeth Kneebone, “New Data Illustrate Local Impact of Tax Credits for Working Families,” Brookings Institution, April 15, 2014, p. 1, available at http://www.brookings.edu/blogs/the-avenue/posts/2014/04/15-data-tax-credits-working-families. Although the program was disbanded during World War II because of food shortages, it was restored under the 1946 National School Lunch Act. As President Harry Truman said at the signing ceremony, “No nation is any healthier than its children.” He could have added that many draftees had been rejected for service in World War II because of malnutrition. As noted later in this chapter, Congress and the president reformed AFDC in 1996 to limit the amount of time individuals could receive benefits.

HELP FOR THE DISABLED AND UNEMPLOYED The New Deal created two new federal programs to help disabled workers and the unemployed. Both were established under the Social Security Act in 1935. Under the Disability Insurance program, workers can apply for government benefits if they have been injured on the job. They must have been disabled for at least five months and be unable to continue on the job. The process for earning a disability payment, which covers part of a worker’s monthly salary, is very strict. Only 20 percent of applications are approved. The worker has to present detailed evidence that the disability was work, not age, related, for example, and must prove that the disability is long term. Approximately 11 million disabled Americans received disability support in 2014 with an average monthly benefit of $1,145.19 Unemployment insurance is available to workers who have lost their jobs because of economic conditions. Workers cannot receive benefits if they quit their jobs by their own choice—for example, if they have children, get married, move to another part of the country—or are fired for poor performance. Federal unemployment insurance is jointly administered by the federal government and the 50 states and is covered by monthly premiums that are automatically deducted from paychecks. Employers also pay monthly premiums for their employees. Unemployed workers cannot receive more than half their monthly pay, up to specific limits—in New York, for example, the maximum payment is approximately $500 a month, but it is less than half that amount in Arizona. During normal economic times, the benefit is paid for 26 weeks, although this period was extended several times between 2010 and 2012 to help unemployed workers during the deep economic turndown. In September 2014, 2.5 million Americans received unemployment insurance benefits. The federal government has several programs to make sure that women, children, and infants receive nutritious food. School lunch programs sometimes provide the only full meal of the day for the nation’s poorest children. There are exceptions to the length of coverage, however. Coverage was extended as unemployment began to rise in 2008. As of September 2014, almost 10 million Americans were either unemployed or had stopped looking for work. Most received some form of extended government support even as unemployment declined. Between January 2000 and July 2012, the unemployment rate increased from 4 percent of employable adults to 8.2 percent but dipped below 6 percent in late 2014. Although these programs sound generous, and are sometimes abused by employees who invent disabilities, they provide the bare minimum for survival. They are often the only sources of income that stand between a family and homelessness, hunger, and the loss of health care. The Great Society The second major expansion of social policy came in the 1960s with what became known as the Great Society. At a commencement speech at the University of Michigan in May 1964, President Lyndon Johnson described his vision of the Great Society: The Great Society rests on abundance and liberty for all. It demands an end to poverty and racial injustice.…But that is just the beginning. The Great Society is a place where every child can find knowledge to enrich his mind and to enlarge his talents.…It is a challenge constantly renewed, beckoning us toward a destiny where the meaning of our lives matches the marvelous products of our labors.20 Johnson’s agenda was as broad as his rhetoric, and Congress enacted much of it in a fairly short period of time. Great Society programs dramatically increased the role of the federal government in health, education, and welfare through a number of programs that continue to exist today: • Food Stamps. The food stamp program gives poor families coupons to purchase the basics of a healthy, nutritious diet. The average benefit is approximately $90 per person per month. Recall that the program was renamed SNAP in 2009. • Head Start. Head Start is a preschool program designed to help poor children get ready for kindergarten. The program served more than 900,000 children each year at a cost of approximately $7,000 per child in 2014. Nearly 30 percent of Head Start teachers and staff are parents of Head Start children or were Head Start children themselves. • Medicare. As noted earlier, Medicare was created in 1965 to provide health care to older citizens. It provides all reasonable hospital, medical, and prescription drug insurance. The hospital insurance is funded by a 1.42 percent tax on employees and employers. Medicare pays for inpatient hospital care, skilled nursing care, and other services. Individuals can purchase additional Medicare insurance to cover some expenses not traditionally covered by Medicare. By 2014, almost 50 million Americans received Medicare benefits. Medicare A national health insurance program for the elderly and disabled. • Medicaid. Medicaid was also created in 1965 to provide basic health services for poor families. The program is administered and partially funded by state governments and covers items such as hospital care and family planning. Obama’s health care plan expanded Medicaid dramatically as a way to provide more coverage for the poor. By 2014, more than 60 million Americans received Medicaid benefits with the number set to rise as Obama’s health care plan went into full effect. Medicaid A federal program that provides medical benefits for low-income people. • Supplemental Security Income. The SSI program was created in 1972 to provide an extra measure of support for the elderly, the poor, and the blind or disabled. Levels of SSI support vary by state to reflect cost-of-living differences, so the program provides monthly benefit checks ranging from only $1 to approximately $800. SSI benefits are financed by general tax revenues and administered by the Social Security Administration. More than 8.4 million Americans received SSI benefits in 2014. • Housing Assistance. The Department of Housing and Urban Development, which was created in 1965, administers a number of programs such as rental assistance designed to help low-income families find affordable, safe housing, in part by giving property owners subsidies to make up the difference between what tenants can pay and what the local housing market will bear. Because of the vast number of housing support programs at the federal and state level, it is difficult to calculate the total number of beneficiaries at any point in time. Reforming Welfare Republicans have not been the only critics of the New Deal and Great Society welfare programs. President Bill Clinton made welfare reform a centerpiece of his reelection agenda in 1996, promising to “end welfare as we know it.”21 Working with the new Republican congressional majority, Clinton won passage of the Personal Responsibility and Work Opportunity Reconciliation Act in 1996, which replaced the New Deal’s AFDC with Temporary Assistance for Needy Families (TANF). Under the new rules, federally funded public assistance is limited to five years during a person’s lifetime, and all recipients must enter some kind of work training program within two months of receiving initial benefits. Although states can exempt up to 20  percent of cases from the work requirements and time limits—an exemption intended for blind and disabled persons—the message to recipients is clear: find work soon. Formerly known as the Food Stamp program, the Supplemental Nutrition Assistance Program (SNAP) gives low-income families funds to purchase food at any public grocery store using electronic benefit cards. Fifty million Americans received SNAP benefits in 2014. The law originally excluded legal immigrants from many welfare programs, but at the strong urging of the governors, most welfare benefits were later restored to legal immigrants. To discourage people on welfare from moving to states with more generous assistance payments, the law gave states the option of limiting welfare to newcomers from other states. This provision was declared unconstitutional by a federal district court judge, however, who said it “denies ‘equal protection of the laws’ to indigent families moving from one state to another.”22 The decision was not appealed. You Will Decide: Should the Federal Government Promote Marriage? Although the 1996 welfare reform legislation focused on replacing welfare with work, it also ordered the federal government to promote marriage. Advocates argue that marriage improves the lives of both children and parents. Married adults, whether women or men, are happier, healthier, and wealthier than their unmarried peers and are more likely to give their children a healthier start in life. Some advocates even argue that more marriages would reduce health costs by reducing depression and crime. This issue was in the news during the 2012 presidential campaign as Republicans reassured their voters that they would continue to support a constitutional amendment defining marriage as a union between a man and woman, and promote marriage as a requirement for many federal programs such as aid to the poor. While Democrats also argued that marriage is a source of strength for families, they did not support the constitutional amendment. The federal government can promote marriage in two ways. First, it can reduce the penalties it imposes on welfare recipients who get married. Under current law, for example, a single mother working full time at a minimum-wage job who marries stands to lose as much as $8,000 per year in cash and noncash benefits. Second, it can promote marriage through advertising, counseling, or even providing cash grants for getting married. What do you think? Should the federal government enact policies that promote marriage? What are the arguments for both sides of the issue? Thinking It Through Although the federal government has long engaged in activities designed to promote vaccinating children, quitting smoking, wearing seat belts, and driving under 55 miles per hour, not everyone believes that promoting marriage is the answer to reducing the welfare rolls. Critics note, for example, that domestic violence and child abuse occur almost as frequently in married as in unmarried households. They also worry that government grants for marriage would promote a rash of false marriages designed to get the cash. Most important, opponents believe that the best way to improve conditions for welfare recipients is to find them good-paying jobs. They look to states such as Minnesota and Wisconsin that have created strong welfare-to-work programs that do not punish married women for getting a job. Nevertheless, marriage affects income. Two paychecks are better than one, and married couples may be more likely to save money for the future. Marital stability also positively influences child well-being on several measures, and marriage fosters healthier living habits as the marriage partners help monitor each other in such areas as smoking, weight gain, and drug use. These effects can be benefits to society in general. The question, however, is whether they are a consequence of marriage or simply a product of adults living together. Absent a solid answer, support for marriage may be more an indicator of a person’s ideology and religion than a position based on careful research.

CRITICAL THINKING QUESTIONS 1. Should the federal government promote social values such as marriage? 2. How is promoting marriage similar to and different from other federal programs such as its campaign to stop smoking? 3. Why is marriage considered a way to reduce poverty? Are there other or better ways to achieve the same goal? Social Policy Challenges for the Future: Health, Education, and Crime 17.3 Evaluate the current status of and challenges for federal government policy in the areas of health care, education, and crime. Even if states take on a greater social policy role, the federal government is sure to remain the greatest source of funding for the safety net. As Figure 17.1 shows, spending for human resource programs such as Social Security, Medicare, Medicaid, and child nutrition has doubled since 1950. The figure also shows a very slight increase in spending on physical resources, such as roads and bridges, due to the large, one-time infusion of money through the economic stimulus package. In addition, the figure shows continued change beyond 2012—according to the federal budget, estimated interest payments will swell to $253 billion by 2015, which will make debt payments one of the largest costs in the spending totals.23 The Federal Role in Health Care Medicare is only one of the federal government’s many health programs. The federal government has been instrumental in reducing disease since 1887, when it opened a one-room laboratory on Staten Island, New York, to study infectious diseases carried to the United States on passenger ships. That one-room laboratory expanded into the National Institutes of Health (NIH), a conglomeration of 37 separate institutes on a 300-acre campus in Bethesda, Maryland.

FIGURE 17.1 CHANGING PRIORITIES IN THE FEDERAL BUDGET ■ What parts of the federal government have seen the greatest change over the last 50 years? What explains these changes in spending priorities? SOURCE: Budget of the U.S. Government, Fiscal Year 2015, Historical Table 3.1 (U.S. Government Printing Office, February 2014), available at http://www.whitehouse.gov/omb/budget/Historicals The Department of Veterans Affairs provides health care to millions of veterans every year. The Iraq and Afghanistan wars have tested the health care system as thousands of soldiers with difficult-to-treat traumatic brain injuries and post-traumatic stress order enter the system. The surgeon general of the United States is arguably the most visible health care official in government. As head of the Public Health Service (PHS), the surgeon general oversees a diverse array of health care researchers at NIH and elsewhere. Federally funded researchers study causes and seek cures for serious diseases. The PHS also grants fellowships for health research to scientists and physicians and administers grants to states and local communities to help improve public health. Another federal agency promoting health is the Food and Drug Administration (FDA), which oversees the development of new drugs and ensures food safety through inspections of the nation’s food supply. Dozens of other federal agencies work to improve public health. The Centers for Disease Control and Prevention (CDC) in Atlanta is also actively engaged in preventing disease. The CDC and its 7,800 “disease detectives” have been at the forefront of identifying a host of mystery illnesses, including the respiratory disease that attacked attendees at an American Legion convention in 1976 (Legionnaire’s disease), toxic shock syndrome in 1980, and hepatitis C in 1989, as well as tracking down the causes of major health disasters, including the outbreak of swine flu in 2009. The swine flu outbreak produced a massive effort to vaccinate Americans against the virus, which was especially threatening to young adults. Despite its success in improving the nation’s health, the federal government faces two major health care challenges in the future: containing costs and expanding coverage as the federal government’s new health care program moves toward full implementation over the coming years.

THE RISING COST OF HEALTH CARE Health care costs in the United States have nearly quadrupled, after controlling for inflation, since 1970.24 Although costs slowed with the rest of the economy in 2001, they are expected to escalate rapidly as the nation ages throughout the next two decades. It’s too early to know if the Patient Protection and Affordable Health Care Act will reduce these increases. Extending the recent trends reported by the federal government, annual per person medical costs are likely to increase beyond $10,000 by 2015 (Figure 17.2 shows the rising cost of health care, while Figure 17.3 shows where the health care dollars went.) All citizens pay for increasing health care costs. Although employers provide insurance to three of five working adults, they have steadily increased the share of insurance that employees must pay, including increased premiums, higher deductibles, and partial payments for services (co-pays). Taxpayers also pay for these increases through federal dollars that might otherwise go to other programs such as homeland security, college loans, or highway construction (see Figure 17.3).

FIGURE 17.2 HEALTH CARE COSTS PER PERSON, 1960–2012 ■ What might explain the continuing rise in individual health care costs? Do you think these costs will fall under Obamacare? SOURCE: The Henry J. Kaiser Family Foundation, Health Care Costs: A Primer, May 2012, available at http://www.kff.org/insurance/upload/7670-03.pdf. The good news is that costs have risen in part because people are living longer. Average life expectancy increased by more than five years between 1970 and 1995. In 1900, only 1 of every 25 American adults was over the age of 65. By 1950, the number was 1 in 12, and by 1985, 1 in 9. According to experts, the number will rise to 1 in 5 by 2030. In 1900, the average American adult lived to age 47; by 2000, the average had increased to 79. Again according to experts, the number will rise into the mid-80s by 2030. As people live longer, of course, they place greater demands on the health care system, as well as on the Social Security program. New and advanced medical technology—life-support systems, ultrasound, sophisticated x-ray equipment, and genetic counseling—have all increased the costs of health care. Nuclear magnetic imaging, or as it is more commonly known, magnetic resonance imaging (MRI), is now routinely used to diagnose a host of diseases not easily detected through more traditional tests. Once a medical center purchases this kind of expensive technology, its physicians are given incentives to use it, which increases patients’ health care costs. Longer life expectancies also place greater demands on other social policies, subtracting from funding for public assistance and other forms of social insurance. At least part of the cost crisis is avoidable. Medicare alone spends billions of dollars each year treating smoking-related diseases, and throughout the next 20 years, the costs to treat such diseases will continue to rise. Other illnesses at least partly related to lifestyle choices include heart disease, liver disease, HIV/AIDS, and the epidemic of health disorders caused or made worse by obesity, such as diabetes.

COVERING THE UNINSURED Despite passage of the Medicare program in 1965, the United States did not provide comprehensive insurance to the rest of the uninsured until 2010. Until then, most uninsured Americans either relied on public clinics, emergency room care, or simply lived without health or dental care.25 The Patient Protection and Affordable Health Care Act, commonly known as Obamacare, was designed to cover as many of these Americans as possible but was one of the most complicated laws passed in recent history. The bill was more than 1,200 pages long and contained a long list of changes in how health care is delivered and to whom. Its key provisions involved expansions of existing health care programs such as Medicaid for the poor and the creation of new health insurance “exchanges” in each state as a source of insurance for Americans who could not buy insurance from private companies. It also contained tax increases and benefit cuts for Medicare. The main provisions of the Act are as follows:

FIGURE 17.3 WHERE THE HEALTH CARE DOLLAR WAS SPENT, 2012 ■ How might you expect the new health care program to change where Americans go for preventive medical care? SOURCE: The Henry J. Kaiser Family Foundation, Health Care Costs: A Primer, May 2012, available at http://www.kff.org/insurance/upload/7670-03.pdf. • Most Americans will be required to buy health insurance starting in 2014 and will be fined by the federal government if they do not do so. • Individuals who cannot buy affordable insurance will be able to purchase insurance from a state insurance exchange. • Insurance companies will be prevented from denying coverage to people for any reason, including preexisting conditions, such as high blood pressure, cancer, or mental illness. • Insurance companies will have to extend coverage for young Americans up to 26 years of age under their parents’ insurance. • The Medicaid program will be expanded to all poor Americans under the age of 65, including the unemployed and unmarried individuals. • General Medicare benefits will not be cut, and all older Americans will qualify for free preventive care, but the special Medicare Advantage program for higher-income beneficiaries will be frozen, and some benefits will be abolished. • Individual Americans will pay a tax on “Cadillac” insurance plans that offer broader coverage at a much higher cost. • The Medicare payroll tax will rise 0.9 percent for Americans who make more than $200,000 per year. Because these changes will be phased in throughout the next decade, it is not clear just how much the new program will cost on a yearly basis. Moreover, it is not clear that older Americans will accept the changes in Medicare, or that states will form the new insurance exchanges on their own. Nevertheless, the program reflects a 50-year effort to expand the social safety net. However, even with full implementation, there will still be a small number of Americans who will not qualify for any coverage because they already receive benefits through other federal programs such as Supplemental Security Income and veterans hospitals. The reform stands alongside the prescription drug coverage that was passed in 2003 as the latest contributors to health safety for the aged. The Federal Role in Education The federal government has been a partner in education at least since the Northwest Ordinance of 1785, in which Congress set aside land in every township for a public school. In 1862, the Morrill Land-Grant Colleges Act provided grants of land to states for universities specializing in the mechanical or agricultural arts. The U.S. Office of Education was established in 1867 to oversee these programs, but the scope of federal involvement was modest by today’s standards. Even the G.I. Bill, which helped provide a college education for approximately 20 million World War II veterans, was seen more as an employment program than an educational one. During the Cold War, however, education became one part of the national defense. When the Soviet Union launched Sputnik—the first human-made satellite to orbit the earth—Congress responded to the need for more scientists in 1958 by passing the National Defense Education Act to upgrade the quality of engineering, physics, language, and mathematics courses. BY the People: Making a Difference: Improving Health One Playground at a Time Citizens can make an immediate difference in public policy by simply changing the way they behave. They can stop smoking, change their diets, and get more exercise every day. They can also lobby their local governments to build more sidewalks and bike paths so that other citizens can exercise safely. They can push school boards to remove sugary drinks and junk food from school vending machines and cafeterias, support efforts to bring full-service grocery stores such as Whole Foods, Walmart, and Walgreens to low-income neighborhoods, and even plant community gardens. In 2012, for example, Walmart began to open “small box” stores, as opposed to its well-known “super stores” in poor neighborhoods to provide easy access to nutritious food. Playgrounds are also an easy place to start. Sixty minutes of exercise a day can reduce health care costs dramatically in the future. Yet, there are thousands of “play deserts” across the country, often in dense urban areas, in which there is no space for children to play. One charitable organization started by Darell Hammond, KaBOOM!, has set out to change that. In 2012, KaBOOM! built more playgrounds across the United States than any state or city in America. You can see play deserts in your community by visiting maps at kaboom.org.* You can easily find a “play-space” where a new playground would improve the opportunity for healthy exercise for low-income children. Consider joining the KaBOOM! building team as a volunteer. QUESTIONS 1. What can you do today to reduce health care costs in the future? 2. Why are playgrounds so important to communities? And why are there so few playgrounds in low-income communities? 3. What other resources do low-income communities need to be healthier places to live? *See Darell Hammond, KaBOOM! How One Man Built a Movement to Say Play (Rodale Press, 2011). ELEMENTARY AND SECONDARY EDUCATION Kindergarten through high school education is generally seen as a state and local responsibility. Most children go to public schools run by local school boards and funded, at least partly, by property taxes. Because school districts vary greatly in the wealth of their residents, children from poor districts are much more likely to have lower-quality public schools than those from wealthier districts. As a result, public schools vary in the quality of teacher preparation, student performance, dropout rates, and educational opportunities provided to minority students. Although the federal government has been reluctant to make direct investments in poor school districts, it has tried to help the children those districts serve. For example, in 1964, Congress created the Head Start program to help low-income children learn to read and understand numbers. Head Start centers also provide healthy meals and snacks and monitor child health care. Many also work with parents to encourage greater involvement and literacy. Recent evaluations suggest that Head Start does increase learning but needs improvement. In 2012, Head Start provided funding to more than 20,000 child care centers and almost 1 million children. The student–teacher ratio also varied significantly across centers. Moreover, the program is not an entitlement, meaning funding covers only approximately a third of eligible children. When the dollars run out, Head Start centers stop enrolling participants. Head Start is not the federal government’s only education program, however. In 1965, Congress passed the Elementary and Secondary Education Act (ESEA), which supplied educational materials for underprivileged public school students and provided funding for research on how to help children from disadvantaged backgrounds. There have been many efforts to improve the performance of public schools. Here, a teacher for the nongovernmental Knowledge is Power Program (KIPP) works with poor children. As concerns about the quality of public education increased during the 1990s, however, the federal government became more engaged in local education, first by setting national goals for student achievement, then by passing the No Child Left Behind Act in 2002. Under the Act, in return for federal funding, states were required to annually test at least 95 percent of all third and eighth graders in reading and mathematics. In addition, states were required to grade schools as passing or failing, to set higher standards for teachers, and to give students in failing schools the option to move to higher-performing schools. Schools must either improve test scores each year or risk being labeled “in need of improvement.” Under the Act, all students are supposed to be proficient in reading and mathematics by 2014. Although the No Child Left Behind Act set higher standards, it increased federal spending for education by only a tiny percentage. Under great pressure during the economic downturn, many states complained that they did not have enough funding to test every student every year or to meet the law’s requirement for teacher training and certification. In addition, schools with many disabled or special-needs students were being unfairly categorized as “failing” because they could not meet the test-score requirement. As of 2013, Congress and the Obama administration were still debating changes in the Act to put a greater emphasis on teacher performance. The debate may be irrelevant, however. By 2012, the Obama administration had already let half of the states out of the program. Parents ask more of their schools than just to educate their children. Schools are now a major means of providing basic nutrition to millions of poor children. They screen at-risk children and attempt to get them medical and psychological assistance; they seek to socialize students into acceptable behaviors, often in the face of increasing violence in the surrounding neighborhoods; and they often reach out to families to provide basic help in parenting.

