Government_Ch10_info

=**Ch. 10 Public Policies and Services Background Information**=

**Taxing and Spending:**
The government (at all levels) gets revenue mostly through taxing and also borrowing. Taxes are payments by individuals and businesses to support the activities of government. Individual income tax is the biggest source of federal revenue and is on taxable income, which is the total income of a person minus deductions and exemptions. An exemption example is a dependent, or one who depends primarily on anther person for food, shelter, and clothing. It is a progressive tax, or one based on taxpayers' ability to pay. The higher the income the higher the rate. April 15 is when the previous years taxes have to be filed by. The IRS, or Internal Revenue Service collects the taxes and can conduct an audit, or check the payments of taxes. The corporate income tax represents about 10% of federal revenue. Nonprofit organizations such as colleges, unions, and churches are exempt. Social insurance tax includes taxes to pay for Social Security, Medicare, unemployment, and other entitlements. Employers match employee payments. This is the second highest sources of federal revenue and is a regressive tax since people with lower incomes usually pay a larger portion of their income than those with higher incomes. An excise tax is on the manufacture, transportation, sale, or consumption of goods and the performance of services, such as gas, oil, tobacco, highways, airports, and others. Customs duties are on imports. Higher ones are called protective tariffs to protect U.S. businesses from foreign competition. Estate and gift taxes are on property and money left after death.

Groups that are affected by taxes often influence Congress to pass exemptions and are often referred to as loopholes. Some exemptions represent government efforts to encourage an activity. Various reforms include tax cuts to stimulate the economy. Tax credits allow taxpayers to reduce their income tax liability, such as those who have dependents, such as children. The government also borrows money by selling federal securities, or financial instruments that include bonds, notes, and treasury bills. When spending is greater than income, the government runs a deficit. Borrowing to fund the annual budget deficits over time creates the national debt.

When preparing the federal budget, the government operates in a fiscal year, which is October 1 through September 30. The president usually proposes a budget and Congress works through it and passes the budget, which the president would have to sign. The Budget and Accounting Act of 1921 made it a law for the president to propose the budget to Congress. The Office of Management and Budget is responsible for the day to day preparation of the budget. Each agency in the government has proposals. About 70% of the federal budget consists of uncontrollable, or expenditures required by law or from previous budget commitments, including entitlements, or benefits that Congress has provided by law to individuals and include Social Security, Medicare, Medicaid, and others. Congress has to approve spending and the Congressional Budget Office (CBO) carefully evaluates the overall budget and estimates how much various programs and new laws will cost.

Federal policy has significant impacts on the economy. The money taken in by the federal government goes to direct benefit payments (Social Security, welfare, health care), national defense, and discretionary spending, which includes grants to state and local levels, the environment, transportation, criminal justice, and other areas. Fiscal policy involves using government spending and taxation to influence the economy. Monetary policy involves controlling the supply of money as well as credit to influence the economy. The Federal Reserve System is the central banking system of the U.S. When banks need money, they go to the Fed, which is divided into 12 federal reserve districts. A seven-member Board of Governors in D.C. supervise the entire system and determines the general money and credit policies.

**Social and Domestic Policy:**
The U.S. is a mixed economy, which are systems in which the government supports and regulates private enterprise and is based on the free enterprise system. Promoting and protecting business in America is important. Regulation through history starting with the first Treasury Secretary Alexander Hamilton wanted a protective tariff to protect American business from foreign competition. Free trade has been promoted more recently with NAFTA (North American Free Trade Agreement), which has no tariffs with Canada and Mexico. This has benefitted American business more than hurt. There are still tariffs on other nations. There are some types of federal subsidies, or aids to business including tax incentives to deduct certain expenses, loans at low interest rates, free services, and cash payments for vital goods purchased by the government. The Commerce Department promotes business interests.

In terms of regulating business, Congress has the power to regulate commerce and is the basis for most regulation of the economy put in by the founders to solve a problem that existed under the Articles of Confederation since the Confederation Congress couldn't resolve the argument over control of the Chesapeake Bay. The government took a laissez-faire, or hands off approach until the late 1800s when business grew. The Sherman Anti-Trust Act outlawed trusts. Several corporations combine stock and a board runs it as one big enterprise making the trust. Monopolies are when there is only one type of the business and controls the whole industry. The Federal Trade Commission (FTC) is a regulatory agency today that regulates business. The founders' intent was that the federal government regulates only commerce - when goods are shipped and that is all. However, the Supreme Court in 1936 started to allow the government to regulate anything that IMPACTS commerce, thus increasing the power of the federal government.

Consumer protection laws have increased after Upton Sinclair wrote //The Jungle//, which led to the Pure Food and Drug Act that said food and drugs had to be labeled properly and the Meat Inspection Act that requires federal inspection of all meat (remember Sinclair was a socialist and wanted government control). The Food and Drug Administration (FDA) protects the public from poorly processed and improperly labeled food and drugs. The FTC protects against false advertising and the Security Exchange Commission (SEC) regulates the stock market and business accounting. The government has also allowed the protection of unions and striking.

