432 CHAPTER 14|ECONOMIC AND SOCIAL POLICY
Interactions between Congress and the president are central to understand-
ing economic and social policy. If the president’s party controls Congress, then the
president’s budget becomes the starting point for congressional negotiations over
the budget. If the opposing party controls Congress, then the president’s budget
is usually considered “dead on arrival” and Congress creates its own document.
Of course, the president can use the veto threat to try to move Congress closer to
his position; but when the budget is contained in one large package that must be
signed or vetoed in its entirety, it is diffi cult to carry out such threats.^7
Similarly, in some instances the president may take the lead in formulating
social policy, as Franklin D. Roosevelt did with the New Deal and Lyndon Johnson
with the Great Society. In other instances Congress plays a central role, as with
health care reform in 2009–10. In all cases the president and Congress must fi nd
some common ground.THE BUREAUCRACY
You might assume that the bureaucracy makes little diff erence in social policy
and simply implements the policies determined by Congress and the president.
For some policies, that is somewhat true—such as Social Security, whose benefi t
levels are determined by law. Implementing this policy largely involves determin-
ing that the proper amount of money is going to the right people and distributing
the payments. However, as discussed in Chapter 11, with many social policies the
“on-the-ground” public employees have a great deal of discretion. One study found
that welfare agencies that distributed AFDC benefi ts had a more “hostile and
punitive” attitude toward their clients than those that administered the disability
program under Social Security. Welfare offi ces in general tend not to be very wel-
coming places. People often have to wait for hours, and offi ce workers are some-
times rude. Some potential welfare recipients are so alienated by the process that
they give up.^8 (This is not true of all welfare offi ces, but there are general diff er-
ences in how recipients are treated in diff erent types of social welfare programs.)
Bureaucratic discretion may also serve more positive ends, though. In fact,
many bureaucratic agencies in the late nineteenth and early twentieth centuries
developed political autonomy and strong reputations that enabled them to analyze
and solve problems, create new programs, and plan and administer programs effi -
ciently.^9 Many of the same insights apply to agencies that deliver social policies
today, such as the Social Security Administration, which has a very strong base of
popular and political support.
In terms of economic policy, two bureaucratic agencies are key in creating mon-
etary policy: the Federal Reserve System (the Fed), an independent agency; and
the Treasury Department, a cabinet-level department. (For a discussion of the
Fed, see pages 440–44.) The Treasury Department’s mission “is to promote the
conditions for prosperity and stability in the United States and encourage pros-
perity and stability in the rest of the world.”^10 Some of these responsibilities over-
lap with the Fed’s, especially supervising banks and managing the public debt. In
most instances the responsibilities are complementary rather than competing,
such as the management of currency and coins: the Treasury produces currency
and coins, and the Fed distributes them to member banks.^11 Financing federal debt
is another matter. The Treasury prefers lower interest rates to keep down the cost
of fi nancing the debt and to promote economic growth, while the Fed is also con-
cerned about keeping rates high enough to avoid infl ation. Therefore, the Fed and
the Treasury must coordinate their policies to avoid working at cross-purposes.Federal Reserve System An inde-
pendent agency that serves as the
central bank of the United States to
bring stability to the nation’s bank-
ing system.
Treasury Department A cabi-
net-level agency that is responsible
for managing the federal govern-
ment’s revenue. It prints currency,
collects taxes, and sells govern-
ment bonds.