HIGHER EDUCATION The federal government also provides help to colleges and universities. In 2012, the federal government provided loans and subsidies to more than 20 million students. Pell grants for low-income students and low-interest guaranteed student loans continue to be the biggest source of college aid for low-income students. In 1998, Congress added three new programs to improve the odds that low-income children will make it to college: (1) GEAR UP, which supports early interventions to help students complete high school; (2) the Learning Anytime Anywhere Partnerships (LAAP), which provide federal funding for distance learning through the Internet; and (3) a new initiative designed to improve teacher quality in primary and elementary schools. Although the three programs account for less than 1 percent of federal spending for education, they acknowledge the link between the quality of primary and elementary education and college success, as well as the need to act early to increase the odds of success for low-income students. All of these programs are means-tested entitlements only to a point—all applicants who qualify for loans are entitled to seek a loan, but the total amount of money available is considered discretionary, not uncontrollable spending. Moreover, the interest rate on student loans is set by Congress and the president, and varies over time. Interest rates were cut in half to 3.7 percent for all student loans in 2007, but the rate may rise to its old level in 2013 as Congress and the president look for ways to cut federal spending. Although the interest rates will continue to change from time to time, Congress and the president seem likely to continue the special loan forgiveness program for students who take public service jobs working for schools, government, or charitable organizations and stay in their jobs for 10 years and make their scheduled repayments during that time. The Federal Role in Crime Control Crime control is not generally seen as a form of social policy, but neither is it a foreign, defense, or economic policy. As such, crime control is best viewed as a way to promote the general welfare by protecting all citizens from harm. Like education policy, policing crime is primarily a state and local matter. The federal government has passed sweeping legislation helping state and local governments pay for crime control. Often, the federal government acts more as a banker than a police officer, providing grants to states and local governments to hire their own police officers, build more prisons, improve drug enforcement, and prosecute organized crime. The federal government must also enforce its own laws against activities such as counterfeiting and pollution, while protecting the borders and preventing drugs from flowing into the country. OF the People: Diversity in America: Access to College Federal aid to education has increased access to college for all American students, but it has had a particularly significant effect on women and people of color at both the community college and four-year levels. Women now earn the majority of both associate and bachelor degrees. Although the number of women and African American college students has increased significantly since 2000, the number of Hispanic students has failed to keep pace. Moreover, there are still significant gaps across all groups in the number of STEM (science, technology, engineering, and mathematics) majors. The number of minority students has more than doubled throughout the decades at both community colleges and four-year colleges and universities. Under the 1998 Higher Education Act, the number of students of color should increase even faster as the federal government puts more dollars into preparing students for college. Although two-year and four-year colleges have seen an increase in enrollments by both women and minority students, growth has been fastest at two-year colleges, which tend to have lower tuition. They are increasingly the destination of choice for many students unable to afford four-year colleges, or who start at two-year colleges to save money, then transfer to four-year institutions.

QUESTIONS 1. Why has the percentage of women attending college increased over the past three decades? 2. Has diversity increased at your college or university? Why or why not? 3. Thinking back to Chapter 5 of this book, what do changes in education mean for U.S. government and politics? The federal government enforces its laws primarily through the Department of Justice, which contains the Federal Bureau of Investigation (FBI). The FBI was created in 1908 and charged with gathering and reporting evidence in matters relating to federal criminal laws. In addition, the FBI provides fingerprint identification and laboratory services to local law enforcement on a cooperative basis and has new responsibilities in the war on terrorism. Other law enforcement agencies of the federal government include the Drug Enforcement Agency (DEA), which is responsible for preventing the flow of illegal narcotics and other illegal drugs into the United States, patrolling U.S. borders, and conducting joint operations with countries where drugs are produced. The Bureau of Alcohol, Tobacco, Firearms, and Explosives monitors the sale of destructive weapons and guns inside the United States, regulates alcoholic beverage production, and oversees the collection of taxes on alcohol and tobacco. Terrorism is clearly the federal government’s top crime priority today. Only weeks after the September 11, 2001, terrorist attacks on New York City and Washington, D.C., Congress passed a massive antiterrorism law, and it created the new Department of Homeland Security the following summer. For his part, President Bush created the Office of Homeland Security within the White House in October 2001, merging 22  agencies and 180,000 federal employees, and ordered a complete reorganization of the Federal Bureau of Investigation in early 2002 to create a stronger focus on preventing terrorism. Under the USA PATRIOT Act of 2001 (the letters stand for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism), the federal government was given sweeping authority to conduct secret investigations of suspected terrorists. Those investigations may use “roving wiretaps” to intercept conversations on any phones a suspect may use and detain any noncitizens believed to be a national security risk for up to seven days without charging them with a crime. Although the PATRIOT Act expired on December 31, 2005, the Bush administration made its renewal a centerpiece of the president’s second-term agenda. The administration also asked Congress to expand the government’s authority to investigate what it called “lone-wolf” terrorists who are not affiliated with a foreign government or known terrorist organization such as Al-Qaeda, which planned the September 11 attacks. Congress reauthorized the act as Bush requested. President Obama also signed a four-year authorization of the main provisions in the act in 2011, leaving it in place until 2015. The Politics of Social Policy Social policy is a major focus of American politics. Welfare, health care, education, and crime—and their costs—are important political battlegrounds between the parties and between contending interest groups, second only to the economy and national security. The nation long ago answered questions about whether the national government has a role in providing decent housing, adequate health care, and a solid education for all citizens. The question is not whether the nation will provide a safety net for its low-income citizens but how strong the net will be and whether state governments or the federal government will be responsible for providing it. There is obvious politics involved in the question. Although most American adults support Social Security and Medicare, for example, they are sharply divided over how much the nation should do for its poorest citizens. They are also increasingly divided about reforms such as the No Child Left Behind Act and its mandatory testing, which have prompted some states to sue the federal government to recover some of the costs of implementing the unfunded mandate portions of the Act. Nevertheless, social policy will be part of the federal agenda far into the future. Although presidents and Congress cannot always know what voters will support and how much they are willing to pay, they can be sure that most want government to take care of citizens who are low-income through no fault of their own. As the earlier figures on payments to individuals show, the economic recession has cost the federal government billions in payments to unemployed Americans. Citizens can influence social policy in several ways. One is to join interest groups that represent low-income Americans or taxpayers. Another is to write letters to their members of Congress when significant legislation such as prescription drug coverage comes to a vote. They can also volunteer for specific programs that are designed to help the needy such as Teach for America or AmeriCorps. Although the federal government has created dozens of programs to help the needy, the nation still relies heavily on charities to fill gaps in coverage, whether through food pantries and soup kitchens or early childhood programs. In turn, these programs rely on volunteers. Review the Chapter The Role of the Federal Government in Social Policy 17.1 Outline the goals of the federal government’s social policy and the forms of protection it provides, p. 506. The goals of social policy are to create a safety net to protect citizens against social and economic problems and to raise the quality of life for all. The two types of social policy are public assistance (usually means-tested) and social insurance. Public assistance takes many forms, including direct payments to the poor, the unemployed, and the disabled; food stamps; job training; housing subsidies; free school lunches; tax credits; and subsidized medical care. Social insurance (usually an entitlement), such as Social Security, is provided to anyone who has paid enough in contributions to receive support after meeting certain requirements, such as reaching retirement age.

The Expansion of Social Policy in the Twentieth Century 17.2 Outline the evolution of social policy throughout the twentieth century, p. 510. The greatest expansion in the federal government’s social programs occurred in two eras: (1) Franklin Roosevelt’s New Deal from 1933 to 1945, and (2) Lyndon Johnson’s Great Society from 1964 to 1969. The New Deal created a number of public assistance and social insurance programs such as job training for the unemployed, Social Security, and Aid to Families with Dependent Children (now called Temporary Assistance to Needy Families); the Great Society produced help for the homeless, more job training, and Medicare. Social Policy Challenges for the Future: Health, Education, and Crime 17.2 Evaluate the current status of and challenges for federal government policy in the areas of health care, education, and crime, p. 517. Health care is well on track to becoming the federal government’s largest social program, in part because health care costs are rising rapidly with the increasing lifespan, new technologies, and access to promising new treatments for life-threatening diseases such as cancer. In 2010, Congress passed a new health insurance program to provide greater access for millions of uninsured Americans. Education and crime continue to be primarily state and local government functions in the United States. However, the federal government plays an important role in funding public schools and pushing national goals for better education and is also heavily engaged in helping finance college and university education. Crime control has also been part of the national agenda for decades, especially related to drugs, but has become much more visible as part of the war on terrorism.

