426 CHAPTER 14|ECONOMIC AND SOCIAL POLICY
for a “millionaire’s tax” that would set a minimum rate of 30 percent for incomes
that reach that level.
Republicans rejected Obama’s call for a millionaire’s tax, arguing that the
problem is not low taxes on the rich, but excessive government spending. They
argue that low taxes stimulate job creation and that lower taxes on capital
gains and dividends encourage investment. Furthermore, taxes on dividends
represent double taxation because corporations pay both a corporate income
tax that is among the highest in the world and then pay taxes on payouts to
shareholders.^3
Tax policies are inherently confl ictual due to their redistributive nature: when
the government takes money from one group and gives it to another, there will be
confl ict over those decisions. For example, if tax policy is used to help the poor,
the wealthy will pay a larger share of their income in taxes than the poor. But
even taxes that do not seem obviously redistributive hit some people harder than
others. A 5 percent sales tax is more of a burden for the poor than the nonpoor
because poor people spend a higher proportion of their income on basic living
costs.
Social policies that redistribute wealth, such as food stamps and welfare,
are even more controversial. Many of America’s political debates concern
economic and social policy: Should we run defi cits or have balanced budgets?
Should we have a largely unregulated free market, or regulations for things like
pollution and health care? What should the government do to help the poor, the
uneducated, and others who are at a disadvantage? Democrats generally favor
an activist government that supports a range of redistributive programs and
regulates the economy to ensure numerous public goods, such as rebuilding the
infrastructure. Republicans generally favor limited government that promotes
lower taxes and less regulation and allows the free market to determine
more social and economic decisions, such as allowing greater development of
domestic energy sources.
The confl ict over economic and social policy is clear, but how about
compromise? The policy responses to the economic meltdown of 2008–09 were
very confl ictual, as the public questioned the use of taxpayers’ money to support
Wall Street and the auto industry. But ultimately, bipartisan majorities agreed on
a plan to shore up the banking system and get the economy on sounder footing.
The stimulus bill of 2009 was also a compromise package comprising roughly
equal parts of tax cuts, federal spending, and support for the states. President
Obama has vowed to increase taxes on the wealthy to help reduce the defi cits,
but House Republicans prefer tax simplifi cation through reducing loopholes and
deductions (both sides agree that spending should be cut, but Republicans want
more cuts with less tax revenue).
Economic and social policy also illustrate the other themes of this book.
The idea that political process matters is evident in the ways Congress, the
president, and the bureaucracy all have a hand in attempting to achieve
economic and social policy goals. The politics of social and economic policy is
also everywhere: these policies directly affect all Americans.
This chapter has three main parts. First we discuss the policy-making
process and the main players in domestic policy making. Next we examine
economic policies, and then social policies. Although we can only scratch
the surface of the many important policies that each of these categories
encompasses, this chapter will provide a basic understanding of how the political
process shapes these policies.CHAPTER goals
Trace the steps through
which problems are
addressed by government
policies.
¾ PAGES 427-34
Explain the main purposes
of government involvement
in the economy and
how fi scal, monetary,
regulatory, and trade
policies infl uence the
economy.
¾ PAGES 434-48
Explain what we mean by
social policy, discuss how
the national government’s
role in social policy has
evolved, and analyze the
current major areas of
social policy
¾ PAGES 448-61