The government also regulates farmers as well as the environment. The Department of Agriculture helps farmers improve and modernize. The Morrill Act sets aside millions of acres of land for state-operated colleges of agriculture. The Homestead Act had passed in the 1860s to give land to people willing to farm. The Rural Electrification Administration (REA) brought electricity and phone service to rural areas. There are services to market farm goods and programs to stabilize prices. The Forest Service restored millions of acres of forests used for outdoor recreation, timber, and for wildlife habitat. The EPA, or Environmental Protection Agency, is a federal agency that regulates the environment. Their job was to enforce environmental laws, but this agency has increased its power by enforcing their own regulations that are rules they impose, not rules passed by Congress. There is debate over drilling for oil in the Arctic National Wildlife Refuge, an oil-rich area in Alaska and home to over 40 species of mammals and 180 species of birds.

In terms of health and public assistance, social insurance and public assistance programs are funded by the federal government. Social insurance programs are designed to help the elderly, ill, and unemployed citizens, while public assistance programs distribute public money to the poor. There are three components of social insurance programs. Social Security is money for the elderly/retired in which workers and employers pay into. Medicare is health care for the elderly. Unemployment insurance comes from employers paying a tax. Public assistance programs include Supplemental Security Income, or SSI), which are programs for the aged, blind, and disabled. Food Stamps are another program to increase food-buying power of low-income families. Medicaid is health care for those with low income. Temporary Assistance for Needy Families (TANF) provides money for states to operate welfare. The largest percentage of federal spending is on health care and is increasing much more after the passage of the Affordable Care Act, nicknamed Obamacare.

Education, housing, and transportation were all programs that were intended to be reserved to the states, but the federal government has gotten involved and controls. The federal level has grown in its control over public education. The No Child Left Behind law of 2002 gives money to states that show improvement through state-created standards. Common Core is a program in the 2010s that create national standards over state standards, which increases national control over education. Federal money is also given for public housing. Programs to purchase and build homes with the Federal Housing Administration (FHA) in the Department of Housing and Urban Development. The Department of Transportation coordinates policies and has agencies such as the Federal Highway Administration that oversees roads and the Federal Aviation Administration oversees air traffic.

**Foreign Policy and Defense:**
Foreign policy is formulated by the president. Foreign policy consists of strategies and goals that guide a nation's relations with other countries. America's foreign policy goals include national security (protection of borders and territories), free and open trade, world peace, aid and help creating democratic governments, and concern for humanity. America's foreign policy has developed throughout history. George Washington urged isolationism, but it was difficult for America to stay isolated. The Monroe Doctrine under President Monroe told Europe that the Western Hemisphere was no longer open to colonization. The U.S. got its first overseas territories in the Spanish-American War. Both world wars increased America's status in the world. In the Cold War, America had the containment policy, which was to stop the spread of communism. Under Reagan, communism collapsed in Eastern Europe. In the post-Cold War world, the U.S. and U.N. went to war against Saddam Hussein in Iraq in the Persian Gulf War. The War on Terror after the September 11 attacks greatly changed America's foreign policy as the U.S. went to war in Afghanistan and Iraq and still combats terrorism in the world.

The President and Congress share authority. The Constitution gives foreign policy power to the president, while Congress has the power to declare war. The president is Commander-in-Chief of the armed forces. the president has the power to appoint ambassadors, or officials who represent the U.S. in other nations (the Senate has to approve). The president also has the power to make treaties (with Senate approval), which are formal agreements between nations. The Secretary of State supervises diplomatic activities and advises on foreign policy. The Secretary of Defense supervises military activities and advises on military and national security. The National Security Council includes both secretaries, the vice president, and the National Security Advisor. The CIA, or Central Intelligence Agency, gathers intelligence on foreign nations. The Congress declares war, has to approve the appropriation (spending) of money, and the Senate has to approve of treaties and appointments.

The State and Defense Departments are the two major departments involved in foreign policy. Within the State Department, officials that serve in foreign nations are in the Foreign Service. An embassy includes the official residence and offices of the ambassador and staff. Consulates are in major foreign cities led by a consul. The Foreign Service is responsible for issuing passports. The Defense Department maintains civilian control of the military and contains the Army, Navy, Marines, and Air Force. The Joint Chiefs of Staff give military advice.

The are four aspects of foreign policy. One is alliances such as mutual defense alliances in which nations protect from a common threat, such as NATO (North Atlantic Treaty Organization), OAS (Organization of American States), and ANZUS (Australia, New Zealand, and the U.S.). A second type are federal aid programs. A third are economic sanctions or withholding loans, arms, or aid to a foreign nation to cease an action. A fourth type of foreign action would be the use of military force.

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