18 Making Foreign and Defense Policy Eight years after it began with a “shock and awe” bombing campaign of Iraq’s capital city of Baghdad, the Iraq war ended in a heavily guarded courtyard at the Baghdad airport on December 15, 2011. Standing in that courtyard, then Defense Secretary Leon Panetta thanked the U.S. combat troops who were about to go home for their service, and then warned the U.S. that “Iraq will be tested in the days ahead—by terrorism, and by those would seek to divide, by economic and social issues, by the demands of democracy itself.”1 The nation was more relieved by the end of the war than ready for a victory parade. Even President Obama avoided any hint of celebration. Instead, he went to Fort Bragg in North Carolina to greet the returning soldiers with a simple message: “As your Commander-in-Chief, and on behalf of a grateful nation, I’m proud to finally say these two words, and I know your families agree: Welcome home. Welcome home. Welcome home. Welcome home.”2 Iraq had been a controversial and expensive war from its very beginning. The war was launched with congressional approval largely based on the Bush administration’s claim that Iraq’s brutal dictator Saddam Hussein had helped the terrorists who planned the September 11, 2011, attacks, and was also armed with a vast inventory of chemical, biological, and even nuclear weapons that could be used against the United States and its allies, especially Israel. Despite the administration’s claim that the war would be quickly won, it eventually claimed the lives of 4,500 U.S. troops, left another 32,000 wounded, and cost more than $1 trillion that was added to the growing national debt. The cost will continue to climb as U.S. military advisers help train the new Iraq Army, and the Department of Veterans Affairs continues to care for wounded soldiers, including many who suffered traumatic brain injuries from hidden roadside bombs. 18.1 Analyze the questions and responses that shape approaches to U.S. foreign policy and defense, p. 530. 18.2 Assess the status of each of the issues that currently dominate the foreign policy and defense agenda, p. 534. 18.3 Outline the structure of the foreign policy and defense bureaucracy, p. 539. 18.4 Evaluate the options for achieving foreign policy and defense goals, p. 544. U.S. Army soldier Zane Miller is greeted by his wife, Chelsea, and son, Jaxon, 8, during a homecoming ceremony at Fort Carson in Colorado Springs, Colorado. He was one of the soldiers who returned to the U.S. after the army ended its combat mission in Iraq. Was the war a success? On the one hand, the alleged weapons of mass destruction were never found. Nor was the United States ever able to prove a link between Iraq’s brutal dictator Saddam Hussein and the September 11 terrorist attacks. Moreover, Iraq was in flames by 2014 as rebels took control of major cities leading to Baghdad. On the other hand, Hussein was removed from power, tried for crimes against his own people, and executed in 2006. Also, by January 2005, Iraq had elected its first democratic government and was rebuilding its economy. But even this limited progress was erased as the United States began an air war against the rebels. This chapter will ask how we make choices in planning and executing foreign and defense policy. We will first examine key debates in making policy, look at basic terms and concepts, and examine some of today’s greatest foreign policy challenges, such as the continued threats of nuclear war and the growing role of Iran in the Middle East. Then, the chapter will turn to a discussion of the key actors in making U.S. foreign policy and appraise the range of tools the United States uses to accomplish its international goals. The chapter concludes with a more detailed assessment of defense policy. Citizens clearly play a role in foreign and defense policy, whether through their advocacy and pressure or through their decisions to petition government or join the armed forces. They can also create change through voting, especially if a foreign policy such as the war in Iraq becomes a national issue, as it did in the 2006 congressional elections. That said, citizens often feel that supporting the nation’s foreign and defense policy is a patriotic duty, and believe that the president should have the authority to protect the nation from international threats even if that means Congress is excluded from making the central decisions. Understanding Foreign Policy and Defense 18.1 Analyze the questions and responses that shape approaches to U.S. foreign policy and defense. In the broadest sense, the primary goal of U.S. foreign and defense policy is to protect the nation and world from international threats such as terrorism, poverty, dictatorships, piracy, and attacks against its own people. Doing so requires more than building strong borders, however, and isolating itself from the rest of the world. The United States tried that prior to World War I and II, and failed to prevent the call to war. As one of the world’s great superpowers, the United States still has a wide range of obligations, including promoting democracy abroad in nations such as Iraq, providing help to victims of disaster such as the 2010 earthquake in Haiti, promoting greater economic ties across all nations, and fighting terrorism. Although the United States supports greater freedom in the world, it has long been divided about its own role in international affairs. Some believe that the United States should defend itself against its enemies but remain isolated from the rest of the world; others question whether it should assume that other nations will act in their own self-interest, or if it should maintain a more hopeful vision of a peaceful world; still others debate whether the United States should use its substantial military strength to force other nations to support its positions, versus using its own history of civil liberties and rights to lead the world through example. In general, these debates start with five basic questions: (1) Should the United States view the world realistically or idealistically? (2) Should it isolate itself from the world or accept a role in the international community? (3) Should it act on its own or only with the help of other nations? (4) Should it act first against threats to its safety or wait until it is attacked? (5) Should it use its military and economic hard power or its diplomatic soft power? We will discuss each of these issues next. Realism Versus Idealism Historically, U.S. foreign and defense policy has been built on two very different views of the world. The first relies on realism, a belief that other nations are interested first and foremost in their own advancement, whether economic, political, or social, and in strengthening their own power. realism A theory of international relations that focuses on the tendency of nations to operate from self-interest. Critics of realism argue that nations seek cooperation and stability, not power. This view invokes idealism, a belief that nations can work together to solve common problems such as global hunger and poverty with peace, not war, as the ultimate aim. Idealists view national power as a tool for good and for promoting democracy in other nations, not merely as a way to amass more military and economic resources. idealism A theory of international relations that focuses on the hope that nations will act together to solve international problems and promote peace. Although realism and idealism represent two competing views of the world, they can become part of a broader, more integrated foreign and defense policy. Thus, the United States could be realistic about the need to work with dictators (realism), and yet still believe that democracy is the best form of government (idealism). As President Bush often argued in the months leading to the war in Iraq, the United States had to be realistic about Iraq’s willingness to use chemical and nuclear weapons against other nations, but Bush was always an idealist about how democracy could lead nations such as Iran and North Korea toward international cooperation and peace. Thus far, the Obama administration has taken a realist approach in which decisions are guided by cold calculations of the costs and benefits of action. BY the People: Making a Difference: Promoting Ethical Investments by Colleges and Universities Students who care about the continued starvation in the Darfur region of Sudan have many options for making their voices heard. They can certainly join organizations that are campaigning against the human rights abuses and can contribute time and money to organizations such as Save Darfur (savedarfur.org). Save Darfur is an alliance of more than 100 organizations that are working to stop the violence. Students can also put pressure on their own colleges and universities to stop investing in businesses that operate in Sudan. Colleges and universities have endowment funds, which they invest to generate income for everything from faculty to financial aid. Some of these investments might be with businesses that have ties to or interests with the Sudanese government. Products bought by universities could be made by businesses that do business with Sudan. Because these purchases and investments are helping these businesses, even indirectly, opponents of the Sudanese government argue that colleges and universities should cut off these sources so that they do not support the Darfur oppression in any way. The University of California system prohibited all such investments in Sudan in 2006, and many colleges and universities have followed suit. Much of the effort has come from students who have worked hard to understand how their colleges and universities invest their endowment money. The first step in stopping such investments is to know which companies actually operate in Sudan, which is sometimes very difficult. Multinational corporations often operate through subsidiaries that might do business with a specific country. The only way to know is to get a list of all companies in an endowment portfolio or sponsor a general resolution ordering the endowment’s investment managers to sell all investments that support Sudan in the war. The Darfur crisis was still simmering despite efforts to broker a peace agreement in 2011, and other nations continue to abuse their citizens. Students must first decide which crisis demands action, and then turn to their universities to force divestment. QUESTIONS 1. Should colleges divest unethical investments even if doing so costs money that could support students? 2. How can a college know when it is making an unethical investment? Are broad policies that prohibit such investments enforceable? 3. How can students make sure that their colleges take action on issues such as Darfur? What kinds of political participation might work on your campus? Isolationism Versus Internationalism Whether it is based on realism or idealism, U.S. foreign policy has reflected very different views of how it should respond to the rest of the world. Some back an approach based on isolationism, a belief that the United States should stay out of international affairs unless other nations constitute a direct threat to its existence. The term was first used during the years leading up to World War I, when many Americans believed that the United States should stay out of the global conflict. isolationism The desire to avoid international engagement altogether. But isolationism is alive and well in the debate about whether the United States should continue fighting in Afghanistan. Isolationists argue that the United States should follow George Washington’s advice to avoid international “entanglements,” lest those entanglements lead the United States into wars that either cannot be won, put its troops in harm’s way, and burden the nation with great costs. Simply put, isolationists argue that the United States should always focus first on its own interests, and leave the rest of the world alone. Other citizens, including most foreign and defense policy experts, believe in internationalism, which says the United States must be engaged in international affairs to protect its own interests. Realists and idealists can disagree on the goals of U.S. foreign and defense policy, but they can still agree that the United States should engage the world on economic, political, and social issues such as human rights for oppressed people, global hunger, and the war on terrorism. Internationalists tend to view themselves as citizens of the world, not only the United States. They feel there are times when the United States should intervene, even when not directly threatened by another nation. internationalism The belief that nations must engage in international problem solving. Unilateralism Versus Multilateralism Although internationalists agree that the United States might have occasional reasons to participate in world affairs, they have two very different views about how. Supporters of unilateralism believe that the United States has the right to act alone in response to threats, even if other nations are unwilling to help. They argue that it should never give other nations (or the United Nations) a veto over its actions, even if that means it acts alone in using its great military power. unilateralism A philosophy that encourages individual nations to act on their own when facing threats from other nations. Hunger remains a serious problem in many less developed countries. Here, Africans stand in line in Southern Sudan waiting for U.S. food aid. Note that the food comes in bags that are marked with the U.S. flag. In fact, President Bush announced a new unilateral policy immediately after the September 11 attacks. Under the Bush Doctrine, any nation that threatened the United States was automatically a potential target for unilateral action. The Bush Doctrine was built on three basic concepts: Bush Doctrine A policy adopted by the Bush administration in 2001 that asserts America’s right to attack any nation that has weapons of mass destruction that may be used against U.S. interests at home or abroad. 1. The United States reserves the right to attack any nation that either harbors terrorists or constitutes a serious threat to the United States. 2. The United States reserves the right to act unilaterally against other nations even if it does not have the support of its allies. 3. The United States reserves the right to use massive force against its enemies, including nuclear weapons if needed. Opponents of the Bush Doctrine support multilateralism, a belief that the United States should act only with the active support of other nations. According to its advocates, multilateralism not only increases the odds that other nations will share the burdens of war with the United States, but it also increases the potential that other nations will support the U.S. position once a war is over. At least partly because of the advantages of multilateralism, the Bush administration began backing away from the Bush Doctrine only three years after announcing it. Faced with mounting costs of rebuilding Iraq and reducing international tension with other Middle Eastern nations, the administration began working to bring other nations such as Russia, France, and Germany into the debate. multilateralism A philosophy that encourages individual nations to act together to solve international problems. Obama has rejected the Bush Doctrine in all but very rare cases when an attack was imminent. Instead, he has generally operated under the multilateralist philosophy, promoting cooperation among U.S. allies in using military force against Libya in 2011, for example. The administration also decided early on that it would not use nuclear weapons against Iran’s nuclear program, even though those weapons could be used against the United States. However, it has continued the long-standing U.S. practice of promising retaliation for attacks on U.S. citizens in other countries. It has been particularly concerned about terrorist attacks around the world and inside the United States and has been ready to respond immediately with strong military force. Preemption Versus Provocation For most of its history, the United States has waited to be provoked before going to war. Although there is considerable debate about what constitutes a provocation to war, preemption assumes the United States can attack first when it believes another nation constitutes a very serious threat. This approach was at the core of the war in Iraq, which was based on the notion that the United States had to stop weapons of mass destruction, such as chemical, biological, or nuclear arms, before they could be used. However, Iraq’s weapons of mass destruction were never found, which led to allegations that U.S. intelligence agencies had been pressured by the Bush administration and Vice President Dick Cheney to justify the invasion and war. preemption A policy of taking action before the United States is attacked rather than waiting for provocation. weapons of mass destruction Biological, chemical, or nuclear weapons that can cause a massive number of deaths in a single use. The war in Iraq is an example of preemption, which some experts call the nation’s first “war of choice.” Prior to Iraq, the United States engaged in war only in direct response to a first attack by an adversary. Believing that Iraq continued to hold weapons of mass destruction, the Bush administration decided to force Saddam Hussein from his dictatorship before he could use those weapons against the United States. The president’s national security adviser Condoleezza Rice also argued that the United States had a moral obligation to remove Hussein from power, even if doing so meant war. “This is an evil man who, left to his own devices, will wreak havoc again on his own population, his neighbors, and, if he gets weapons of mass destruction and the means to deliver them, on all of us,” Rice told the British Broadcasting Corporation in August 2002. “There is a very powerful moral case for regime change. We certainly do not have the luxury of doing nothing.”3 Hard Power Versus Soft Power Internationalists have different views of just how the United States should influence other nations in protecting itself. Some favor the use of hard power, or military and economic strength, whereas others favor soft power, or negotiation and diplomacy. These two forms of power will be discussed later in this chapter as we look at different options for accomplishing foreign and defense goals.4 hard power Reliance on economic and military strength to solve international problems. soft power Reliance on diplomacy and negotiation to solve international problems. Hard power depends almost entirely on a nation’s ability to threaten or force another nation to act a certain way to avoid an attack. It relies on military strength as measured by the number of soldiers in uniform, their preparation for war, the quality of their equipment, and their nation’s willingness to put them in harm’s way. We often associate hard power with the theory of deterrence, under which a nation creates enough military strength to ensure a massive response to any attack. During the Cold War, the United States maintained more than enough nuclear weapons to deter the Soviet Union from using its nuclear weapons first and argued that sufficient bombs would survive any Soviet attack to ensure the destruction of the Soviet Union. This notion of mutual assured destruction, sometimes called MAD, was enough to keep both nations from using their nuclear weapons, but it kept each on constant alert just in case the other dared to act first. theory of deterrence A theory that is based on creating enough military strength to persuade other nations not to attack first. Soft power is based on more traditional diplomacy and a nation’s reputation for keeping its word in honoring treaties, its readiness to provide financial aid, and its ability to find consensus by bargaining with allies and adversaries alike. The Obama administration has been a strong supporter of more diplomacy in international affairs, although it has shown a willingness to use hard power in Afghanistan. Obama’s strategy is evidence that nations can use hard and soft power at the same time to resolve disputes. In fact, the threat of military force is often enough to produce a negotiated settlement, as was the case throughout the Cold War. The Foreign Policy and Defense Agenda 18.2 Assess the status of each of the issues that currently dominate the foreign policy and defense agenda. The United States does not always have a choice about whether to act in world affairs. Many unavoidable issues reach its borders. These issues often dominate the foreign and defense policy agenda, which currently put on six major issues at the top of a long list of concerns. The six issues are presented in the following pages in alphabetical order: (1) addressing global climate change, (2) controlling weapons of mass destruction such the nuclear weapons allegedly being built by Iran and North Korea, (3) fighting terrorism, (4) negotiating peace in the Middle East, (5) promoting free trade abroad, and (6) strengthening democracy and international understanding. Just because an issue such as global health and poverty is not on the list does not mean it is off the agenda. Rather, we focus here on the issues that appear to be at the top of the agenda today. Addressing Global Climate Change The United States has a mixed record in efforts to control the global climate change often associated with greenhouse gases that trap heat in the environment and raise the world’s temperature. Much of the recent increase in greenhouse gases is related to the release of carbon dioxide from the burning of fossil fuels such as gasoline and coal by automobiles and power plants. President Jimmy Carter, Egyptian President Anwar El Sadat, and Israeli Prime Minister Menanchem Begin share a famous handshake in 1978 agreeing to negotiate for peace in the Middle East. The three met at the U.S. president’s retreat at Camp David, Maryland. Experts do not all agree that global warming is a problem; there is considerable debate today regarding the scientific evidence underpinning the call for action on global warming. However, rising temperatures appear to threaten the world’s climate in two ways. First, as the average temperature rises, the polar ice caps and glaciers melt. As the water melts, the oceans rise, threatening low-lying areas across the world. By some estimates, New York City, the states of Washington, Florida, Louisiana, and other coastal areas could be completely under water within several hundred years. Second, as the average temperature rises, the world’s weather becomes more unpredictable and potentially severe. New assessments in 2014 suggest that global warming is coming much faster than expected, and may soon be irreversible.5 The world acknowledged these problems when it adopted an international treaty called the Kyoto Protocol in 1997. Under the treaty, all participating nations agreed to reduce their emission of greenhouse gases by set amounts during the coming decades. Although 85 nations signed the agreement and 190 have ratified it, the United States has never ratified the treaty and has yet to embrace limits on burning fossil fuels, even though it produces a significant amount of the world’s greenhouse gases. The United States has argued that the limits imposed by the Kyoto Protocol would weaken its economy. Efforts continued as many of the world’s largest carbon producers met in Copenhagen in early 2010, but they were still fighting over standards in 2014. Controlling Weapons of Mass Destruction The international community has been working for decades to reduce the threat of weapons of mass destruction. Although the world is particularly concerned about the development of such weapons in North Korea and Iran, the effort to reduce the spread of nuclear weapons actually started with nuclear disarmament talks between the United States and the Soviet Union in the 1970s. With the end of the Cold War in 1989, the United States and Russia began to look for new ways of reducing their nuclear arsenals. In 2010, they agreed to reduce the number of nuclear warheads dramatically. Meeting in Prague on April 8, Russia and the United States agreed that each would reduce the number of nuclear warheads to 1,550, a cut of almost 50 percent. In early 2012, the Obama administration began a new round of conversations about reducing the total number of weapons by another 1,500.6 By late 2014, the negotiations stalled as Russia continued to threaten its former ally, Ukraine. As noted earlier, the world is also threatened by biological and chemical weapons. Although chemical weapons were outlawed by international agreement after World War I, at least nine countries say they have developed chemical weapons, such as nerve gases, that kill on contact. The Syrian ruling government used chemical weapons in 2013 and 2014 against rebel forces and civilians during a long civil war, but was eventually forced to dismantle the weapons under international pressure. The United States has been particularly concerned in recent years about Iran and North Korea’s recent efforts to develop nuclear weapons, which the United States and many other nations believe they may use against Israel. By 2012, Iran appeared well on its way to producing the enriched uranium needed for a nuclear weapon. There is also concern about the possibility that terrorists could build and explode some kind of nuclear weapon in the United States. Fighting Terrorism The war on terrorism is a broad term used to describe efforts to control terrorist acts sponsored by other nations, such as Afghanistan, Iran, Syria, Yemen, and even Iraq, or acts undertaken by independent groups that operate without any connection to a government. In early 2009, the United States received satellite photos of Iran’s nuclear development program. The United States responded by demanding more international penalties against Iran in an effort to strangle the country’s economy. Iran continues to develop nuclear capabilities and shows no readiness to negotiate. Although the war is most often associated with Osama bin Laden and his Al-Qaeda terrorist organization, dozens of other terrorist organizations exist. These groups have executed bombings in London, Madrid, Moscow, the Middle East, and throughout Southeast Asia, including Thailand, Malaysia, the Philippines, and Indonesia, where terrorists have carried out several bombings at or near popular tourist hotels. For example, in November 2008, terrorists conducted a coordinated attack on major hotels in Mumbai, India, that killed 172 people. The attack was followed in December 2009 with the attempted Christmas Day bombing of a Northwest Airlines flight, and further threats through 2014. These attacks showed the power of violence as a tool of terrorism, and the media’s widespread coverage of terrorist incidents like these also (unwittingly or not) spreads this fear. Groups that were once small can achieve widespread notoriety, which helps with fundraising and recruiting. Negotiating Peace in the Middle East Long before the September 11 attacks, the United States was working to secure peace between Israel and its neighbors, in part because the Middle East is such an important source of the world’s oil and in part because the United States has long considered Israel an ally. However, despite decades of U.S. efforts to promote peace in the region, the Middle East remains locked in a violent struggle over Israel’s right to exist. Progress toward peace has been threatened by ongoing conflict with Arab nations and terrorist groups. In 2002, however, the United States, Israel, and most Arab nations embraced “The Road Map to Peace.” Under this agreement, signed in April 2003, Israel and its adversaries agreed to two broad steps toward peace. The Palestinian Authority, which represents citizens in territories captured by Israel in past wars and still claimed as part of Israeli territory, agreed to arrest, disrupt, and restrain individuals and groups that plan and conduct violent attacks on Israel. Israel in turn agreed to start dismantling settlements of Israeli citizens in the occupied territories to its south and east. Israel honored part of its end of the agreement starting in 2005 by beginning to dismantle settlements and turn over control of these territories to the Palestinian Authority. Osama bin Laden became America’s number one public enemy after his Al-Qaeda organization took credit for destroying the World Trade Center on 9/11. He was killed by U.S. commandos in 2011. However, the dismantling of settlements happened in Gaza only; the settlements in East Jerusalem and the West Bank continue to expand. The dispute continued into 2014 under the Obama administration, which was still working toward a “soft power” resolution that would create a separate Palestinian nation and restore territorial lines to the pre-1967 war boundaries. The effort was soon complicated, however, by Iran’s suspected development of a nuclear weapon that could be used against Israel. Despite repeated efforts to stop the development, Iran was allegedly still at work on the weapon and the rockets to carry it to a target in 2014. Promoting Free Trade As the world economy has grown, so has international competition over access to global markets. The United States has generally responded with a basic policy of free trade, meaning a commitment to the free movement of goods across international borders. But it does not allow the unrestricted export of technologies that can be used to build weapons of mass destruction, and it has long protected certain defense industries that are essential for U.S. military strength. The United States has also used trade as a tool to promote human rights and democratic reform. Conflicting goals have characterized the U.S. debate over free trade with China. On the one hand, China has a long history of violating basic human and democratic rights. But it also has one of the fastest-growing economies in the world. U.S. exports to China have tripled during the past decade, and imports from China have grown rapidly. The conflict between concern for human rights and a desire to benefit from China’s growing economy became especially prominent when the Clinton administration asked Congress to grant normal trade relations status to China. Despite strong opposition from advocates of strong restrictions on labor, environmental, and human rights abuses, China was granted permanent normal trade status in 2000. normal trade relations Trade status granted as part of an international trade policy that gives a nation the same favorable trade concessions and tariffs that the best trading partners receive. Typically, Congress grants normal trade relations under a “fast-track,” or accelerated, basis by limiting its own debate to a simple up-or-down vote with no amendments. Although Congress initially refused to use this process for China, it eventually approved the status and extended the president’s authority to negotiate such trade agreements in 2002. Obama used that authority in late 2011 to create proposed agreements with South Korea, Columbia, and Panama, but Congress tabled the proposals until after the 2012 election. He also continued to pressure China to abide by the trade agreements. Strengthening Democracy and International Understanding The United States has long engaged in promoting democracy and its freedoms. It does so mostly through economic sanctions to increase the pain that might bring its adversaries to negotiations. However, some efforts conflict with other U.S. goals such as promoting international trade and fighting the war on terrorism. For example, the United States continues to promote international trade with China, one of the world’s fastest-growing economies, even though China continues to deny its citizens basic rights such as a free press. In addition, the United States still provides aid to many Middle Eastern nations ruled by dictatorships in order to gain their help in the war on terrorism. The United States also provides humanitarian aid to nations affected by natural disasters such as the devastating 2013 cyclone in the Philippines. Although dictators led many of the countries affected, the United States has long believed that citizens should not suffer during crises even though their governments are not free. Finally, the United States uses programs such as the Peace Corps to promote international understanding. Peace Corps volunteers are expected to serve in another nation for two years and become part of the community they are serving. They work on a variety of projects, such as teaching mathematics and science, doing community development work, and improving water and sanitation systems. Most have a college degree, specific international experience, or both. Approximately 10 percent of the 7,300 current volunteers are over the age of 50. The Peace Corps covers travel and a minimum salary and typically trains volunteers in language and job skills for approximately three months before their service abroad.7 The Global Community: International Support for Ties with International Business Global citizens have very different views of ties between business and their countries. Some see the ties as essential for economic growth, whereas others worry that business is only interested in profits. In addition, some global citizens appear to worry about corruption in business dealings with their countries. Many even view business as too involved in local affairs. Nevertheless, international trade is usually seen as a way to help nations reduce poverty. The Pew Research Center’s Spring 2011 Global Attitudes Survey strongly suggests that the world’s citizens believe that global trade is very or somewhat good for their nation. Respondents were asked: What do you think about the growing trade and business ties between your country and other countries—do you think it is a very good thing, somewhat good, somewhat bad, or a very bad thing for your country? Favorability toward global trade has fallen in most countries during the past three years, in part because of the economic recession. Although Indians have become more supportive of trade as their economy grows, Americans remain skeptical about business ties. Worries about the recession have driven these concerns higher within the nation as Americans blame business and trade for the high unemployment that has followed the economic collapse. However, most Americans understand that trade is one way to rebuild the economy as long as it flows both ways. They want more free trade between all nations. In general, support for trade varies by the economic conditions of the world’s nations. Poorer nations tend to see trade as a way out of poverty, but it is not always clear that trade has benefited them. CRITICAL THINKING QUESTIONS 1. Why are all of these countries supporting international trade, and should they be so favorable? 