Summary

Public policy is the broad strategy government uses to do its job, the relatively stable set of purposive governmental behaviors that address matters of concern to some part of society. Most policy outcomes are the result of considerable debate, compromise, and refinement that happen over years and are finalized only after input from multiple institutions within government. Health care reform, for instance, was developed after years of analysis, reflection on existing policy, and even trial implementation at the state level.

People evaluate public policies based on their outcomes, that is, who benefits and who loses. Even the best-intended policies can have unintended consequences and may even ultimately harm someone, if only those who must pay for the policy through higher taxes.

Goods are the commodities, services, and systems that satisfy people’s wants or needs. Private goods can be owned by a particular person or group, and are excluded from use by others, typically by means of a price. Free-market economists believe that the government has no role in regulating the exchange of private goods because the market will regulate itself. Public goods, on the other hand, are goods like air, water, wildlife, and forests that no one owns, so no one has responsibility for them. Most people agree the government has some role to play in regulating public goods.

We categorize policy based upon the degree to which costs and benefits are concentrated on the few or diffused across the many. Distributive policy collects from the many and benefits the few, whereas regulatory policy focuses costs on one group while benefitting larger society. Redistributive policy shares the wealth and income of some groups with others.

The three major domestic policy areas are social welfare; science, technology, and education; and business stimulus and regulation. Social welfare programs like Social Security, Medicaid, and Medicare form a safety net for vulnerable populations. Science, technology, and education policies have the goal of securing the United States’ competitive advantages. Business stimulus and regulation policies have to balance business’ needs for an economic edge with consumers’ need for protection from unfair or unsafe practices. The United States spends billions of dollars on these programs.

The two groups most engaged in making policy are policy advocates and policy analysts. Policy advocates are people who feel strongly enough about something to work toward changing public policy to fix it. Policy analysts, on the other hand, aim for impartiality. Their role is to assess potential policies and predict their outcomes. Although they are in theory unbiased, their findings often reflect specific political leanings.

The public policy process has four major phases: identifying the problem, setting the agenda, implementing the policy, and evaluating the results. The process is a cycle, because the evaluation stage should feed back into the earlier stages, informing future decisions about the policy.

Until the Great Depression of the 1930s, the U.S. government took a laissez-faire or hands-off approach to economic policy, assuming that if left to itself, the economy would go through cycles of boom and bust, but would remain healthy overall. Keynesian economic policies, with their emphasis on government spending to increase consumer consumption, helped raise the country out of the Depression.

The goal of federal fiscal policy is to have a balanced budget, in which expenditures and revenues match up. More frequently, the budget has a deficit, a gap between expenditures and revenues. It is very difficult to reduce the budget, which consists of mandatory and discretionary spending, but no one really wants to raise revenue by raising taxes. One way monetary policies can change the economy is through the level of interest rates. The Federal Reserve Board sets these rates and thus guiding monetary policy in the United States.