318 PART FouR • PolicymAking
chaptersummary
1 Domestic policy consists of laws, government
planning, and government actions that concern
internal issues of national importance. Policies are
created in response to public problems or public
demand for government action.
2 The policymaking process is initiated when
policy makers become aware—through the media
or from their constituents—of a problem that
needs to be addressed by the legislature and the
president. The process of policymaking includes
five steps: agenda building, policy formulation,
policy adoption, policy implementation, and policy
evaluation. Policy actions typically result in both
costs and benefits for society.
3 Health-care spending accounts for almost
18 percent of the U.S. economy and is growing.
Reasons for this growth include the increasing
number of elderly persons and advancing
technology. A major source of funding is Medicare,
the federal program that pays health-care expenses
of U.S. residents over the age of sixty-five. The
federal government has tried to restrain the growth
in Medicare spending.
4 More than 15 percent of the population does
not have health insurance—a major political
issue. Individual health-insurance policies (not
obtained through an employer) are expensive
and may be unobtainable at any price. In most
wealthy countries, this problem is addressed by a
universal health-insurance system under which the
government provides basic coverage to all citizens.
In 2010, Congress passed a health-care reform
package that in time will provide near-universal
coverage in the United States. It will require
residents not already covered to purchase coverage,
which will be subsidized for low-income persons.
5 Today, more than 1 million immigrants enter the
United States each year, and foreign-born persons
make up about 13 percent of the U.S. population.
The status of illegal immigrants, who may number11 million, is a major political issue. Some people
wish to give such persons a legally recognized status
and allow them someday to become citizens. Others
call for tougher laws against illegal immigration and
against hiring undocumented workers.
6 Issues concerning energy and the environment
are on the nation’s agenda today. One problem
is our reliance on petroleum imports, given that
many petroleum exporters are hostile to American
interests. In recent years, however, production
techniques such as fracking have increased the
domestic supply of crude oil and especially of
natural gas. Global warming, caused by the emission
of CO 2 and other greenhouse gases, is a second
major problem, although some dispute how serious
it actually is.
7 Fiscal policy is the use of taxes and spending
to affect the overall economy. Time lags in imple-
menting fiscal policy can create serious difficulties.
The federal government has run a deficit in most
years since 1960. The deficit is met by U.S. Treasury
borrowing. This adds to the public debt of the U.S.
government. Although the budget was temporarily
in surplus from 1998 to 2002, large deficits now
seem likely for many years to come.
8 Monetary policy is controlled by the Federal
Reserve System, or the Fed. Monetary policy con-
sists of changing the rate of growth of the money
supply in an attempt to either stimulate or cool the
economy. A loose monetary policy, in which more
money is created, encourages economic growth.
A tight monetary policy, in which less money is
created, may be the only effective way of ending an
inflationary spiral.
9 U.S. taxes amount to about 27 percent of the gross
domestic product. Individuals and corporations that
pay taxes at the highest rates will try to pressure
Congress into creating exemptions and tax loopholes.
Loopholes allow high-income earners to reduce their
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