2. What are the advantages of international trade in creating peaceful relations around the world? 3. Why is the United States the least favorable toward international trade? *2010 survey. SOURCE: Pew Research Center, “China Seen Overtaking U.S. as Global Superpower: U.S. Favorability Ratings Remain Positive,” July 13, 2011, available at http://www.pewglobal.org/2011/07/13/china-seen-overtaking-us-as-global-superpower/. Although promoting democracy involves persuasion and even global advertising, it is often backed up by the threat and use of military power. For example, the U.S. was deeply involved in the “Arab Spring” uprisings that began in 2011 with the uprising in Tunsia, and quickly spread to Egypt, Syria, and Yemen. The U.S. also participated with the North Atlantic Treaty Organization (NATO) in the air war over Libya, which began in March 2011 after the Libyan public rose up against another brutal dictator, Muammar Gaddafi. The U.S. provided key intelligence the civil war sparked by the protests, supplied arms to anti-Gaddafi forces, and launched Tomahawk missiles against Libyan military targets from its ships and aircraft. But the United States and NATO never committed troops to the battle. A new Peace Corps volunteer greets a villager in a small village east of Phnom Penh, Cambodia. Almost 200,000 Americans have served in the Peace Corps since its creation in 1961. More than 8,000 served in more than 150 countries in 2012. Government forces fought hard against the uprising, but eventually surrendered after Gaddafi was caught and killed on October 20, 2011. The United States and NATO refused to get involved in the current Syrian civil war, however, for fear that the conflict was unresolvable. The Foreign Policy and Defense Bureaucracy 18.3 Outline the structure of the foreign policy and defense bureaucracy. Even in troubled times, the president does not have absolute authority to act. Congress has the power to declare war, to appropriate funds for the armed forces, and to make rules that govern them. But the president is commander in chief and is authorized to negotiate treaties and receive and send ambassadors—that is, to recognize or refuse to recognize other governments. The Senate confirms U.S. ambassadorial appointments and gives consent (by a two-thirds vote) to treaty ratification. Officially, the president’s principal foreign policy adviser is the secretary of state, although others, such as the national security adviser or the vice president, are sometimes equally influential. In practice, the secretary of state delegates the day-to-day responsibilities for running the State Department and spends most of the time negotiating with the leaders of other countries. However, foreign policy requires more than one adviser. The application of hard and soft power is the responsibility of several major departments and agencies, including State, Defense, Treasury, Agriculture, Commerce, Labor, Energy, the Central Intelligence Agency (CIA), and the Department of Homeland Security. The National Security Council The president’s National Security Council (NSC) is the most important White House agency involved in coordinating foreign policy. Created by Congress in 1947, it serves directly under the president and is intended to help integrate foreign, military, and economic policies that affect national security. By law, it consists of the president, vice president, secretary of state, and secretary of defense. Recent presidents have sometimes also included the director of the CIA, the White House chief of staff, and the national security adviser as assistants to the NSC. The national security adviser, appointed by the president, has emerged as one of the most influential foreign policy makers, sometimes rivaling the secretary of state in influence. Presidents come to rely on these White House aides both because of their proximity (down the hall in the West Wing of the White House) and because they owe their primary loyalties to the president, not to any department or program. Each president has shaped the NSC structure and adapted its staff procedures to suit his personal preferences. Throughout the years, however, the NSC, as both a committee and a staff, has taken on a major role in making and implementing foreign policy. The State Department The State Department is responsible for the diplomatic realm of foreign and defense policy. It is organized around a series of “desks” representing different parts of the world and foreign policy missions. DUTIES The State Department is responsible for negotiating treaties with other nations and international organizations, protecting U.S. citizens abroad, promoting U.S. commercial interests in other nations, and granting visas to foreign visitors. The State Department also staffs and protects all U.S. embassies and consulates abroad. Embassies provide full diplomatic services on behalf of the United States and its citizens; consulates are smaller branch offices of embassies that help foreign citizens enter the United States through visas, or entry papers. The State Department also plays a significant role in homeland security, often in cooperation with the Department of Homeland Security, which was created in 2002 and oversees the Transportation Security Administration that conducts passenger and baggage screening at the nation’s airports. Many of the September 11 terrorists had entered the United States on student visas granted by the State Department’s Bureau of Consular Affairs. Although their movements once in the United States were supposed to be monitored by the Justice Department’s Immigration and Naturalization Service, the State Department was criticized for granting the visas without conducting deep background checks on individuals who might cause harm to the country. THE FOREIGN SERVICE U.S. embassies are staffed largely by members of the U.S. Foreign Service. Although part of the State Department, the service represents the entire government and performs jobs for many other agencies. Its main duties are to carry out foreign policy as expressed in the directives of the secretary of state; gather political, economic, and intelligence data for U.S. policy makers; protect U.S. citizens and interests in foreign countries; and cultivate friendly relations with host governments and foreign peoples. The Foreign Service is a select group of approximately 4,000 highly trained civil servants, comparable to army officers in the military and expected to take assignments anywhere in the world on short notice. As of 2014, about two-thirds of the approximately 180 U.S. ambassadors to other nations came from the Foreign Service. The others are usually presidential appointees confirmed by the Senate. The Foreign Service is one of the most prestigious, and most criticized, career services of the national government. Criticism sometimes comes as much from within as from outside. Critics claim that the organizational culture of the Foreign Service stifles creativity; attracts officers who are, or at least become, more concerned about their status than their responsibilities; and requires new recruits to wait 15 years or more before being considered for positions of responsibility. Like other federal agencies, most notably the Central Intelligence Agency (CIA) and the Justice Department’s Federal Bureau of Investigation (FBI), the Foreign Service has had great difficulty recruiting officers with Arabic-language skills, which clearly weakens each agency’s ability to interpret, let alone collect, intelligence about the terrorist networks that have emerged in the Middle East and Asia. The spirit of bipartisanship is reflected in the report of the 9/11 Commission, issued on July 22, 2004. The commission was made up of both Democrats and Republicans who managed to put their ideological differences aside and issue a report that is critical of both the Clinton and Bush administrations in their handling of terrorism. Shown here are 9/11 Commission co-chairs Thomas Kean and Lee Hamilton. Despite these criticisms, few would question the courage and commitment of the Foreign Service. Many serve in the most dangerous countries across the world, and often take great risks in their jobs. In September 2012, for example, Ambassador J. Christopher Stevens was killed in a terrorist attack on the U.S. mission in Benghazi, Libya. He had joined the Foreign Service in 1991. Intelligence Agencies Accurate, timely information about foreign nations is essential for making wise decisions. As the Senate Intelligence Committee and the national commission created to investigate the September 11, 2001, attacks both noted, the intelligence community failed to provide that information in time to prevent the attacks or change the course of the Iraq War.8 THE CENTRAL INTELLIGENCE AGENCY The most important intelligence agency is the Central Intelligence Agency, created in 1947 to gather and analyze information that flows into various parts of the U.S. government from all around the world. According to secret documents released by Eric Snowden in 2013–2014, the CIA has approximately 20,000 employees, who both collect information and shape intelligence estimates.9 Although most of the information the CIA gathers comes from open sources such as the Internet, the CIA does use spies and undercover agents to monitor foreign threats. This secret intelligence occasionally supplies crucial data. But it is not all glamour; much is routine. Intelligence work consists of three basic operations: reporting, analysis, and dissemination. Reporting is based on close and rigorous observation of developments around the world; analysis is the attempt to detect meaningful patterns in what was observed in the past and to understand what appears to be going on now; dissemination means getting the right information to the right people at the right time. THE BROADER INTELLIGENCE COMMUNITY The CIA is one of almost two dozen intelligence agencies in the federal government, most notably the State Department’s Bureau of Intelligence and Research; the Defense Department’s Defense Intelligence Agency (which combines the intelligence operations of the Army, Navy, Air Force, and Marine Corps); the Federal Bureau of Investigation; the Treasury Department’s Office of Terrorism and Finance Intelligence; the Energy Department’s Office of Intelligence; the Homeland Security Department’s Directorate of Information Analysis and Infrastructure Protection and Directorate of Coast Guard Intelligence; the National Security Agency (which specializes in electronic reconnaissance and code breaking); the National Reconnaissance Office (which runs the U.S. satellite surveillance programs); and the National Geospatial-Intelligence Agency (which collects and analyzes photographic imagery). Together, these agencies are the heart of the U.S. intelligence community. Because each of these agencies was created to collect unique information (imagery, electronic intelligence, and so forth) for a unique client (the president, the secretary of defense, or others), the agencies rarely shared information. The lack of cooperation clearly affected the government’s ability to prevent the September 11, 2001, attacks. “Many dedicated officers worked day and night for years to piece together the growing body of evidence on Al-Qaeda and to understand the threats,” the 9/11 Commission concluded. “Yet, while there were many reports on bin Laden and his growing Al-Qaeda organization, there was no comprehensive review of what the intelligence community knew and what it did not know, and what that meant.”10 Congress responded by creating the Office of the Director of National Intelligence in 2004 to coordinate the movement of information within the intelligence community. Under its legislation, the new director was responsible for providing the primary advice to the president on intelligence issues and was given the authority to make recommendations regarding the annual budgets of each intelligence agency. The director also oversees a new federal counterterrorism center, responsible for making sense of all national intelligence on potential terrorist threats to the United States. Despite the promise of more coordination, however, congressional critics in both parties complained that the new director merely added a layer of bureaucracy to an already cumbersome system. The intelligence community has been criticized in recent years for failing to detect several potential attacks, notably the Boston Marathon bombing in 2013. The brothers who planned the deadly bombing were on two national terrorist watchlists, but had been lost somewhere. “Of course, it is an intelligence failure,” a former White House intelligence adviser described the attack ten days later. “It is every investigator’s worst nightmare—to have your eyes on a person, allow them to drop from your attention, and then they carry out a terrorist attack.”11 The Department of Defense The president, Congress, the National Security Council, the State Department, and the Defense Department all make overall defense policy and attempt to integrate U.S. national security programs, but the day-to-day work of organizing for defense is the job of the Defense Department. Its headquarters, the Pentagon, houses within its 17.5 miles of corridors 23,000 top military and civilian personnel. The offices of several hundred generals and admirals are there, as is the office of the secretary of defense. As of 2014, the secretary was Chuck Hagel, a former Nebraska senator. Hagel is the civilian leader of the armed services, and was in charge of the armed forces at the end of the Afghanistan War. THE JOINT CHIEFS OF STAFF The committee known as the Joint Chiefs of Staff serves as the principal military adviser to the president, the National Security Council, and the secretary of defense. It includes the heads of the Air Force, Army, Navy, and Marine Corps, and the chair and vice chair of the Joint Chiefs. The president, with the consent of the Senate, appoints all the service chiefs to four-year nonrenewable terms. Note that the twice-renewable two-year term of the chair of the Joint Chiefs is part of the process of ensuring civilian control over the military. The Department of Defense Reorganization Act of 1986 shifted considerable power to the chair of the Joint Chiefs. Reporting through the secretary of defense, the chair now advises the president on military matters, exercises authority over the forces in the field, and is responsible for overall military planning. In theory, the chair of the Joint Chiefs can even make a military decision that the chiefs of the other services oppose. Note, however, that the chair of the Joint Chiefs is not the head of the military. The chair and the Joint Chiefs are advisers to the secretary of defense and the president, but the president can disregard their advice and on occasion has done so. A president must weigh military action or inaction against the larger foreign and security interests of the nation. THE ALL-VOLUNTEER FORCE The Constitution authorizes Congress to do what is “necessary and proper” in order to “raise and support Armies,” “to provide and maintain a Navy,” and “to provide for calling forth the Militia.” The Joint Chiefs and the presidential appointees who serve as secretaries of the Air Force, Army, Navy, and Marine Corps oversee the 1.5 million soldiers who currently serve in what the founders might call the national militia. During most of its history, the United States has used military conscription to raise and support its armed services. The draft, as it is called, was first used in 1862, during the Civil War, and again during World War I, World War II, and Vietnam. Shortly before the Vietnam War ended, Congress replaced the draft with an all-volunteer force, composed entirely of citizens who choose to serve. all-volunteer force The replacement for the draft (conscription) for recruiting members of the armed services. As of 2012, the armed services had almost 1.5 million active-duty personnel, but was scheduled to cut 100,000 positions between 2013 and 2017 with most the cuts scheduled to hit the U.S. Army and Marine Corps. Although the proposal was driven in part by the effort to reduce federal spending, it also reflected the changing nature of war over the past 100 years. Whereas World War I, World War II, and the Korean and Iraq wars were fought by massive armies in face-to-face combat, future wars are likely to involve more precise engagements and the use of sophisticated technologies such as unmanned drones and even the kind of computer viruses used to disable Iranian nuclear centrifuges in 2009. Hence, the Defense Department argues that there will be less need for infantry soldiers, and more need for stealth bomber and fighter pilots, technology experts, and naval ships that act as offshore military bases. CONTRACTORS The tools of war include contracts with private businesses. The U.S. defense budget reached $626 billion in 2014, not counting the lingering costs of the wars in Afghanistan and Iraq. More than $400 billion of that total is for private business contracts, such as military equipment, computer programming, and housing for troops. Including all costs, defense spending fell dramatically at the end of the Cold War as weapons systems were canceled or postponed, bases closed, ships retired, and large numbers of troops brought home from Germany, the Philippines, and elsewhere. The army was cut by more than 30 percent, and the National Guard and the military reserve were cut back by approximately 25 percent. As a result, defense spending also fell, dropping from 25 percent of total federal spending at the height of the Cold War in the mid-1980s to 15 percent in 2000. In part because of the ongoing war against terrorism and the wars in Iraq and Afghanistan, the defense budget rose from 2000 to 2012, but began falling in 2011. It now covers 17 percent of federal spending.12 Weapons are, in fact, a major U.S. industry, one that members of Congress work hard to promote and protect. As former World War II hero Dwight Eisenhower warned in his presidential Farewell Address in 1960, the United States must be wary of the military-industrial complex that supports increased defense spending as a way to protect jobs. Eisenhower’s words are well worth rereading today: OF the People: Diversity in America: Diversity in the Military The U.S. military has become much more diverse during the past three decades, in part because of much more aggressive recruiting of women and minorities. In 1990, for example, only 11 percent of all military active-duty personnel were women, and 28 percent were minorities. By 2011, 15 percent of military personnel were women, while the percentage of minorities had not changed. White males were most heavily represented in the office corps.* The four armed services—the army, navy, marine corps, and air force—vary greatly in terms of diversity, however. Looking at new recruits in 2011, 23 percent of the air force, 27 percent of the navy, 19 percent of the army, and only 10 percent of the marine corps were women. In turn, 32 percent of the navy, 33 percent of the army, 29 percent of the air force, and 17 percent of the marine corps were minorities.** Several reasons explain why the armed services have done better recruiting minorities than recruiting women. First, there have been a series of recent sexual harassment scandals in the armed services, and few women have advanced to senior posts over the decades. Second, the armed services have worked particularly hard at improving their appeal to minority enlistees. Colin Powell’s rise to the highest post in the armed services has often been used to show recruits of color that anything is possible in the military. Powell entered the military as a second lieutenant in 1958, served two tours of duty in Vietnam, and eventually became the first African American officer to chair the Joint Chiefs of Staff. Third, the military has long focused on recruiting high school graduates who are not college bound, which is a group that contains more minorities. More recently, however, the military has tried to extend its reach to recruits who intend to go to college, and has launched several programs that set aside substantial amounts of funding for future college tuition, which has also been effective in recruiting minorities. QUESTIONS 1. What may explain the large percentages of minority soldiers in the military? 2. What may explain the much smaller percentages of women in the military? 3. Should the military represent all groups in society? Should combat soldiers be equally representative? *Military Leadership Diversity Commission, From Representation to Inclusion, U.S. Government Printing Office, March 15, 2011. **Defense Department, Office of the Under Secretary for Personnel and Readiness, “Population Representation in the Military Services,” available at http://prhome.defense.gov/RFM/MPP/AP/POPREP.aspx. This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence—economic, political, and even spiritual—is felt in every city, every State house, and every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources, and livelihood are all involved; so is the very structure of our society. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.13 Despite Eisenhower’s warning, the military-industrial complex has grown dramatically since the 1950s. Contractors are now involved in military operations in Afghanistan as the war winds down. In 2011, about 430 contractors were killed in the war as they fought side-by-side with U.S. troops.14 Foreign Policy and Defense Options 18.4 Evaluate the options for achieving foreign policy and defense goals. The United States has a number of tools for achieving foreign policy success, not the least of which is military might. But military might, or hard power as we discussed earlier, is no longer enough to ensure success, or even deter foreign threats. There are also a number of other forms of hard and soft power, such as conventional diplomacy to send its message clearly, foreign aid to help nations in need, economic sanctions to isolate its adversaries, and public diplomacy to help other nations understand its agenda, the nation will not succeed in reaching its foreign policy goals. After reviewing the various forms of soft power below, this section will turn to the ultimate form of hard power, war. An Egyptian citizen casts a ballot in her nation’s first democratic election following the Arab spring uprising that unseated the dictatorship. The United States did not use hard power to support the Egyptian uprising, but applied soft power through quiet diplomacy designed to support the transition to democratic government. Conventional Diplomacy (Soft Power) Much of U.S. foreign policy is conducted by the Foreign Service and ambassadors in face-to-face discussions across the world. International summit meetings, with their high-profile pomp and drama, are another form of conventional diplomacy. Even though traditional diplomacy appears more subdued and somewhat less vital in this era of personal leader-to-leader communication by telephone, fax, and teleconferencing, it is still an important, if slow, process by which nations can gain information, talk about mutual interests, and try to resolve disputes. Conventional diplomacy can become hard power when the United States breaks diplomatic relations with another nation. Doing so greatly restricts tourist and business travel to a country and in effect curbs economic as well as political relations with the nation. Breaking diplomatic relations is a next-to-last resort (force is the last resort), for it undermines the ability to reason with a nation’s leaders or use other diplomatic strategies to resolve conflicts. It also hampers our ability to get valuable information about what is going on in a nation and to have a presence there. The United Nations is one of the most important arenas for traditional diplomacy. Established in 1945 by the victors of World War II, it now has 189 nation members. Despite its promise as a forum for world peace, the United Nations has been frustrated in achieving progress during past decades. Critics contend that the UN has either avoided crucial global issues or has been politically unable to tackle them. During much of that time, the U.N. General Assembly, dominated by a combination of Third World and communist nations, was hostile to many U.S. interests. More recently, the five permanent members of the U.N. Security Council—the United States, China, Russia, Britain, and France—have usually worked in harmony to resolve pressing global crises. Moreover, the United Nations’ assumption of responsibilities in the Persian Gulf War and its extensive peacekeeping missions in Cyprus and Lebanon have been notable examples of the effort to build respect for the United Nations. Several of the United Nations’ specialized agencies—including the World Health Organization, the United Nations High Commission for Refugees, and the World Food Program—are considered major successes in fighting poverty and diseases. But the review is much more mixed with respect to the United Nations’ 63 peacekeeping efforts throughout its history. As of early 2014, the United Nations was engaged in 18 different peacekeeping missions around the world, including the continuing effort to help Haiti recover from a 2010 hurricane. Moreover, some members of Congress steadfastly oppose further U.S. funding of the United Nations, arguing that the U.N. is corrupt and wasteful, and that other nations do not fulfill their financial obligations. And even strong supporters of the United Nations argue that the Security Council gives its five members too much power to veto action by the larger membership. In 2014, for example, Russia vetoed strong U.N. resolutions to curb the humanitarian crisis in Syria following several bloody attacks against civilians. Russia argued that rebels were just as responsible for the crisis as Syrian government troops. Public Diplomacy (Soft Power) In July 2002, President George W. Bush created the White House Office of Global Communications to address the question he asked before a joint session of Congress only a week after the terrorist attacks on New York City and Washington, D.C.: “Why do they hate us?” The Office of Global Communications is designed to enhance the United States’ reputation abroad, countering its image as the “Great Satan,” as some of its enemies describe it.15 Bush was not the first president to worry about the U.S. image abroad. President Franklin Roosevelt created the Office of War Information early in World War II, which in turn established the Voice of America program to broadcast pro-U.S. information into Nazi Germany. President Harry Truman followed suit early in the Cold War with the Soviet Union by launching the Campaign of Truth, which eventually led to the creation of the U.S. Information Agency under President Dwight Eisenhower. Both agencies exist today and are being strengthened as part of the “new public diplomacy.” Public diplomacy is a blend of age-old propaganda techniques and modern information warfare. It has three basic goals: (1) to cast the enemy in a less favorable light among its supporters, (2) to mold the image of a conflict such as the war in Afghanistan, and (3) to clarify the ultimate goals of U.S. foreign policy. For example, the United States has tried to convince the people of Iran that its leader is moving the nation toward war with further development of a nuclear weapon. Foreign Aid (Soft Power) The United States offers aid to more than 100 countries directly and to other nations through contributions to various U.N. development funds. Since 1945, the United States has provided approximately $400 billion in economic assistance to foreign countries. In recent years, however, its foreign aid spending has amounted to approximately $15 billion per year, or less than 50 percent of what it spent in inflation-adjusted dollars back in 1985.16 Most foreign aid goes to a few countries the United States deems to be of strategic importance to national security: Israel, Egypt, Ukraine, Jordan, India, Russia, South Africa, and Haiti. That list is sure to change in the future as the nation reallocates its budget to nations central to the war on terrorism. However, regardless of which nation receives the aid, most foreign aid is actually spent in the United States, where it pays for the purchase of U.S. services and products being sent to those countries. It thus amounts to a subsidy for U.S. companies and their employees. The American public thinks the United States spends much more on foreign aid than it actually does and therefore opposes increased spending. Although the United States is one of the largest foreign aid contributors in terms of total dollars, it ranks low among developed countries when aid is measured as a percentage of gross national income. A recent poll of U.S. citizens found that few supported increased foreign aid, and approximately half favored reducing it. The rest favor keeping foreign aid at the same level. But these views are often based on a lack of information regarding actual U.S. spending. According to a 2013 survey, 20 percent of Americans estimated that foreign aid accounts for 30 percent of the federal budget. In reality, the total is barely 1 percent.17 FOR the People: Government’s Greatest Endeavors: Supporting New Democracies Abroad Approximately 60 years after the United States completed its effort to rebuild Europe after World War II, it continues to engage in what experts call “nation building.” Nation buildi

is generally defined as the effort to convert dictatorships into democracies. This exercise of both soft and hard power has been particularly visible in recent years. It was part of the stated reason for going to war in Iraq and Afghanistan in 2003, and engaging in the effort to overthrow dictatorships in Tunisia, Egypt, Libya, Syria, and Yemen from 2011 to 2014. Nation building is a very difficult task. After all, it took 15 years for the United States to declare its independence and remove the British from power during the Revolutionary War. Today’s efforts often take longer, in part because of deep divisions within countries led by dictators. Dictators often use their power while in office to build strong support within their countries, and often use heavy military force to suppress calls for democracy from their citizens. Facing just such an uprising from his own people, Syrian president Bashar al-Assad used every military means at his disposal to fight the rebellion. He deployed heavy tanks and snipers to kill hundreds of protestors in full view of the international community, assassinated opponents, shut off water and electricity to cities and villages that opposed his reign, and opened fire on defenseless civilians engaged in peaceful protests. He even ordered the execution of his own soldiers who refused to fire on the protestors. As of November 2014, the rebels were still fighting with no end of the war in sight. A Syrian child wounded by shelling is treated at a makeshift hospital in Homs, July 2012. Nation building involves much more than removing a dictator from control, however. Once a nation is free from tyranny, it must create new democratic institutions such as a legislature, presidency, and judiciary. It must also write a constitution, hold free and fair elections, create a free press, and allow peaceful protests. The U.S. often provides aid in the form of health care, education, and food, some of which is provided by volunteers from charitable organizations such as Doctors without Borders. The U.S. has long played a prominent role in these efforts, usually through large injections of foreign aid. In doing so, it is still applying the lessons it learned at the end of World War II when it helped rebuild the roads, railroads, bridges, and factories that had been bombed into rubble during the war. It also helped to rekindle the economies that had been devastated by labor shortages and address the unemployment, hunger, and homelessness that were pervasive in war-torn Europe. These efforts were part of a program called the Marshall Plan in honor of World War II Gen. George C. Marshall. The Marshall Plan was a stunning foreign policy success, particularly in helping the United States contain communism. But it was also a great moral victory for America, prompting British Prime Minister Winston Churchill to call it “the most unsordid act in history.” Nation building today is arguably much more difficult. The countries that participated in the Marshall Plan already had the basic institutions of democracy and were ready to return to well-established practices of self-governance after Germany and Italy’s defeat. But it is still a noble, if very difficult, goal. QUESTIONS 1. Why was rebuilding Europe so important to the United States? 2. How is this kind of soft power being used today around the world? 3. Should the United States spend money helping other nations free themselves from tyranny even if their new governments are hostile to U.S. allies such as Israel? State Department officials are invariably the most vocal advocates of foreign aid. Presidents also recognize the vital role foreign aid plays in advancing U.S. interests and have wanted to maintain the leverage with key countries that economic and military assistance provides. One major debate today is how much debt relief to provide for the world’s poorest nations, especially ones that are hard hit by war and natural disasters such as Haiti. Despite these arguments, Congress invariably trims the foreign aid budget, at least in partly in response to Americans misconceptions about the extent of that aid. Critics also note that U.S. foreign aid has subsidized the most autocratic and most corrupt of dictators. And there are plenty of instances in which foreign aid money has been stolen or misspent. Defenders counter that some corruption is inevitable. Economic Sanctions (Soft Power) The United States has frequently used economic pressure to punish other nations for opposing its interests. Indeed, it has employed economic sanctions more than any other nation—more than 100 times in the past 50 years. Economic sanctions deny export, import, or financial relations with a target country in an effort to change that country’s policies. Those imposed on South Africa doubtless helped end apartheid and encourage democracy in that nation; sanctions on Libya helped end its nuclear weapons program. But sanctions imposed on Cuba have not had much effect in dislodging that nation’s dictatorial regime. Similarly, recent sanctions against Iran have had little effect in controlling its effort to develop a nuclear weapon. economic sanction A denial of export, import, or financial relations with a target country in an effort to change that nation’s policies. The use of economic sanctions has varied throughout the years. They are especially unpopular among farmers and corporations that have to sacrifice part of their overseas markets to comply with government controls, and they rarely work as effectively as intended. They can also be costly to U.S. businesses and workers while intensifying anti-U.S. sentiment. Military Action (Hard Power) War is the ultimate form of hard power, and reflects the breakdown of soft power. The United States has used military force in other nations on the average of almost once a year since 1789, although usually in short-term initiatives such as NATO’s military activities in Bosnia and Kosovo. Although presidential candidate John Kerry argued that the Iraq War was the first time in history the United States had gone to war because it chose to, not because it had to, the country has actually sent forces into combat many times without a clear threat. It did not have to go to war against Spain in 1898 or send troops to Cuba, Haiti, the Dominican Republic, Lebanon, Mexico, Nicaragua, Somalia, South Vietnam, or even Europe in World War I.18 (See Table 18.1 for the number of troops killed in the nation’s major wars.) Experts tend to agree that the use of force is most successful in small and even medium-sized countries for short engagements (Grenada, Panama, Kuwait, Kosovo, and Afghanistan). They also agree that it “often proves ineffective in the context of national civil wars (the United States in Vietnam; Israel in Lebanon).”19 TABLE 18.1 COSTS OF WAR War in Historical Order Length of War Number of U.S. Troops Killed Revolutionary War 8.4 years 4,435 War of 1812 2.6 years 2,260 Civil War 5 years 214,939 Spanish-American War 8 months 385 World War I 1.6 years 53,402 World War II 3.7 years 291,557 Korean War 3.1 years 35,516 Vietnam War 10.2 years 58,516 Persian Gulf War 5 months 382 Iraq War 8.8 years 4,500 Afghanistan War 12.4 years* 2,315* *As of March 1, 2014 ■ What explains the declining number of deaths during wars, and the increased length of wars? SOURCE: The Washington Post, May 26, 2003; figures updated by authors. Military action is not always visible to the public, nor are the intended targets always clear. Covert, or secret activities such as attacks on terrorist leaders are often planned and executed without any notice at all until the operation is over, if they are ever announced at all. The United States repeatedly engaged in covert operations during the Cold War, including early intervention in Vietnam, Central America, and Afghanistan. But covert activities in Cuba, Chile, and elsewhere were quickly discovered, leading to public opposition and new congressional controls once the interventions were discovered and reported by the media. Ironically, U.S. covert aid to the Afghan rebels who fought against the Soviet Union in the late 1970s eventually led to the rise of the Taliban government that gave Osama bin Laden and his followers the freedom to establish the training bases where the September 11 terrorist attacks were planned. You Will Decide: Should Women Engage in Combat? As the number of women in the armed forces has increased, so has the number of women who serve near combat zones. Whereas women constituted 6 percent of U.S. forces who served during the first Iraq War in 1991, they made up 15 percent of military personnel who served during the in the second Iraq War from 2003–2012. Although their jobs were in noncombat positions, Iraq and Afghanistan have been very dangerous places to serve—by December 2012, 113 female soldiers had been killed. Technically, the women killed in Iraq and Afghanistan did not die in combat operations. Under a 1994 Defense Department order, women can fly combat aircraft to and from airfields, protect convoys, guard prisoners of war, and rescue wounded soldiers, but may not participate in any “direct combat on the ground.” Although the military is redesigning assignments to ensure that women have an equal opportunity to participate in noncombat operations, women are allowed to serve only in support units. In February 2012, the Defense Department announced that women would be allowed to take even more dangerous jobs closer to the battlefield. Although some advocates applauded the decision, others expressed strong concern. The military has changed dramatically in recent years—combat uses high technology weapons and requires tight coordination of air, land, and sea operations, which can blur the lines between support and combat units. As war has become more complicated, experts are asking whether women should be given the order to engage in combat. What do you think? Should women be engaged in direct ground combat? What are some of the arguments for or against this? Thinking It Through Opponents argue that men are physically superior to women—although there are many high-tech jobs in combat, there is nothing high-tech about a face-to-face encounter with a deadly enemy. These opponents believe that men are better suited to win these encounters. There is also concern that men and women would form personal relationships in combat units that might distract them as they enter battle, or that female soldiers might be in the early stages of pregnancy when called for combat. Moreover, opponents feel women would be much more vulnerable to sexual harassment in combat units, which is harder to police during battle. Nevertheless, recent studies suggest that women in the military face discrimination and harassment. Advocates of a combat role for women argue that physical differences are mostly irrelevant. All soldiers must meet certain physical qualifications such as height, weight, and conditioning. If women meet these criteria, they argue, they should be allowed to fight. After all, they go through the same boot camps as men and learn how to use the same weapons. With the armed services struggling to recruit new soldiers, advocates also argue, women constitute an important source of future volunteers. CRITICAL THINKING QUESTIONS 1. What are the political barriers against allowing women in combat? 2. Are women just as able as men to win the face-to-face battles that often arise in combat? 3. How can the military ensure that personal relationships do not affect combat decisions on the battlefield? Prospects for the Future The world has become a much more uncertain place since the end of the Cold War, if only because the United States now faces many potential “hot spots” where individual nations and groups can challenge its views. Moreover, the Internet has increased access to information around the world, the global economy has increased competition for jobs and markets, and the war on terrorism has increased anti-U.S. sentiment in many nations. The United States is clearly struggling to address this uncertainty without frustrating the public or compromising basic democratic principles. On the one hand, for example, citizens favor open borders, easy movement of imports and exports, short lines at airports, quick access to information, and protection of their privacy. On the other hand, they want government to monitor terrorists, detect dangerous cargo, ensure airport security, keep secrets from the enemy, and make sure no one slips through the border to bring harm to the nation. Although these goals are not necessarily contradictory, they do require a careful balance of individual liberty and national interest. They also call for an effort to prevent the spread of terrorism by promoting global peace and understanding. The war on terrorism will not be won in a single battle with a single adversary, nor will weapons of mass destruction disappear without a broad international commitment to action. As the United States has learned during the hard months of combat in Iraq, coalition building may be difficult, frustrating, and most certainly time consuming, but, ultimately, it may be the only option available. Having fought the Iraq War largely on its own, the United States has come to realize that it needs help to accomplish its goals. Citizens can help the United States achieve its goals in many ways, whether by contributing or volunteering to provide humanitarian aid, serving in the military, or trying to improve the nation’s reputation by addressing problems at home. At the same time, citizens can help change the foreign policy and defense agenda through active engagement in the political process. Their voices can be and have been heard on many issues. By putting pressure on the federal government, citizens can influence the priorities given to our foreign policy goals, while holding the nation’s elected leaders accountable for what they do. Review the Chapter Understanding Foreign Policy and Defense 18.1 Analyze the questions and responses that shape approaches to U.S. foreign policy and defense, p. 530. Views of foreign policy address five basic questions: Should the United States view the world realistically or idealistically? Should the United States isolate itself from the world or accept a role in the international community? Should the United States act on its own or only with the help of other nations? Should the United States act first against threats to its safety or wait until it is attacked? And should the United States use its military and economic hard power or its diplomatic soft power? Hard power relies on military and economic strength, whereas soft power uses diplomacy. The Foreign Policy and Defense Agenda 18.2 Assess the status of each of the issues that currently dominate the foreign policy and defense agenda, p. 534. The foreign policy and defense agenda contains a long list of issues, but seven are currently at the top of the list: controlling weapons of mass destruction such as nuclear missiles, fighting terrorism, negotiating peace in the Middle East, promoting free trade abroad, reducing global warming, ending the war in Afghanistan, and strengthening democracy and international understanding. Congress and the president do not always agree on the specific issues but tend to spend most of their time and the federal budget on them. The Foreign Policy and Defense Bureaucracy 18.3 Outline the structure of the foreign policy and defense bureaucracy, p. 539. The defense bureaucracy involves a set of interlocking agencies that engage in many of the same issues. The National Security Council, State Department, intelligence agencies, and Defense Department all play a role in setting and administering foreign policy and defense. The Defense Department is designed to ensure civilian control of the U.S. military but seeks advice from the military through the Joint Chiefs of Staff, who oversee the all-volunteer force. Contractors deliver a large amount of goods and services to the department and are part of what President Eisenhower in the 1950s called the military-industrial complex. Foreign Policy and Defense Options 18.4 Evaluate the options for achieving foreign policy and defense goals, p. 544. Foreign policy and defense options involve a mix of hard and soft power, including conventional diplomacy and foreign aid, economic sanctions, and military intervention.

5 Interest Groups: The Politics of Influence Starting in 1962, federal government employees were allowed to join unions.1 Today roughly 650,000 public employees at the federal level are represented by the American Federation of Government Employees,2 and most state and local government employees are represented by the American Federation of State, County and Municipal Employees (AFSCME) union, which has more than 1.6 million members.3 One of the primary reasons to join a union is to benefit from collective bargaining, the process where the union represents a group of employees in negotiations with management about wages, benefits, and workplace safety. collective bargaining The process in which a union represents a group of employees in negotiations with the employer about wages, benefits, and workplace safety. Wisconsin was the first state to allow public employees to bargain collectively, passing legislation to this effect in 1959. Decades earlier in 1911, Wisconsin was also the first state to enact a workers’ compensation law, which is an insurance program that provides cash benefits and medical care to workers injured on the job. It was first as well to provide unemployment compensation (1936), a program that provides funds for a limited time to unemployed workers meeting specified criteria.4 5.1 Explain the role of interest groups and social movements in American politics, p. 130. 5.2 Categorize American interest groups into types, p. 132. 5.3 Analyze sources of interest group power, p. 140. 5.4 Describe lobbyists and the activities through which they seek to influence policy, p. 145. 5.5 Identify ways interest groups use money in elections and assess efforts to regulate this spending, p. 148. 5.6 Evaluate the effectiveness of interest groups in influencing elections and legislation, p. 155. But following the 2010 election, Wisconsin became a battleground for efforts to roll back public employee bargaining rights and benefits. In 2010, voters elected Republican Scott Walker governor and gave the Republicans majorities in both houses of the state legislature.5 Soon after taking office, Walker and the state legislature set about to enact some of his campaign promises. With the state budget deficit rising quickly during the economic downturn, Walker wanted public employees to pay more toward their pension and health care benefits. He also wanted to limit public employee union rights as a way to reduce salaries negotiated through collective bargaining agreements in which all employee salaries went up together (police and fire unions were not part of the proposed change).6 Protestors demonstrate in the capitol rotunda on February 25, 2011, in Madison, Wisconsin. They have occupied the building for the past 11 days protesting the governor’s attempt to push through a bill that would restrict collective bargaining for most government workers. In response, the public employee unions and allied groups organized protests, shut down some public services, and delayed legislative consideration of the proposed changes. Governor Walker and the Republican legislative majorities prevailed and enacted their changes, which in turn prompted opponents to circulate recall petitions, giving voters the option to remove Walker from office prior to the normal end of his term. After a hotly contested election, Walker again prevailed and continued in office.7 recall A procedure for submitting to popular vote the removal of officials from office before the end of their term. Wisconsin is not the only state trying to abolish public employee unions’ right to collective bargaining. In 2012 in Michigan, unions sought to protect collective bargaining and sponsored a referendum to prohibit the legislature from limiting public and private unions from bargaining collectively. The 2012 vote in Michigan failed, and only weeks later the Republican-controlled state legislature and Republican governor enacted legislation limiting unions in their ability to collect union dues as a condition of employment. States like Wisconsin and Michigan have long been seen as more supportive of unions, which makes the limits to collective bargaining all the more noteworthy. Differences in state laws regarding unions are often pointed to as reasons for some industries to locate to non-unionized states, and non-union states emphasize this when seeking to get companies to locate in their states. Boeing, the company that has long been a world leader in making airplanes, is headquartered in Washington, a unionized state. South Carolina recently pressed for Boeing to produce a new jetliner there rather than in Washington. As companies like Boeing decide where to expand or contract, union rules may be a factor.8 The political battles over unions are only one example of the interplay between interest groups and the government, or among interest groups themselves. For example, during the 2012 election, substantial attention was given to efforts by the federal government to assist the auto industry in 2008 and 2009 and whether these “bailouts” had been good public policy. Auto companies and public employee unions are both examples of interest groups. Like other interest groups, they use a variety of strategies, from local citizens spontaneously organizing for some political purpose to more organized, election-focused political action committees (PACs). After 2010, individuals and groups could give unlimited amounts to “independent expenditure only committees” or “Super PACs.” Interest groups like these have long been important in electing and defeating candidates, in providing information to officeholders, and in setting the agenda of American politics. Similarly, U.S. citizens have been concerned about the power of “special interests” and the groups’ focus on their self-interest at the expense of less well-organized groups or the general public. Restraining the negative tendencies of interest groups while protecting their liberty is not easy. In this chapter, we examine the full range of interest group activities as well as efforts to limit their potentially negative influences, including reforming campaign finance regulations. Interest Groups Past and Present: The “Mischiefs of Faction” 5.1 Explain the role of interest groups and social movements in American politics. The founders of the Republic were very worried about groups with common interests, which they called factions. (They also thought of political parties as factions.) For the framers of the Constitution, the daunting problem was how to establish a stable and orderly constitutional system that would both respect the liberty of free citizens and prevent the tyranny of the majority or of a single dominant interest. faction A term the founders used to refer to political parties and special interests or interest groups. As a talented practical politician and a brilliant theorist, James Madison offered both a diagnosis and a solution in The Federalist, No. 10. He began with a basic proposition: “The latent causes of faction are…sown in the nature of man.” All individuals pursue their self-interest, seeking advantage or power over others. Acknowledging that we live in a maze of group interests, Madison argued that the “most common and durable source of factions has been the various and unequal distribution of property.” Madison defined a faction as “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.” For Madison, “the causes of faction cannot be removed, and…relief is only to be sought in the means of controlling its effects.”9 James Madison played a critical role in drafting and enacting the Constitution, and many of its provisions are aimed at limiting the “mischiefs of faction.” Separation of powers and checks and balances make it hard for a faction to dominate government. Staggered terms of office make it necessary for a faction to endure. But rather than trying to encourage one or another faction, the Constitution encourages competition between them. Indeed, checks and balances arguably function best when factions within the branches work to counter one another. The Constitution envisions a plurality of groups competing with each other, an idea that has been called pluralism. pluralism A theory of government that holds that open, multiple, and competing groups can check the asserted power by any one group. How well pluralism has worked in practice is debated.10 We will see that over time, government has sought to regulate factions as a response to the power some groups such as corporations, unions, and wealthy individuals have had in American government. The debate about how to check their power without damaging their liberty is an enduring one. A Nation of Interests Some U.S. citizens identify with groups distinguished by race, gender, ethnic background, age, occupation, religion, or sexual orientation. Others form voluntary groups based on their opinions about issues such as gun control or tax reduction. When such associations seek to influence government, they are called interest groups. interest group A collection of people who share a common interest or attitude and seek to influence government for specific ends. Interest groups usually work within the framework of government and try to achieve their goals through tactics such as lobbying. Interest groups are also sometimes called “special interests.” Politicians and the media often use this term in a pejorative way. What makes an interest group a “special” one? The answer is highly subjective. One person’s special interest is another’s public interest. However, so-called public interest groups such as Common Cause or the League of Women Voters support policies that not everyone agrees with. Politics is best seen as a clash among interests, with differing concepts of what is in the public interest, rather than as a battle between the special interests on one side and “the people” or the public interest on the other. In fact, the term “special interest” conveys a selfish or narrow view, one that may lack credibility. For this reason, we use the neutral term “interest groups.” An interest group simply speaks for some, but not all, of us. A democracy includes many interests and many organized interest groups. The democratic process exists to decide among them. Part of the politics of interest groups is thus to persuade the general public that the interest their group represents is more important than others. Social Movements Interest groups sometimes begin as social movements. A social movement consists of many people interested in a significant issue, idea, or concern who are willing to take action to support or oppose it. Examples include the civil rights, environmental, anti-tax, animal rights, women’s rights, Christian Right, gay rights, anti-immigration, and antiwar movements. In some respects, the Tea Party groups that formed in 2009 and 2010 and remained active through the 2014 election are examples of social movements. The Tea Party began in early 2009, not long after Barack Obama took office; groups started forming to protest the $787 billion economic stimulus package, officially known as the American Recovery and Reinvestment Act of 2009. These groups adopted the name Tea Party, a reference to the Boston Tea Party of 1773 when colonists rebelled against what they thought to be unfair British taxes on tea. The group’s general concerns are about increasing government spending and growing government power. While exhibiting many characteristics of a social movement, the Tea Party has also become part of the Republican Party. social movement A large body of people interested in a common issue, idea, or concern that is of continuing significance and who are willing to take action. Movements seek to change attitudes or institutions, not just policies. Nonviolent protest demonstrations were used by the civil rights movement to press for legislation and integration. Here, former baseball star Jackie Robinson helped lead a march in Frankfurt, Kentucky, in March 1964. The presence of a well-known figure like Robinson helped generate national media attention for the march. The Bill of Rights protects movements, popular or unpopular, by supporting free assembly, free speech, and due process. Consequently, those who disagree with government policies do not have to engage in violence or other extreme activities in the United States, as they do in some countries, and they need not fear prosecution for demonstrating peacefully. In a democratic system that restricts the power of government, movements have considerable room to operate within the constitutional system. Types of Interest Groups 5.2 Categorize American interest groups into types. Some interest groups are formal associations or organizations like the National Rifle Association (NRA); others have no formal organization. Some are organized primarily to persuade public officials on issues of concern to the group such as reducing greenhouse gases; others conduct research, or influence public opinion with published reports and mass mailings. We can categorize interest groups into several broad types: (1) economic, including both business and labor; (2) ideological or single-issue; (3) public interest; (4) foreign policy; and (5) government itself. Obviously, these categories are not mutually exclusive. Most American adults are represented by a number of interest groups, even if they don’t know it. For instance, people aged 50 and older may not know that AARP (which began as the American Association of Retired Persons) claims to represent all older citizens, not only those who are actually members. Similarly, the American Automobile Association (AAA) claims to represent all motorists, not only those who join. The varied and overlapping nature of interest groups in the United States has been described as interest group pluralism, meaning that competition among open, responsive, and diverse groups helps preserve democratic values and limits the concentration of power in any single group. We look at each category of interest group next. Economic Interest Groups There are thousands of economic interests: agriculture, consumers, plumbers, the airplane industry, landlords, truckers, bondholders, property owners, and more. Economic interests pursue what benefits them both financially and politically. BUSINESS The most familiar business institution is the large corporation. Corporations range from one-person enterprises to vast multinational entities. General Motors, AT&T, Microsoft, Coca-Cola, McDonald’s, Wal-Mart, Wall Street banks and investment firms, and other large companies exercise considerable political influence, as do hundreds of smaller corporations. For example, as Microsoft and Wal-Mart came under heightened government and public scrutiny, their political contributions expanded.11 Corporate power and a changing American and global economy make business practices important political issues. Cooperation between groups can increase their effectiveness, giving even small business an important voice in public policy. The Commerce Department, for example, includes a Small Business Administration. Small businesses are also organized into groups such as the National Federation of Independent Business (NFIB) that help elect pro-business candidates and persuade the national government on behalf of its members. TRADE AND OTHER ASSOCIATIONS Businesses with similar interests join together as trade associations, as diverse as the products and services they provide. Businesses of all types are also organized into large nationwide associations such as the National Association of Realtors and smaller ones like the American Wind Energy Association. The broadest business trade association is the Chamber of Commerce of the United States. Organized in 1912, the Chamber is a federation of thousands of local Chambers of Commerce representing millions of businesses. Loosely allied with the Chamber on most issues is the National Association of Manufacturers, which, since 1893, has tended to speak for the more conservative elements of American business. LABOR Workers’ associations have a range of interests, including professional standards and wages and working conditions. Labor unions are one of the most important groups representing workers, yet the American workforce is among the least unionized of any industrial democracy.12 (See Figure 5.1.) Two areas where unions have seen growth in recent years are service employees and public employees.13 As discussed earlier in this chapter, public sector unions have become the focus of controversy in recent years. The level of unionization has policy consequences. For example, a nation’s minimum wage rates increase with unionization. FIGURE 5.1 TRADE UNION MEMBERSHIP IN THE UNITED STATES COMPARED TO OTHER COUNTRIES ■ How might aspects of American culture and ideology help explain the relatively low unionization of the American workforce? SOURCE: Organisation for Economic Co-operation and Development (OECD), http://stats.oecd.org/Index.aspx?DataSetCode=UN_DEN. Throughout the nineteenth century, American workers organized political parties and local unions. Their most ambitious effort at national organization, the Knights of Labor, registered 700,000 members in the 1890s. But by approximately 1900, the American Federation of Labor (AFL), a confederation of strong and independent-minded national unions mainly representing craft workers, was the dominant organization. During the 1930s, unions more responsive to industrial workers broke away from the AFL and formed a rival national organization, the Congress of Industrial Organizations (CIO). In 1955, the AFL and CIO reunited. In 2005, more than a third of AFL-CIO members, affiliated with the Service Employees International Union (SEIU), the International Brotherhood of Teamsters, and two other unions, split off from the AFL-CIO, forming a new group named the Change to Win Federation.14 Although union leadership is now less consolidated, in many activities, unions remain unified. The AFL-CIO speaks for approximately three-fourths of unionized labor,15 and unions represent about 13 percent of the nation’s workforce (see Figure 5.2).16 The proportion of the U.S. workforce belonging to all unions has fallen, in part because of the shift from an industrial to a service and information economy. Unions have seen some growth in membership in health care, in the public sector, and in some other areas. Dwindling membership limits organized labor’s influence. In Wisconsin after the change in public sector collective bargaining in 2011, the number of union members fell sharply.17 Recently, however, some service sector unions have begun to expand, and even some doctors have unionized. Membership in SEIU rose from 1.58 million in 2006 (a number only slightly changed from 2003) to 2.1 million in 2012.18 Union membership is optional in states whose laws permit the open shop, in which workers cannot be required to join a union as a condition of employment. In states with the closed shop, workers may be required to join a union to be hired at a particular company if most employees at that company vote to unionize. In both cases, the unions negotiate with management, and all workers share the benefits the unions gain. In open-shop states, many workers may choose not to affiliate with a union because they can secure the same benefits that unionized workers enjoy without incurring the costs of joining the union. When a person benefits from the work or service of an organization like a union (or even a public TV or radio station) without joining or contributing to it, this condition is referred to as the free rider problem, which is an issue discussed later in the chapter. open shop A company with a labor agreement under which union membership cannot be required as a condition of employment. closed shop A company with a labor agreement under which union membership can be a condition of employment. free rider An individual who does not join a group representing his or her interests yet receives the benefit of the group’s influence. FIGURE 5.2 LABOR FORCE AND UNION MEMBERSHIP, 1930–2013 ■ How can you explain the steady upward growth of the labor force without a comparable growth in the unionized labor force? NOTE: Represents those who are 16+ years of age. SOURCE: Barry Hirsch, Georgia State University, and David Macpherson, Florida State University, 1973–2011, “Union Membership, Coverage, Density, and Employment Among All Wage and Salary Workers, 1973–2011,” http://www.unionstats.com. Since 1998, in political campaigns, unions have emphasized direct contact with members and their families through mail, e-mail, on the phone, and in person. They have organized get-out-the-vote drives and paid for television advertising. Unlike the case in 2000, when unions were important to securing Al Gore’s nomination,19 in the 2004 and 2008 Democratic presidential primaries they were divided. In 2008, some unions such as SEIU and the Change to Win Federation supported Senator Barack Obama, whereas the United Steel Workers supported John Edwards, and the American Federation of State, County, and Municipal Employees supported Senator Hillary Clinton. In the 2012 general election, unions were unified in backing Obama. Unions experienced mixed results in state level elections in 2011 and 2012. As noted, a ballot measure in Ohio passed reversing legislation that would have limited public employee collective bargaining,20 but, as also noted, the 2012 Wisconsin recall election was widely seen as a defeat for public sector unions.21 Traditionally identified with the Democratic Party, unions have not enjoyed a close relationship with Republican legislatures or executives. Given labor’s limited resources, one option for unions is to form temporary coalitions with consumer, public interest, liberal, and sometimes even industry groups, especially on issues related to foreign imports. Labor has been unsuccessful in blocking free trade agreements like the North American Free Trade Agreement (NAFTA).22 PROFESSIONAL ASSOCIATIONS Professional people join professional associations such as the American Medical Association (AMA) and the American Bar Association (ABA), which serve some of the same functions as unions. Other professions are divided into many subgroups. Teachers and professors, for example, belong to the National Education Association, the American Federation of Teachers, and the American Association of University Professors, and also to subgroups based on specialties, such as the Modern Language Association and the American Political Science Association. professional association A group of individuals who share a common profession and are often organized for common political purposes related to that profession. Barack Obama meets with labor union members over breakfast while campaigning for the Democratic nomination for the presidency in 2008. Government, especially at the state level, regulates many professions. Lawyers are licensed by states, which, often as a result of pressure from lawyers themselves, set standards of admission to the state bar. Professional associations also use the courts to pursue their agendas. In the area of medical malpractice, for example, doctors lobby hard for limited-liability laws, while trial lawyers resist them. Teachers, hairstylists, and marriage therapists are licensed by states and work for or against legislation that concerns them. It is not surprising, then, that groups representing professional associations such as the AMA and the National Association of Home Builders are among the largest donors to political campaigns. Ideological or Single-Issue Interest Groups Ideological groups focus on issues—often a single issue. Members generally share a common view and a desire for government to pursue policies consistent with it. Such single-issue groups are often unwilling to compromise. Right-to-life and pro-choice groups on abortion fit this description, as do the National Rifle Association (NRA) and anti-immigration groups. Countless groups have organized around other specific issues, such as civil liberties, environmental protection, nuclear energy, and nuclear disarmament.23 Such associations are not new. The Anti-Saloon League of the 1890s was devoted solely to barring the sale and manufacture of alcoholic beverages, and it did not care whether legislators were drunk or sober as long as they voted dry. One of the best-known single-issue groups today is the NRA, with nearly 5 million members committed to protecting the right to bear arms.24 Other single-issue groups include the Club for Growth, a generally libertarian and anti-tax group. Public Interest Groups Out of the political ferment of the 1960s came groups that claim to promote “the public interest.” For example, Common Cause campaigns for electoral reform, for making the political process more open and participatory, and to stem media consolidation. Its Washington staff raises money through direct-mail campaigns, oversees state chapters of the group, publishes research reports and press releases on current issues, and lobbies Congress and government departments. After uncovering design flaws in the Ford Pinto in 1977 resulting in 180 deaths, consumer activists like Ralph Nader charged Ford “with sacrificing human lives for profit.”25 Ralph Nader was instrumental in forming organizations to investigate and report on governmental and corporate action—or inaction—relating to consumer interests. Public interest research groups (PIRGs), as these groups are called, today seek to influence policy on Capitol Hill and in several state legislatures on environmental issues, safe energy, and consumer protection. Foreign Policy Interest Groups Interest groups also organize to promote or oppose foreign policies. Among the most prestigious is the Council on Foreign Relations in New York City. Other groups pressure Congress and the president to enact specific policies. For example, interest groups have been trying to influence American policy on China’s refusal to grant independence for Tibet. Other groups support or oppose free trade. Foreign policy groups should not be confused with foreign governments and interest groups in other nations, which are banned from making campaign contributions but often seek to influence policy through lobbying firms. One of the most influential foreign policy groups is the American Israel Political Action Committee (AIPAC), with more than 100,000 members.26 Because AIPAC’s primary focus is influencing government directly, not distributing campaign funds, it is not required to disclose where its money comes from or goes. AIPAC’s successes include enactment of aid packages to Israel, passage of the 1985 United States–Israel Free Trade Agreement, and emergency assistance to Israel in the wake of the 1992 Gulf War. Its counterpart, the Arab American Institute, lobbies to support Arab causes. Efforts to secure a negotiated settlement between the Palestinians and Israel have kept U.S. interest groups on both sides visible and important. Nongovernmental organizations (NGOs), nonprofit groups that operate outside the institutions of government but often pursue public policy objectives and lobby governments, are another type of foreign policy interest group. The most common are social, cultural, or environmental groups such as Greenpeace, Amnesty International, and the Humane Society of the United States. nongovernmental organization (NGO) A nonprofit association or group operating outside government that advocates and pursues policy objectives. Public Sector Interest Groups Governments are themselves important interest groups. Many cities and most states retain Washington lobbyists, individuals who advocate on behalf of the city or state before Congress and with the executive branch of the federal government. Governors are organized through the National Governors Association, cities through the National League of Cities, and counties through the National Association of Counties. Other officials—lieutenant governors, secretaries of state, mayors—have their own national associations as well. Government employees form a large and well-organized group. The National Education Association (NEA), for example, has 3.2 million members.27 The NEA endorses politicians from both parties but more typically supports Democrats. In 2008, the NEA endorsed Barack Obama for the presidency. The NEA fits the definition of a professional association, labor union, and public sector interest group. Public employees are increasingly important to organized labor because they constitute the fastest-growing unions. The Global Community: Global Climate Change Much of the debate over global warming has been about the accuracy of the scientific claims about changes in the Earth’s climate. Interest groups on both sides of the debate have cited studies supporting their point of view and a wide range of interest groups have a stake in what, if anything, governments should do. Examples of such interests include oil companies, automobile manufacturers, and environmental groups like the Natural Resources Defense Council, the Environmental Defense Fund, and the Union of Concerned Scientists. Public opinion on whether global warming is a serious problem was part of the Pew Global Attitudes Survey. Respondents were asked, “In your view, is global climate change a very serious problem, somewhat serious, not too serious, or not a problem?” The graph plots responses from our sample countries to this question. How serious of a problem is global warming? In your view, is global climate change a very serious problem, somewhat serious, not too serious, or not a problem? SOURCE: Pew Research Center, 2010 Spring Survey of the Global Attitudes Project (Pew Research Center, 2010). On this question, the United States stands a part in that fewer Americans think global warming is a very or somewhat serious problem. Between 72 and 94 percent of people surveyed in our sample of countries outside the United States saw global warming as a very serious or somewhat serious problem. In the United States, the proportion was 70 percent. When we look only at those with the more strongly held view that global warming is a “very serious” problem, the United States is again lower than all other countries in the percent having that view. In contrast, roughly three-fifths to two-thirds of people in Mexico, Japan, and India think global warming is a very serious problem. In China, 41 percent think global warming is a very serious problem. CRITICAL THINKING QUESTIONS 1. Why does public opinion on the severity of global warming differ between the United States and China? 2. Do you think attitudes on this question are related to whether people would be willing to accept limitations in lifestyle to reduce the threat of global warming? Other Interest Groups American adults are often emotionally and financially engaged by a wide variety of groups: veterans’ groups, nationality groups, and religious organizations, among others. Individuals join groups because of a common interest, because of a shared identification, or because of an issue or concern. The American Legion or Veterans of Foreign Wars not only provide opportunities for military veterans to meet other veterans, but the groups provide an important advocacy function for veterans as they deal with Congress or the Veterans’ Administration bureaucracy. Women’s organizations have long been important in advocating for equal rights, most notably for the right to vote. Among the best-known group in the area of political rights for women is the League of Women Voters, formed in 1920 and with chapters in all 50 states. Interest groups with a focus on reproductive rights include NARAL Pro-Choice America or Planned Parenthood. More broadly focused is the National Organization of Women (NOW). Environmental groups are increasingly active (see Table 5.1). Among the best known of these groups is the Sierra Club. Founded in 1892, the Sierra Club is the oldest and largest environmental organization. The Sierra Club is active in environmental protection efforts in states and local communities, and it has a lobbying presence in Washington, D.C. Another group known for its efforts to elect pro-environment candidates is the League of Conservation Voters (LCV). The Defenders of Wildlife and the Wilderness Society have members and paid staff committed to protecting wildlife and securing, preserving, and protecting wilderness. TABLE 5.1 ENVIRONMENTAL GROUPS’ RESOURCES AND STRATEGIES Group Membership Issues Activities Sierra Club 2,400,000 Wilderness, pollution, global warming, human rights, population, suburban sprawl Grassroots action; litigation; news releases Natural Resources Defense Council 1,400,000 Resources, energy, global warming, pollution, nuclear weapons Lobbying; litigation; watch-dog; its scientists compete with experts from agencies and industry Defenders of Wildlife 1,110,000 Imperiled wildlife and habitat, public lands, climate change impacts, international wildlife trade Grassroots advocacy; litigation; hands-on conservation; lobbying Greenpeace USA 250,000 Forests, global warming, genetically engineered foods, oceans, persistent organic pollutants, nuclear weapons Media events; mass mailings; grassroots activity; does not lobby government Wilderness Society 500,000 500,000 Wilderness areas, public lands, energy development Scientific studies; analysis; advocacy group SOURCE: Greenpeace USA, http://www.greenpeace.org/usa/en/about/; Natural Resources Defense Council, http://www.nrdc.org/about; Sierra Club, http://www.sierraclub.org/about; Wilderness Society, http://www.wilderness.org/partner-us; and Defenders of Wildlife, http://www.defenders.org/sites/default/files/publications/Defenders-Annual-Report-2013.pdf (all accessed June 17, 2014). Greenpeace worldwide membership is 2.86 million. Characteristics and Power of Interest Groups 5.3 Analyze sources of interest group power. An important aspect of the relative power of groups is the size and cohesion of their membership. Securing the participation of individuals in groups—what economist Mancur Olson labeled collective action,28 and others have described as public choice29—is challenging because often the benefits from the group efforts are shared with everyone, including those who do not participate in the work of securing the benefit. This creates the free rider problem. For example, unions that achieve wage concessions from management do so for all workers in and out of the union. This results in little incentive to join the union or support it financially. Groups sometimes attempt to sanction or punish free riders, which is why unions prefer that only union workers be employed in a given firm or industry. When this is not possible, group leaders try to reduce the free rider problem through persuasion or group pressure. collective action How groups form and organize to pursue their goals or objectives, including how to get individuals and groups to participate and cooperate. The term has many applications in the various social sciences such as political science, sociology, and economics. public choice Synonymous with “collective action,” specifically studies how government officials, politicians, and voters respond to positive and negative incentives. Groups vary in their goals, methods, and power. Among their most important characteristics are size, incentives to participate, resources, cohesiveness, leadership, and techniques. As we will demonstrate, these different resources and objectives help us understand the power of interest groups. Size and Resources Obviously, size is important to political power; an organization representing 5 million voters has more influence than one speaking for 5,000. Perhaps even more important is the number of members who are active and willing to fight for policy objectives. Interest groups often provide tangible incentives to join, such as exclusive magazines, travel benefits, professional meetings and job opportunities, and discounts on insurance, merchandise, and admission to cultural institutions. Some are compelling enough to attract the potential free rider. Many government programs provide services that benefit everyone such as clean air, national defense, and street lights. One solution to the free rider problem is to pay for these widely shared benefits through taxes. Nongovernment service providers can require a number of people to pay for the service before providing it. It is then in everyone’s interest to pay for the service or face the prospect that no one will have it. For example, during the recent recession, scores of cities and towns canceled their local July 4th fireworks because private and public sources were no longer able to provide the funding.30 Groups rarely overcome the risk of free riders, but unless we offer some compensation for providing easily shared goods and services, they are not likely to be produced. Although the size of an interest group is important to its success, so is its spread—the extent to which membership is concentrated or dispersed. Because automobile manufacturing is concentrated in Michigan and a few other states, the auto industry’s influence does not have the same spread as the American Medical Association, which has an active chapter in virtually every congressional district. Concentration of membership in a key battleground state, however, such as Cuban Americans in Florida or ethanol producers in Iowa, enhances that group’s influence. Finally, groups differ in the extent of their resources—money, volunteers, expertise, and reputation. Some groups can influence many centers of power—both houses of Congress, the White House, federal agencies, the courts, and state and local governments—whereas others cannot. The U.S. Chamber of Commerce has a broad reach, with active “chambers” at the local, state, and national levels. An even larger group, the American Association of Retired Persons (AARP) touts its larger and national membership in policy debates. Particular industries, like citrus growers, have a spread that includes only a few states. Actor Dennis Quaid is seen here on the cover of the AARP Magazine, which featured an article about medical errors that nearly cost the lives of his twin children. Quaid, like any person over fifty years of age, can join the AARP (American Association of Retired Persons). The AARP is active on issues of concern to older Americans. Cohesiveness Most mass-membership organizations include three types of members: (1) a relatively small number of formal leaders who may hold full-time, paid positions or devote much time, effort, and money to the group’s activities; (2) a few hundred people intensely involved in the group who identify with its aims, attend meetings, pay dues, and do much of the legwork; and (3) thousands of people who are members in name only and cannot be depended on to vote in elections or act as the leadership wants. When these groups share common views on the aims of the organization, the group is more cohesive; single-issue groups typically enjoy strong cohesion among their members. An example of a cohesive group with strong organizational structures is Planned Parenthood, which operates offices all over the country and has a clear purpose that is well understood by its supporters. In 2012, when one underwriter announced it was no longer contributing to Planned Parenthood, the reaction was swift and strong and the sponsor reversed itself and resumed funding the organization.31 Leadership In a group that embraces many attitudes and interests, leaders may either weld the various elements together or sharpen their disunity. The leader of a national business association, for example, must tread cautiously between big business and small business, between exporters and importers, between chain stores and corner grocery stores, and between the producers and the sellers of competing products. The group leader is in the same position as a president or a member of Congress; he or she must know when to lead and when to follow. An example of an effective group leader is Thomas J. Donohue, the president of the U.S. Chamber of Commerce. Under Donohue’s leadership, the Chamber has grown in size and influence. He has also met with President Obama, even though the Chamber and the president are often on opposing sides. Techniques for Exerting Influence Our separation-of-powers system provides many access points for any group attempting to influence government. They can present their case to Congress, the White House staff, state and local governments, and federal agencies and departments. They can also challenge actions in court. Efforts by individuals or groups to inform and influence public officials are called lobbying. Groups also become involved in litigation, protests, and election activities and even establish their own political parties. Groups vary in the extent to which they have widespread support that comes from the people (grassroots) vs. activity that is orchestrated or initiated centrally but looks to be grassroots (astroturf). lobbying Engaging in activities aimed at influencing public officials, especially legislators, and the policies they enact. PUBLICITY, MASS MEDIA, AND THE INTERNET One way to attempt to influence policy makers is through the public. Interest groups use the media—television, radio, the Internet including Web sites, newspapers, leaflets, signs, direct mail, and word of mouth—to influence voters during elections and motivate them to contact their representatives between elections. Businesses enjoy a special advantage because, as large-scale advertisers, they know how to deliver their message effectively or can find an advertising agency to do it for them. But organized labor is also effective in communicating with its membership through shop stewards, mail, phone calls, and personal contact. Mobilization increasingly occurs through the Internet, especially through social media such as Facebook and Twitter. Business organizations like the Business and Industrial Political Action Committee (BIPAC) have used the Internet to communicate with members and employees of affiliated businesses. BIPAC’s Web site provides downloadable forms to request absentee ballots and the roll call votes of legislators on issues of interest to their businesses.32 Some groups, such as MoveOn.org, operate almost exclusively online, while massive forums such as DailyKos.com and Townhall.com act as a clearinghouse for left- and right-wing causes. As one scholar noted, much of what modern interest groups do “could not work without the Internet.”33 The Internet helps interest groups in two ways. First, it allows citizens to easily organize themselves for rallies, marches, letter-writing drives, and other kinds of civic participation. Second, the Internet opens new, exclusively online forms of political action, such as sending mass e-mails, posting videos, joining Facebook groups, donating money online, commenting on articles, and blogging. We discuss these developments in greater detail in the media chapter. MASS MAILING/E-MAILING One means of communication that has increased the reach and effectiveness of interest groups is computerized and targeted mass mailing.34 Before computers, interest groups could either cull lists of people to contact from telephone directories and other sources or send mailings indiscriminately. Today’s computerized communication technology can target personalized letters and e-mails to specific groups and individuals. Environmental groups make extensive use of targeted mail and e-mail. The Obama campaign had a list of over 13 million e-mail addresses after the 2008 campaign,35 which it used to communicate messages during Obama’s first term and which provided the foundation for the e-mail list for the 2012 reelection campaign. Vote 4 Energy, a group backed by the American Petroleum Institute, advertised widely in 2012 on the theme that energy resources are important and people should vote with energy in mind. DIRECT CONTACT WITH GOVERNMENT Organized groups have ready access to the executive and regulatory agencies that write the rules implementing laws passed by Congress. Government agencies publish proposed regulations in the Federal Register and invite responses from all interested persons before the rules are finalized—in the “notice and comments period.”36 Well-staffed associations and corporations use the Register to obtain the specific language and deadlines for pending regulations. Lobbyists prepare written responses to the proposed rules, draft alternative rules, and make their case at the hearings. Federal Register An official document, published every weekday, that lists the new and proposed regulations of executive departments and regulatory agencies. LITIGATION When groups find the political channels closed to them, they may turn to the courts.37 The Legal Defense and Educational Fund of the National Association for the Advancement of Colored People (NAACP), for example, initiated and won numerous court cases in its efforts to end racial segregation and protect the right to vote for African Americans. Urban interest groups, feeling underrepresented in state and national legislatures, turned to the courts to press for one-person, one-vote rulings to overcome the disproportionate power rural interest groups had in legislatures and to otherwise influence the political process.38 Individuals and groups opposed to campaign finance reform have challenged federal, state, and local laws in this area and in recent years been able to overturn laws and regulations.39 In addition to initiating lawsuits, associations can gain a forum for their views in the courts by filing amicus curiae briefs (literally, “friend of the court” briefs), presenting arguments in cases in which they are not direct parties. It is not unusual for courts to cite such briefs in their opinions. At the U.S. Supreme Court, amicus briefs have been found to influence decisions on whether to review cases.40 In its review of the constitutionality of health care reform, the Supreme Court received 136 amicus briefs, a number greater than the number of briefs submitted in the prior two record-holder affirmative action cases.41 amicus curiae brief Literally, a “friend of the court” brief, filed by an individual or organization to present arguments in addition to those presented by the immediate parties to a case. PROTEST To generate interest and broaden support for their cause, movements and groups often use protest demonstrations. For example, after the House of Representatives passed new laws on illegal immigration in 2006, pro-immigrant groups mounted protests in cities such as Phoenix and Washington, D.C., with more than 1 million participants.42 Two months later, more than 600,000 protesters gathered in Los Angeles and 400,000 in Chicago to focus greater media attention on the important role immigrants play in the economy. (The legislation died when differences between the Senate and House versions of the bill could not be reconciled.) More recently, individuals have come together to protest the unequal distribution of income and the greater power the rich have influencing government. The group called itself “Occupy Wall Street” and occupied a small park in New York City, near Wall Street. Other “occupy” groups emerged, most notably in Oakland, California, where protests turned to violence.43 The Occupy groups achieved one of their aims as the 2012 election focused more on income and wealth distribution than had the elections of 2008 or 2010. Other movements or groups that have used protest include the civil rights movement and antiwar, environmental, and anti-globalization groups.44 CONTRIBUTIONS TO CAMPAIGNS Interest groups also form political action committees (PACs), which are the legal mechanism for them to contribute money to candidates, political party committees, and other political committees. One of the oldest PACs is the Committee on Political Education (COPE) of the AFL-CIO, but business groups and others have long existed to direct money to favored candidates. PACs also encourage other PACs to contribute to favored candidates, occasionally hosting joint fundraisers for candidates. In 2012 a new type of PAC, a Super PAC, was allowed to form. A Super PAC can spend money supporting or opposing candidates with no limitations as to the amount of money individuals, corporations, or unions can contribute. These groups played a critical role in the Republican presidential nomination contest and in the presidential general election, and also in several congressional election campaigns. Super PAC An independent expenditure only committee first allowed in 2010 after court decisions allowing unlimited contributions to such a PAC. Super PACs were important in recent elections. Individuals clearly associated with an interest group also contribute to campaigns as individuals in ways that make clear to the candidate the interest of the donor. Often one party gathers contributions from several individuals and then gives the checks made out to the candidate’s campaign in a bundle, a process called bundling. This can also be done via the computer. In 2011–2012, Super PACs had individual donors who contributed in excess of $5 million, and Las Vegas casino owner Sheldon Adelson and his wife Miriam Adelson together gave $20 million to “Winning Our Future,” the Super PAC supporting Newt Gingrich. Overall the Adelsons gave a reported $88.4 million to Republican Super PACs; another individual, Harold Simmons, gave nearly $25 million.45 bundling A tactic in which PACs collect contributions from like-minded individuals (each limited to $2,000) and present them to a candidate or political party as a “bundle,” thus increasing the PAC’s influence. CANDIDATE SUPPORT/OPPOSITION Most large organizations are politically engaged in some way, though they may be, or try to be, nonpartisan. Most organized interest groups try to work through both parties and want to be friendly with the winners, which often means they contribute to incumbents. But as competition for control of both houses of Congress has intensified and with presidential contests also hotly contested, many interest groups invest mostly in one party or the other. Many interest groups also publicly endorse candidates for office. Ideological groups like Americans for Democratic Action and the American Conservative Union publish ratings of the voting records of members of Congress on liberal and conservative issues. Other interest groups, such as the U.S. Chamber of Commerce and the League of Conservation Voters, create scorecards of key legislative votes and report to their members how their representative voted on those issues. NEW POLITICAL PARTIES Another interest group strategy is to form a political party, not so much to win elections as to publicize a cause. Success in such cases may occur when a major party co-opts the interest group’s issue. The Free Soil Party was formed in the mid-1840s to work against the spread of slavery into the territories, and the Prohibition Party was organized two decades later to ban the sale of liquor. Farmers have formed a variety of such parties. More often, however, interest groups prefer to work through existing parties. This is also true for factions like the Tea Party, which is closely identified with the Republican Party. Today, environmental groups and voters for whom the environment is a central issue must choose between supporting the Green Party, which has yet to elect a candidate to federal office, an Independent candidate such as Ralph Nader in 2008, or one of the two major parties. Sometimes minor-party candidates can spoil the chances of a major-party candidate. In a New Mexico congressional special election in 1997, the Green Party candidate won 17 percent of the vote, taking some votes from the Democrat and thereby helping to elect a Republican to what had been a Democratic seat. The Tea Party Movement became a rallying cry for some candidates in 2010. However, although more closely identified with Republicans than Democrats, the Tea Party movement is not currently a party. COOPERATIVE LOBBYING Like-minded groups often form cooperative groups. In 1987, the Leadership Conference on Civil Rights and People for the American Way brought together many groups to defeat the nomination of outspoken federal judge Robert Bork to the U.S. Supreme Court.46 Different types of environmentalists work together, as do consumer and ideological groups on the right and on the left. For example, although a large variety of groups that reflect diverse interests represent women, the larger the coalition, the greater the chance that members may divide over such issues as abortion, or opposition to the War in Afghanistan, and no longer be able to pursue cooperative lobbying. Since 2004, a group of pro-Democratic interest groups, under pressure from some major donors, have come together to share information and campaign support plans with each other on an ongoing basis during the campaign. The coordinating group is named America Votes, and those who coordinate with each other include Planned Parenthood, EMILY’s List, Sierra Club, League of Conservation Voters, several unions, Move-On, and other groups.47 Republicans have formed their own coordinating group, called the Weaver Terrace Group, named after the street where a former Bush administration advisor who was instrumental in forming the group resides.48 Some conservative groups have opted not to participate in the coordination.49 The Influence of Lobbyists 5.4 Describe lobbyists and the activities through which they seek to influence policy. Individuals who try to influence policy decisions and positions, often representing groups, are called lobbyists. The term “lobbying” was not generally used until around the mid-nineteenth century in the United States. These words refer to the lobby or hallway outside the House and Senate chambers in the U.S. Capitol and to those who hung around the lobby of the old Willard Hotel in Washington, D.C., when presidents dined there. The noun “lobby” is now used as a verb. lobbyist A person who is employed by and acts for an organized interest group or corporation to try to influence policy decisions and positions in the executive and legislative branches. Despite their negative public image, lobbyists perform useful functions for government. They provide information for decision makers in all three branches of government, help educate and mobilize public opinion, help prepare legislation and testify before legislative hearings, and contribute a large share of the costs of campaigns. But many people fear that lobbyists have too much influence on government and add to legislative gridlock by stopping action on pressing problems. Who Are the Lobbyists? The typical image of policy making is of powerful, hard-nosed lobbyists who use a combination of knowledge, persuasiveness, personal influence, charm, and money to influence legislators and bureaucrats. Often former public servants themselves, lobbyists are experienced in government and often go to work for one of the interests they dealt with while in government, or for a lobbying firm. Moving from a government job to a job with an interest group, or vice versa, is so common that this career path is called the revolving door. Many former members of Congress become full-time lobbyists. For a period of time, former national government employees may not directly lobby the agency from which they came, but their contacts and experience are helpful to interest groups. For example, they may design a lobbying strategy, identify key decision makers, or advise on building a coalition; in each of these cases, they do not have to register as a lobbyist and may avoid scrutiny. Some have called such individuals “unlobbyists.”50 revolving door An employment cycle in which individuals who work for government agencies that regulate interests eventually end up working for interest groups or businesses with the same policy concern. In 2007, Congress passed the Honest Leadership and Open Government Act (HLOGA), which requires more disclosure of employment history of lobbyists, sets stricter limits on lobbyist activities, requires senators to wait two years before lobbying, and requires staff to wait one year before lobbying any Senate office. The Obama Administration used this lobbying list to prohibit any registered lobbyists from serving in any White House or executive branch jobs. Many lobbyists participate in issue networks or relationships among interest groups, congressional committees and subcommittees, and government agencies that share a common policy concern. Personal relationships among members of these groups can sometimes allow these networks to become so strong and mutually beneficial that they almost form a separate branch of government. issue network Relationships among interest groups, congressional committees and subcommittees, and the government agencies that share a common policy concern. Legal and political skills, along with specialized knowledge, are so crucial in executive and legislative policy-making that they have become a form of power in and of themselves. Elected representatives increasingly depend on their staffs for guidance, and these issue specialists know more about “Section 504” or “Title IX” or “the 2012 amendments”—and who wrote them and why—than most political and administrative leaders, who are usually generalists.51 New laws often need specific rules and applications spelled out in detail by the agencies charged to administer them. In this rule-making activity, interest groups and issue networks assume even more significance. OF the People: Diversity in America: Breaking into a Male-Dominated Profession Relatively few women and even fewer minorities are lobbyists. The first woman to own a lobbying firm was Anne Wexler, who started her own firm after leaving the Carter administration in 1981. Wexler observed that when she started, “there were very few women in lobbying. It was completely male dominated.”* More women head lobbying firms today. For example, April Burke, who was trained as a lawyer and spent time both on Capitol Hill and in the not-for-profit sector, heads Lewis-Burke Associates LLC. She has represented clients with interests in technology transfer, health policy, higher education, science, and energy sectors. Women have begun to make inroads into the lobbying profession, especially in areas such as health care, reproductive rights, and education. Because the number of women serving in senior congressional and White House staffs has grown, the pool of women that would likely become lobbyists has similarly grown. Today, more than one-third of lobbyists in Washington are women, according to research by Denise Benoit Scott, the author of The Best Kept Secret: Women Corporate Lobbyists, Policy & Power in the United States,** and a similar proportion of lobbyists at the state level are female.† While the new hires have boosted the ranks of minority lobbyists, they remain a small group. There are more than 30,000 registered lobbyists in Washington. Among them, there are about 200 blacks, according to the Washington Government Relations Group, a black lobbying organization. The Hispanic Lobbyists Association counts 60 members in its group.‡ QUESTIONS 1. Why have so few women become lobbyists? 2. Why are so few racial minorities lobbyists? *Jeffrey H. Birnbaum, “Women, Minorities Make Up New Generation of Lobbyists,” Washington Post (May 1, 2006), p. D1. **Denise Benoit Scott, The Best-Kept Secret: Women Corporate Lobbyists, Politics and Power in the United States. (New Brunswick, NJ: Rutgers University Press, 2007). †Michael G. Bath, Jennifer Gayvert-Owen, and Anthony J. Nownes, “Women Lobbyists: The Gender Gap and Interest Representation,” Politics and Policy, 33 (March 2005), pp. 136–152. ‡Jeanne Cummings, “Minority Lobbyists Gain Ground,” Politico, May 7, 2007, http://www.politico.com/news/stories/0507/3858.html (accessed June 19, 2012). FOR the People: Government’s Greatest Endeavors: Disclosure of Lobbyist Activity Obtaining meaningful and timely disclosure of interest group and lobbyist activities is an important way to protect the political process from the undue influence of interest groups. During the last few decades, the government has been engaged in reform efforts seeking to achieve more meaningful disclosure. One of the problems of prior efforts at disclosing lobbying activities was an imprecise definition of lobbying. The Lobbying Disclosure Act of 1995 (LDA) requires all lobbyists to register with the Clerk of the House of Representatives or the Secretary of the Senate and provides a more detailed definition of exactly what is considered lobbying and who is considered a lobbyist. Lobbyists must file quarterly reports about their lobbying activity, the compensation they received, the time they spent, and the expenses they incurred. Congress and the president went a step further in 2007 with passage of amendments to the 1995 law known as the Honest Leadership and Open Government Act of 2007 (HLOGA). This law made the lobbyist registration and their reports publicly available online and permits the House clerk and Senate secretary to review the reports for accuracy. The HLOGA includes further restrictions on gifts and privately funded travel for members of Congress, and also requires lobbyists who bundle contributions from individual donors to disclose that activity.* Although some progress has been made in achieving greater disclosure of lobbying activity, substantial gaps remain. A 2008 study found that approximately two-thirds of the details in lobbyists reports could not be verified and the level of detail in the reports was sometimes lacking.** In addition, disclosure laws do not apply to people who only indirectly try to influence policy or legislation through activities such as organizing others to write letters or call decision makers. Newt Gingrich, who received more than $1.6 million from one entity after leaving Congress, claimed he only offered “strategic advice,” and therefore did not have to file as a lobbyist.† QUESTIONS 1. Why is disclosure assumed to limit abuses by lobbyists? 2. Why is there resistance to full and complete disclosure by lobbyists and legislators? *Anthony Corrado, “The Regulatory Environment,” in David B. Magleby and Anthony Corrado, eds., Financing the 2008 Election (Washington, D.C.: Brookings Institution Press, 2011). **United States Government Accountability Office, “2008 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements,” April 2009. †Eric Lichtblau, “Gingrich’s Deep Ties to Fannie Mae and Freddie Mac,” New York Times, February 3, 2012, http://www.nytimes.com/2012/02/04/us/politics/gingrichs-deep-ties-to-fannie-mae-and-freddie-mac.html?_r=1&pagewanted=all (accessed May 3, 2012). What Do Lobbyists Do? Thousands of lobbyists are active in Washington, but few are as glamorous or as unscrupulous as the media suggest. Nor are they necessarily influential. One limit on their power is the competition among interest groups. As we have seen, rarely does any one group have a policy area all to itself. To members of Congress, the single most important thing lobbyists provide is money for their next reelection campaign. “Reelection underlies everything else,” writes political scientist David Mayhew.52 Money from interest groups is the most important source funding this driving need among incumbents. Interest groups also provide volunteers for campaign activity. In addition, their failure to support the opposition can enhance an incumbent’s chances of being reelected. Beyond their central role in campaigns and elections, interest groups provide information of two important types, political and substantive. Political information includes such matters as who supports or opposes legislation, including the executive branch, and how strongly they feel about it.53 Substantive information, such as the impact of proposed laws, may not be available from any other source. Lobbyists often provide technical assistance for drafting bills and amendments, identifying persons to testify at legislative hearings, and formulating questions to ask administration officials at oversight hearings.54 An example of a group that not only lobbied for legislation but has drafted laws that were introduced as written in four states is named the American Legislative Exchange Council (ALEC). The group is funded by oil companies and other corporations. Interest groups sometimes attempt to influence legislators and regulators by going directly to the people and urging them to contact public officials. They sometimes do this through television advertising, but also through mail, e-mail, and banner ads on the Internet. During the protracted debate over health care reform in 2009–2010, multiple groups

ok their message directly to the people, not only to influence public opinion on possible legislation, but also as a way to try to pressure Congress. In 2010, an estimated $200 million was spent in TV advertising on health care.55 Money and Politics 5.5 Identify ways interest groups use money in elections and assess efforts to regulate this spending. Interest groups also seek to influence politics and public policy by spending money on elections. They can do this in several ways. One way is by contributing money to candidates for their election campaigns; another is by contributing to political parties that assist candidates seeking office, especially in contested races. They can also contribute money to other interest groups; communicate to the members of their group, including employees; and spend money independently of the parties and candidates. Helping to elect candidates creates a relationship between the interest group and the elected official that a group may later exploit. At a minimum, substantial involvement in the election process helps provide access to policy makers.56 We discuss the dynamics of campaign finance and efforts to reform or regulate it in a later chapter. Here, we discuss the most important ways interest groups organize and participate in funding campaigns and elections. Political Action Committees (PACs) A political action committee (PAC) is the political arm of an interest group legally entitled to raise limited and disclosed funds on a voluntary basis from members, stockholders, or employees in order to contribute funds to favored candidates or political parties. PACs link two vital techniques of influence—giving money and other political aid to politicians and persuading officeholders to act or vote “the right way” on issues. Thus, PACs are one important means by which interest groups seek to influence which legislators are elected and what they do once they take office.57 We categorize PACs according to the type of interest they represent: corporations, trade and health organizations, labor unions, ideological organizations, and so on. political action committee (PAC) The political arm of an interest group that is legally entitled to raise funds on a voluntary basis from members, stockholders, or employees to contribute funds to candidates or political parties. PACs have grown in number and importance. The number of PACs registered rose from 608 in 1974 to more than 6,800 today.58 Corporations and trade associations contributed most to this growth; today, their PACs constitute the majority of all PACs. Labor PACs, by contrast, represent less than 5 percent of all PACs.59 Super PACs also are part of the surge in the number of PACs. But the increase in the number of PACs is less important than the intensity of PAC participation in elections and lobbying (see Figure 5.3). Surprisingly, considering that the growth in numbers of PACs has occurred mainly in the business world, organized labor invented this device. In the 1930s, John L. Lewis, president of the United Mine Workers, set up the Non-Partisan Political League as the political arm of the newly formed Congress of Industrial Organizations (CIO). When the CIO merged with the American Federation of Labor (AFL), the new labor group established the Committee on Political Education (COPE), a model for PACs. Some years later, manufacturers formed the Business and Industry Political Action Committee (BIPAC), but the most active business PAC today is the one affiliated with the National Association of Realtors.60 Table 5.2 lists the most active PACs in elections since 2000. FIGURE 5.3 TOTAL PAC CONTRIBUTIONS TO CANDIDATES FOR U.S. CONGRESS, 1975–2012 ■ Since 1976 the limit on what a PAC can give has not been increased and yet the amount given has risen dramatically. Why do you think this is the case? SOURCE: Harold W. Stanley and Richard G. Niemi, Vital Statistics on American Politics 2009–2010 (CQ Press), p. 92; and Federal Election Commission, “2011–2012 Election Cycle Data Summaries through 12/31/12,” http://www.fec.gov/press/ summaries/2012/ElectionCycle/PACYE.shtml. TABLE 5.2 PACs THAT GAVE THE MOST TO FEDERAL CANDIDATES, CUMULATIVELY, 2000–2012 (MILLIONS OF DOLLARS) PAC 2000 2002 2004 2006 2008 2010 2012 Total 1. National Association of Realtors $3.42 $3.65 $3.77 $3.75 $4.01 $3.79 $3.96 $26.35 2. International Brotherhood of Electrical Workers (IBEW) $2.46 $2.21 $2.30 $2.78 $3.33 $2.98 $2.89 $18.95 3. National Auto Dealers Association $2.50 $2.58 $2.58 $2.82 $2.86 $2.48 $3.07 $18.89 4. National Beer Wholesalers Association $1.87 $2.07 $2.29 $2.95 $2.87 $3.30 $3.39 $18.74 5. American Federation of State, County, and Municipal Employees (AFSCME) $2.59 $2.42 $1.64 $2.05 $2.11 $2.31 $2.34 $15.46 6. International Brotherhood of Teamsters $2.49 $2.33 $1.89 $2.07 $2.20 $2.31 $2.08 $15.37 7. National Association of Home Builders $1.82 $1.92 $2.22 $2.90 $2.48 $2.13 $1.71 $15.18 8. Credit Union National Association $1.43 $1.84 $2.01 $2.39 $2.31 $2.30 $2.55 $14.83 9. United Parcel Service $1.76 $1.62 $2.14 $2.24 $2.08 $1.84 $2.94 $14.62 10. International Association of Machinists and Aerospace Workers (IAMAW) $2.18 $2.20 $1.91 $1.76 $2.33 $2.01 $2.18 $14.57 ■ What kinds of interests do the most active PACs support? What responsibility do candidates who receive funds have to those PACs? SOURCE: Federal Election Commission, “PAC Contributions to Candidates,” http://www.fec.gov/press/press_archives.shtml. The 2012 elections saw growth in a new type of PAC—Super PACs, which could spend unlimited amounts of money in support of or opposition to federal candidates. Super PACs came into existence in 2010 after the U.S. Supreme Court declared limits on corporations’ and unions’ spending from their general funds on campaign communications unconstitutional in Citizens United v. FEC.61 And in a subsequent case, SpeechNow.org v. FEC, the U.S. District Court held that groups were free of prior restrictions in making independent expenditures.62 In the 2010 election cycle, Super PACs spent more than $60 million,63 a training exercise for some of them in anticipation of even more spending and activity in 2012. For years, corporations and unions had PACs that made limited contributions, but they had not been able use their profits or general funds to influence elections through independent expenditures. Corporations and unions, however, are still prohibited from contributing money to candidates’ campaigns from their profits or general funds. After the Citizens United and SpeechNow.org decisions, the Federal Election Commission issued rules allowing PACs that are “independent expenditure only committees.”64 In the 2011–2012 presidential election, these Super PACs provided substantial support to candidates like Newt Gingrich, Mitt Romney, Rick Santorum, and Barack Obama. See Table 5.3 for the amounts of money that candidates spent out of their campaign funds and that the Super PACs spent on the candidates’ behalf. Elected officials also form their own PACs to collect contributions from individuals and other PACs and then make contributions to candidates and political parties. These committees, called leadership PACs, were initially a tool of aspiring congressional leaders to curry favor with candidates in their political party. For example, Republican Speaker John Boehner’s PAC spent $4.5 million in the 2010 cycle and expended even more in 2012.65 leadership PAC A PAC formed by an officeholder that collects contributions from individuals and other PACs and then makes contributions to other candidates and political parties. How PACs Invest Their Money PACs are important not only because they contribute such a large share of the money congressional candidates raise for their campaigns, but also because they contribute so disproportionately to incumbents, committee chairs, and party leadership. PACs often give not only to the majority party, but to key incumbents in the minority. In the 2012 cycle, House incumbents seeking reelection raised 42 percent of the funds for their campaigns from PACs, compared to only 11 percent for the challengers opposing them. In total, House incumbents raised more than eight PAC dollars for every one PAC dollar going to a challenger.66 Senate incumbents raise proportionately more from individuals but also enjoy a fundraising advantage among PACs compared to Senate challengers (see Figure 5.4). One reason members of Congress become entrenched in their seats is that PACs fund them. The law limits the amount of money that PACs, like individuals, can contribute to any single candidate in an election cycle. But raising money from PACs was for many years more efficient for a candidate than raising it from individuals. Since the 1970s, PAC contributions to any federal candidate have been limited to $10,000 per election cycle (primary and general elections), whereas until 2004 individuals were limited to $2,000 per candidate per election cycle. The Bipartisan Campaign Reform Act (BCRA) doubled individual contribution limits and mandated that they increase with inflation while leaving PAC contribution limits unchanged. The contribution limit for 2011–2012 was $5,000 (primary and general elections combined). This means two individuals giving the maximum allowable can now equal the maximum allowable PAC contribution. This probably reflected the view of the legislators that actual corruption or the appearance of it is more likely to come from organized interests such as unions, trade associations, and businesses than from individuals. Bipartisan Campaign Reform Act (BCRA) Largely banned party soft money, restored long-standing prohibition on corporations and labor unions use of general treasury funds for electoral purposes, and narrowed the definition of issue advocacy. TABLE 5.3 CANDIDATE AND ALLIED SUPER PAC SPENDING IN 2012 PRESIDENTIAL ELECTION Candidate/Supporting Super PAC Candidate Spending Super PAC Spending Super PAC as Percentage of Total Gingrich/Winning Our Future $24,312,428 $17,002,762 41% Santorum / Red White & Blue Fund $22,782,771 $7,529,554 25% Paul / Endorse Liberty $39,038,495 $3,578,240 8% Huntsman / Our Destiny PAC $8,913,912 $2,084,234 24% Romney / Restore Our Future, American Crossroads $716,216,051 $314,052,298 31% Obama / Priorities USA Action $1,092,335,218 $90,067,770 8% NOTE: Reporting period is July 1, 2012, to December 31, 2012. SOURCE: Compiled from FEC data. This table is part of a larger table in David B. Magleby, “A Classification of Super PACs into Three Types: Candidate, Party and Interest Group,” in John Green, Daniel Coffey, and David Cohen, eds., The State of the Parties, 7th ed. (Lanham, MD: Rowman & Littlefield, forthcoming). FIGURE 5.4 PAC CONTRIBUTIONS TO CONGRESSIONAL CANDIDATES, 1998–2012 ■ Over time, how has the distribution of PAC money changed? Why do PACs contribute so disproportionately to incumbents? SOURCE: Federal Election Commission, “PAC Contributions to Candidates,” http://www.fec.gov/press/press_archives.shtml. The U.S. Supreme Court in 2014 made possible an even greater role for individuals when it declared unconstitutional the aggregate individual contribution limits for money given to candidates, party committees, or PACs. That decision, in McCutcheon v. Federal Election Commission, left in place the contribution limits to any particular candidate, party committee, or PAC.67 After the Democratic Party took control of Congress in 2007, some PACs changed loyalties. In the House, approximately 60 percent of PAC money went to Democrats and 40 percent to Republicans.68 Before Congress changed hands, just the opposite was true—approximately 60 percent of PAC money went to Republicans. In the Senate, Republicans once received more PAC money than Democrats, but in recent elections there has been near parity in PAC giving to the two parties.69 Mobilizing Employees and Members Another way interest groups can influence the outcome of elections is by persuading their employees, members, or stockholders to vote in a way consistent with the interests of the group or corporation. They accomplish this mobilization through targeted communications at the workplace, through the mail, on the telephone, or on the Internet. As we discuss elsewhere in this chapter, labor unions have been especially effective in member communications. Corporations and business associations have been following labor’s lead. Membership organizations such as the NRA have also been able to mobilize their members, as well as allied individuals and groups.70 Other Modes of Electioneering Until the 2004 election cycle, interest groups and individuals could avoid the contribution limitation to political parties by contributing so-called soft money to political parties. Originally justified as an exception to contribution limits to help the political parties by funding get-out-the-vote drives or party appeals that are not specific, soft money came to be used for candidate-specific electioneering.71 We discuss party soft money in greater detail in the next chapter and the Bipartisan Campaign Reform Act in a later chapter. soft money Money raised in unlimited amounts by political parties for party-building purposes. Now largely illegal except for limited contributions to state or local parties for voter registration and get-out-the-vote efforts. You Will Decide: Should Corporations and Unions Be Unlimited in Running Campaign Ads? Does limiting the ability of corporations or unions to use their general or “treasury” funds for election-related expenditures violate the constitutional guarantee of freedom of speech? Corporations and unions, like other groups, are free to form political action committees to make contributions to candidates and parties. What has been at dispute is whether they could take their profits or general funds and spend those on electing or defeating candidates or in support of party efforts. For more than a century, federal law had banned unions and corporations from spending general or treasury funds on electoral politics. These rules changed in 1979 when the Federal Election Commission allowed unions and corporations to give unlimited general treasury funds or profits to help political parties generally. This was called soft money. In 1996, unions and later corporations began spending unlimited and undisclosed amounts of money on “issue ads,” which were really campaign commercials. The Bipartisan Campaign Reform Act banned soft money contributions to parties and more clearly defined election communications as television or radio ads that refer to a specific candidate and that air within 30 days of the primary or 60 days of the general election. The Supreme Court initially upheld both bans but later reversed itself on election communications and also now allows general treasury funds to be spent on election-specific ads. Given this reversal, opponents of the soft money ban are likely to again challenge this provision in court. What do you think? Should corporations and unions be unlimited in funding parties and in running issue ads? What are some arguments for or against this? Thinking It Through The Supreme Court in McConnell v. FEC cited a long list of precedents in upholding the limitation on unions and corporations using their general funds to influence elections.* The economic power of corporations such as Microsoft or major unions could, if unconstrained, drown out the voices of other participants and corrupt the electoral process. But unions and corporations argue that constraints on them are unfair when compared with the ability of wealthy individuals to spend unlimited amounts of their own money on politics via independent expenditures, which the Court allowed in its prior landmark decision, Buckley v. Valeo.** They would agree with Justice Scalia’s dissent in McConnell v. FEC that restricting how much a group “can spend to broadcast [its] political views is a direct restriction on speech.”† With respect to electioneering or issue ads, in 2007, the reconstituted Supreme Court in FEC v. Wisconsin Right to Life, Inc. said the BCRA language was too broad in defining electioneering and that unions and corporations had a right to communicate with voters about political topics in the days and weeks before primary and general elections.‡ Chief Justice Roberts substituted a new, more open definition of electioneering communication. In the past, language like that used by Chief Justice Roberts provided media consultants with enough latitude to craft election communications, arguing that they were about issues and not candidates. In 2010, the Supreme Court further broadened the opportunity for corporations and unions to engage in electioneering for or against candidates by reversing a long-standing ban on the use of corporate or union general funds, including profits.§ This means that future elections could have substantial electioneering by unions and corporations on the eve of elections that is not subject to the other limitations of the law. CRITICAL THINKING QUESTIONS 1. What are the implications for voters of unlimited spending by corporations and unions in campaigns? 2. If in an election there is an imbalance in the spending by groups supporting the two sides in an election, is that a cause for concern? *McConnell v. FEC, 124 S. Ct. 533 (2003). **Buckley v. Valeo, 96 S. Ct. 760 (1976). †Justice Antonin Scalia, dissenting in McConnell v. FEC, 124 S. Ct. 618 (2003). ‡Federal Election Commission v. Wisconsin Right to Life Inc., 466 F. Supp. 2d 195 (2007). §Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010). During the 2014 election, interest groups often tried to tie Democratic candidates to President Obama, as was done in this ad from the National Rifle Association in the North Carolina U.S. Senate election. The charge against both President Obama and Senator Hagen was that they were shredding the U.S. Constitution. North Carolina was one of the contests where large amounts of money were spent by Super PACs, party committees, and interest groups through independent expenditures. Between 1996 and 2002, interest groups could also help fund so-called issue ads supporting or opposing candidates as long as the ads did not use certain words. The Supreme Court in 2007 declared parts of BCRA relating to these kinds of ads unconstitutional, allowing corporations and unions to again spend their general funds on ads that advocate a point of view on political issues, which may affect elections.72 Their 5-to-4 decision in Citizens United v. FEC in 2010, discussed above, allowed corporations and unions to use unlimited general funds for election-specific ads and has resulted in much greater spending by corporations and unions in this mode of electioneering in competitive federal election contests.73 Interest groups can avoid disclosure if they communicate with voters through the mail, in newspaper ads, on billboards, on the phone, and by e-mail. Not all interest groups typically make the presidential campaign their highest priority. Some groups, such as the League of Conservation Voters (LCV), in the past had invested some of their resources in presidential races, but have generally made House and Senate races higher priorities. The major groups representing business and labor invest heavily in both presidential and congressional elections. Independent Expenditures The Supreme Court in 1976 declared that limits on independent expenditures were unconstitutional when the contributions or expenditures were truly independent of a party or candidate. Hence, groups, like individuals, can campaign for or against a candidate, independent of a party or candidate committee and in addition to making contributions to candidates and party committees from their PAC. These independent expenditures are unlimited but must be disclosed to the Federal Election Commission (FEC). Interest-group independent expenditures fall well below PAC contributions to candidates and parties. Groups that have made heavy use of independent expenditures include MoveOn PAC, NRA, EMILY’s List, several unions, National Right to Life PAC, the Club for Growth, and the National Association of Realtors. (See Table 5.4.) independent expenditures The Supreme Court has ruled that individuals, groups, and parties can spend unlimited amounts in campaigns for or against candidates as long as they operate independently from the candidates. When individuals, groups, or parties do so, they are making an independent expenditure. Independent expenditures enable groups to direct unlimited amounts of money to a particular race. In 2012, for example, the National Rifle Association (NRA), Service Employees International Union (SEIU), and Affiliated Federal, State, County and Municipal Employees (AFSCME) were the most active groups in making independent expenditures, spending between $12.5 and $16.5 million independently.74 This spending dwarfs what groups can do through PAC contributions. The SEIU was the most active in independent expenditures in the 2004–2012 period. Other groups were active in only one election, like the Media Fund in 2004 (Table 5.4). TABLE 5.4 INDEPENDENT EXPENDITURES BY TOP INTEREST GROUPS, 2004–2012 Interest Group Expenditure Service Employees International Union (SEIU) $130,154,277 America Coming Together $85,038,718 Joint Victory Campaign 2004 $72,588,053 Media Fund $59,679,624 College Republican National Committee $57,836,732 America Votes $54,267,480 EMILY’s List $52,473,254 American Solutions Winning $51,434,217 Progress for America $48,631,952 International Brotherhood of Electrical Workers (IBEW) $48,514,889 NOTE: Expenditures for all national affiliates of an organization are combined, but expenditures for state affiliates are excluded. SOURCE: Center for Responsive Politics, “Top 50 Federally Focused Organizations,” http://www.opensecrets.org/527s/527cmtes.php?level=C&cycle=2012 (accessed June 23, 2014). This spending dwarfs what groups can do through PAC contributions. Groups making independent expenditures receive credit with their members for their activity because the source of independent expenditures is clearly communicated. Campaigning Through Other Groups For more than a century, reformers had sought disclosure of money in politics. In campaigns and elections, disclosure was often incomplete, and groups quickly found ways to avoid it. Then, the disclosure provisions of the Federal Election Campaign Act of 1971, amended in 1974, were defined by the Supreme Court as applying to communications that used words such as “vote for” or “vote against” and made them subject to disclosure and spending limits.75 For a time, citizens, journalists, and scholars had a complete picture of who was giving what to whom, and who was spending money and in what ways, to influence elections. That changed in 1994 and 1996, when interest groups found a way to circumvent disclosure and contribution limits through issue advocacy. They simply made election ads without words like “vote for” or “vote against,” and then they spent millions attacking or promoting particular candidates. Labor unions were the first to exploit this tactic in a major way, spending an estimated $35 million in 1996, mostly against Republican candidates.76 Corporations and ideological groups quickly followed labor’s lead. Issue advocacy was limited by the 2002 Bipartisan Campaign Reform Act (BCRA).77 issue advocacy Promoting a particular position or an issue paid for by interest groups or individuals but not candidates. Much issue advocacy involves electioneering for or against a candidate, avoiding words like “vote for,” and until 2004 had not been subject to any regulation. Even after reform, interest groups continued to mount their own campaigns against or for candidates in ways similar to the old issue advocacy approach. For example, some Vietnam War veterans formed a group they named Swift Boat Veterans for Truth and ran ads attacking Senator John Kerry’s Vietnam War record.78 Groups like Swift Boat Veterans for Truth are called 527 organizations or groups because they are tax-exempt groups organized under section 527 of the Internal Revenue Service Code. More recently, through Super PACs and by other means, interest groups and individuals again have been spending large amounts of money in ways not directed or controlled by the candidates, but with the purpose of electing or defeating particular candidates. 527 organization A political group organized under section 527 of the IRS Code that may accept and spend unlimited amounts of money on election activities so long as they are not spent on broadcast ads run in the last 30 days before a primary or 60 days before a general election in which a clearly identified candidate is referred to and a relevant electorate is targeted. An important part of campaigns is registering new voters and canvassing them about their views on issues. In this photo, a volunteer from an interest group focusing on get-out-the-vote efforts uses a hand-held device to record survey responses from a Minnesota family. How Much Do Interest Groups Influence Elections and Legislation? 5.6 Evaluate the effectiveness of interest groups in influencing elections and legislation. We have said that because PACs give more money to incumbents, challengers have difficulty funding their campaigns and have to rely more on individual contributors. Even with the larger individual contribution limits allowed in 2004 and since, most challengers still had much less money than their incumbent opponents. How much does interest group money influence election outcomes, legislation, and representation? Former U.S. senator Alan Simpson (R-WY) said that “too often, members’ first thought is not what is right or what they believe, but how it will affect fundraising. Who, after all, can seriously contend that a $100,000 donation does not alter the way one thinks about—and quite possibly votes on—an issue?”79 Another former senator, Warren Rudman (R-NH) says, “You can’t swim in the ocean without getting wet; you can’t be part of this system without getting dirty.”80 In this area, as in others, money obviously talks. But it is easy to exaggerate its influence. Although a candidate may receive a great amount of interest group money, only a fraction of that total comes from any single group. It is also debatable how much campaign contributions affect elections, and there is no guarantee that money produces a payoff in legislation. What the substantial spending by Super PACs showed in 2012, however, is that allowing an individual to spend unlimited amounts through a Super PAC in support of a candidate can allow that candidate to continue to stay in the race. Without Super PAC support, it is doubtful that Gingrich or Santorum would have been able to stay in the race as long as they did. BY the People: Making a Difference: Lobbying for Education Policy Lobbying on education policy has important implications for college students. Numerous policies and laws enacted by Congress directly affect students and universities, and so it is important for students and universities to try to influence these policies for their own best interests. For example, approximately seven in ten college students graduating in 2012 with a bachelor’s degree had some debt, with the average amount more than $29,400.* Approximately 9 million students received a Federal Pell Grant in 2013–2014.** Congress recently enacted changes in student loans and Pell Grants through two pieces of legislation—the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act. Under these acts, the maximum Pell Grant scholarship for the 2014–2015 school year was $5,730—about $1,000 higher than in 2008–2009.† Among the groups active in lobbying Congress on this matter were Sallie Mae, the nation’s largest student lender; the Consumer Bankers Association; and the National Direct Student Loan Coalition. Most universities and colleges retain a lobbyist to help them secure the support of government, either at the state level, the federal level, or both. Public institutions rely more on the state legislature than do private institutions. You can search online to learn about whether your institution has a lobbyist and how much the institution spent lobbying last year. Find a site on lobbyists in your state—such as http://cal-access.sos.ca.gov/lobbying/ for California or www.ethics.state.tx.us/main/search.htm for Texas—to get information on how your school lobbies the state government. QUESTIONS 1. Why do you think your university or college hires lobbyists? 2. On matters like changes in the laws relating to student loans, do you think students’ perspectives are adequately represented before Congress and the bureaucracy? 3. Is the money your school spent on lobbyists well spent? Why or why not? *The Project on Student Debt, “State by State Data,” 2013, http://projectonstudentdebt.org/state_by_state-data.php (accessed June 19, 2014). **Department of Education, “Student Financial Assistance Fiscal Year 2015 Budget Request,” http://www2.ed.gov/about/overview/budget/budget15/justifications/q-sfa.pdf (accessed June 19, 2014). †U.S. Department of Education, Federal Student Aid, “Federal Pell Grants,” https://studentaid.ed.gov/types/grants-scholarships/pell (accessed June 19, 2014). Numerous groups seek to mobilize their membership in elections. They create Web sites for members to obtain information about their view of candidates and provide voter registration materials and absentee ballot request forms. How effective is electioneering by interest groups? In general, mass-membership organizations fail to mobilize their full membership in elections, although they can effectively mobilize when their interests are directly attacked.81 More typically, too many cross-pressures operate in the pluralistic politics of the United States for any one group to assume a commanding role. Some groups reach their maximum influence only by allying themselves closely with one of the two major parties. They may place their members on local, state, and national party committees and help send them to party conventions as delegates, but forming such alliances means losing some independence. Curing the Mischiefs of Faction—Two Centuries Later If James Madison were to return today, neither the existence of interest groups nor their variety would surprise him. However, the varied weapons of group influence, the deep investment of interest groups in the electoral process, and the vast number of lobbyists in Washington and the state capitals might come as a surprise. And doubtless, Madison would still be concerned about the power of interest groups and possible “mischiefs of faction,” especially their tendency to foster instability and injustice. Concern about the evils of interest groups has been a recurrent theme throughout U.S. history. President Dwight Eisenhower used his Farewell Address to warn against the “military-industrial complex,” the alliance of defense industries and the U.S. military formed to pursue more spending on weapons. President Ronald Reagan in his Farewell Address warned of the power of “special interests.”82 Single-issue interest groups organized for or against particular policies—abortion, handgun control, tobacco subsidies, animal rights—have aroused increasing concern in recent years. “It is said that citizen groups organizing in ever greater numbers to push single issues ruin the careers of otherwise fine politicians who disagree with them on one emotional issue, paralyze the traditional process of governmental compromise, and ignore the common good in their selfish insistence on getting their own way.”83 But which single issues reflect narrow interests? Women’s rights—even a specific issue such as sexual harassment or abortion—are hardly “narrow,” women’s rights leaders contend, because women represent more than half the population. These issues may seem different from those related to subsidies for dairy farmers, for example. One of the main arguments against interest groups is that they do not represent people equally. For example, fewer interest groups represent young or low-income people than represent senior citizens or corporations. Further, some groups are better organized and better financed, allowing them a decided advantage over more general groups. And the existence of a multiplicity of interests often leads to incoherent policies, inefficiency, and delay as lawmakers try to appease conflicting interests. In addition, the propensity of interest groups to support incumbents in elections increases the advantages of incumbency, which is often seen as undesirable. What—if anything—should we do about factions? For decades, American citizens have tried to find ways to keep interest groups in check. They have agreed with James Madison that the “remedy” of outlawing factions would be worse than the disease. It would be absurd to abolish liberty simply because it nourished faction. And the Constitution solidly protects the existence and activity of interest groups and lobbies. Moreover, interest groups provide important services. They supply needed and accurate information to government officials. But by safeguarding the value of liberty, have we allowed interest groups to threaten equality, the second great value in our national heritage? The question remains: How can we regulate interest groups in a way that does not threaten our constitutional liberties? Should we? The United States has generally responded to this question by seeking to regulate lobbying in general and political money in particular. Concern over the use of money—especially corporate funds—to influence politicians goes back more than a century, to the administration of Ulysses S. Grant in the 1870s, when members of Congress promoted the Crédit Mobilier construction company in exchange for the right to make huge profits by buying its stock below market value. In the Progressive Era during the first two decades of the twentieth century, Congress legislated against corporate contributions in federal elections and required disclosure of the use of the money (Tillman Act, 1907 and Federal Corrupt Practices Act, 1925).84 But federal legislation was not very effective and was loosely enforced. Many candidates filed incomplete reports or none at all. The reform mood of the 1960s and the Watergate scandal of 1972 brought basic changes. The outcome was the Federal Election Campaign Act of 1971 (FECA), amended in 1974. We discuss FECA and the more recent Bipartisan Campaign Reform Act in greater detail in the chapter on campaigns and elections. During President Bill Clinton’s first term, and after the Republicans won control of Congress in 1994, Congress passed the first major overhaul of lobbying laws since 1946. Under the Lobbying Disclosure Act of 1995, the definition of a lobbyist was expanded to include part-time lobbyists, those who deal with congressional staff or executive branch agencies, and those who represent foreign-owned companies and foreign entities. The number of registered “clients” nearly doubled eight years after enactment of the act,85 and more recent estimates show additional growth in numbers. The act also included specific disclosure and information requirements. But as the 2012 election highlighted, disclosure was still incomplete or came after key election contests. For example, a group led by Republican political professionals, Crossroads GPS, spent in excess of $20 million in anti-Obama ads in 2012 without having to disclose its donors because the group ostensibly was not supporting any specific candidate.86 The disclosure of Super PAC donors did not come in most cases until January 31, 2012, which was after the Iowa Caucuses and New Hampshire and South Carolina primaries. Participants in those contests did not know who was funding the multimillion-dollar advertising campaigns being run in their states. More broadly, interest groups provide important opportunities for individuals to work together to pursue common objectives. Sometimes, this means that individuals join existing groups; at other times, they form new ones. Interest groups not only foster healthy competition in our politics, but they also teach important lessons about self-government. While the potential for abuse by interest groups is real, they serve critical functions in American government. Review the Chapter Interest Groups Past and Present: The “Mischiefs of Faction” 5.1 Explain the role of interest groups and social movements in American politics, p. 130. Interest groups form when a collection of people share similar political goals and organize to achieve them. Sometimes, these groups are based on a shared group identity, such as race, ethnicity, gender, or sexual orientation. Others are based on specific policy issues, such as reducing taxes or combating global warming. Still others claim to operate in the public interest on broad issues, such as educating voters or reducing the federal deficit. Interest groups sometimes begin as social movements, which consist of many people at the grassroots level who are interested in a significant issue, idea, or concern and take action to support or oppose it. Types of Interest Groups 5.2 Categorize American interest groups into types, p. 132. Interest groups can be categorized as economic, ideological or single-issue, public interest, foreign policy, and government itself. Economic groups include corporations, labor unions, and professional and trade associations; they lobby officials and campaign for candidates whose trade, tax, and regulation policies favor their perspective. Ideological groups typically pursue a single policy goal through many means; for example, the ACLU pursues civil liberties cases. Public interest groups are presumably more broadly based, including watchdog groups and charities. Foreign policy groups work to influence some area of the United States’ international affairs. Finally, government groups include public sector unions and other government entities. Characteristics and Power of Interest Groups 5.3 Analyze sources of interest group power, p. 140. Size, resources, cohesiveness, leadership, and techniques, especially the ability to contribute to candidates and political parties and to fund lobbyists, affect interest group power. But the actual power of an interest group stems from how these elements relate to the political and governmental environment in which the interest group operates. Interest groups typically include people with many other cross-cutting interests, which both reduces and stabilizes their influence. The Influence of Lobbyists 5.4 Describe lobbyists and the activities through which they seek to influence policy, p. 145. Lobbyists represent organized interests before government. Lobbying involves communicating with legislators and executive-branch officials, making campaign contributions, and assisting in election activity, especially through political action committees (PACs). Interest groups also communicate their message directly to the public through mass mailings, advertising, and online media. Money and Politics 5.5 Identify ways interest groups use money in elections and assess efforts to regulate this spending, p. 148. Interest groups spend money to lobby government officials and to support or defeat candidates, especially through the expanded use of PACs. Groups that lack money typically struggle to get their message out to the public and fail to influence public officials. Congress has enacted laws to regulate and reform excesses of interest groups in electoral democracy. The Federal Election Campaign Act (FECA) was passed in the 1970s in response to the Watergate scandal, and the Bipartisan Campaign Reform Act (BCRA) was passed in 2002 in response to soft money and other abuses by political parties and interest groups. Court decisions like Citizens United v. FEC have removed some of the restrictions on interest group activities during elections. How Much Do Interest Groups Influence Elections and Legislation? 5.6 Evaluate the effectiveness of interest groups in influencing elections and legislation, p. 155. Interest groups can be important in influencing elections. In 2004, groups helped George W. Bush by attacking John Kerry’s heroism and patriotism and by promoting Bush’s leadership. In more recent elections, groups were important in competitive contests and in reinforcing the electorate’s tendency to reelect incumbents. The influence of groups in the legislative process is greatest when there is an absence of strong groups on the other side of the issue and when members of Congress do not have a strong constituency interest.

Reference

Magleby, D. B., Light, P.C, & Nemacheck, C.L. (2015). Government by the People. Boston, MA: Pearson