Welcome and Introduction to the Course Policy Advice to the President School of Public Policy & Urban Affairs | Northeastern University Joan Fitzgerald

Welcome and Introduction to the Course

Open Classroom Policy Series Policy Advice to the President

School of Public Policy & Urban Affairs | Northeastern University

Joan FitzgeraldInterim Dean, School of Public Policy & Urban Affairs

Setti WarrenMayor, City of Newton

Barry BluestoneFounding Dean, School of Public Policy & Urban Affairs

Session 1: September 5th

Government: For What? How Much?

What do you want government to do?

How much do you want to pay for it?

Federal Expenditures by FunctionFY2013

Social Security $825,872National Defense $701,767Income Security $559,413Medicare $530,246Health $385,868Net Interest $247,715Veterans Benefits & Services $140,117Education, Training, Employment & Social Services $122,135Transportation $114,228Administration of Justice $62,792International Affairs $59,556Natural Resources & Environment $41,312Community & Regional Development $34,983General Science, Space, & Technology $31,265General Government $26,266Agriculture $25,624Energy $13,914Commerce & Housing Credit -$25,001

Federal Expenditures by FunctionFY2008 FY2013 % Change

Energy $628 $13,914 2115.6%International Affairs $28,857 $59,556 106.4%Veterans Benefits & Services $84,653 $140,117 65.5%Transportation $77,616 $114,228 47.2%Community & Regional Development $23,952 $34,983 46.1%Agriculture $18,387 $25,624 39.4%Health $280,599 $385,868 37.5%Medicare $390,758 $530,246 35.7%Social Security $617,027 $825,872 33.8%Education, Training, Employment & Social Services $91,287 $122,135 33.8%Administration of Justice $48,097 $62,792 30.6%Natural Resources & Environment $31,817 $41,312 29.8%Income Security $431,313 $559,413 29.7%General Government $20,323 $26,266 29.2%General Science, Space, & Technology $26,772 $31,265 16.8%National Defense $616,073 $701,767 13.9%Net Interest $252,757 $247,715 -2.0%Commerce & Housing Credit $27,870 -$25,001 -189.7%

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

$4,000.0

U.S. Federal Receipts vs. Federal Outlays

Fed Receipts Fed Outlays

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

-$1,600

-$1,400

-$1,200

-$1,000

-$800

-$600

-$400

-$200

$0

$200

$400

-$5.9 -$25.1 -$23.4-$73.7 -$73.8

-$185.4-$155.2

-$290.3

-$107.4

$236.2

-$412.7-$458.5

-$1,326.9

-$901.4

U.S. Federal Deficits

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.05

1.16

1.11

1.25

1.14

1.28

1.17

1.27

1.07

0.88

1.22

1.18

1.54

U.S. Federal Outlays as Percent of Federal Receipts

Balanced Budget

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

-0.9%

-2.9%

-2.0%

-4.2%

-2.7%

-4.8%

-3.1%

-4.7%

-1.4%

2.4%

-3.5%-3.2%

-8.5%

-5.5%

U.S. Federal Surplus (+) or Deficit (-) as Percent of Gross Domestic Product

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

$14,000.0

$256.8 $289.5 $322.4 $477.4$711.9

$1,307.0

$2,051.6

$2,999.7

$3,734.1$3,409.8

$4,295.5

$5,803.1

$11,578.1

$12,636.7

U.S. Federal Debt (Held by Public)

Axis Title

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 20120.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

17.9%

19.6%18.6%

20.4%21.2%

21.7%20.9%

21.8%

19.9%

18.0%

19.3%

20.9%

24.8%

U.S. Federal Outlays as Percent of Gross Domestic Product

Sweden

France

Hungary

Denmark Italy

Austria

Finlan

d

Belgium

Portuga

l

Netherla

nds

German

y

United Kingd

om

Czech

Republic

Poland

Greece

Icelan

d

Norway

New Zeala

nd

Canad

a

Luxe

mbourgSp

ain

Slova

k Republic

United St

ates

Japan

Australi

a

Irelan

d

Switz

erland

Korea

Mexico

OECD29

0%

10%

20%

30%

40%

50%

60%

54.3%52.7%51.9%51.6%

49.9%49.4%48.9%48.4%

46.3%45.6%45.3%44.2%43.8%43.8%

42.2%41.7%40.5%39.9%39.3%38.6%38.5%

37.1%36.4%36.0%34.9%

33.8%33.7%

30.2%

19.0%

42.0%

Total Government Spending as Percent of Country GDP(includes State and Local Government)

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2011:IV0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

12.2%

9.7%

8.7%

9.5%9.1%

8.4%

5.8%

7.0%7.6%

8.0%

U.S. Federal Government Consumption Expenditures & Gross Investment as Percent of Gross Domestic Product

Bush IObama

Johnson

Reagan

Clinton

Bush II

Nixon

Carter

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

46.2% 46.0%

34.3%

24.1%22.7%

26.7% 27.3%

21.6%

17.0% 16.5%

19.9%20.7%

18.9% 18.5%

U.S. Defense Spending as Percent of Federal Outlays

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

14.0%13.4%

17.4%

19.9% 20.1%20.9% 20.6% 20.8%

22.4% 22.9%21.6%

20.7% 20.5%21.7%

Social Security as Percent of Federal Outlays

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1.5%

2.5%

3.8%4.2%

3.9%3.6%

4.2%

6.5%

7.7%

8.6%

10.5%

9.4% 9.5%10.1%

Federal Spending on Health as Percent of Federal Out-lays

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 (est)

2013 (est)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

U.S. Federal Spending on Social Securty + Health Care vs. Defense

Defense S.S. + Health

U.S. Government Spending Over Time

In Sum:

Optimal role of government is a balancing act;

neither “big” government nor “small” government

is inherently good or bad if that government does

what its constituents want at a price they are willing

to pay.

THE MANY ROLES OF GOVERNMENT

Major Functions of Federal Government

Provide for the National DefenseEstablish and Adjudicate Private Property RightsEnsure Compliance with the Constitution and the Bill of RightsEstablish a National CurrencyProvide for National Economic Policy to maintain Economic Growth, Full

Employment, and Stable PricesProvide for National Infrastructure to assure Transportation and

CommunicationAssure Public HealthCollect Taxes to Pay for Federal Government Operations

Major Functions of State GovernmentProvide for Regional Transportation

Ensure Public Safety and Security

Provide for Higher Education

Assure K-12 Equity across Municipalities

Promote Economic Development

Ensure Public Health

Regulate Energy Sector

Protect the State Environment

Encourage the Production of Affordable Housing

Provide Unemployment Insurance

Provide Workers Compensation

Major Functions of Local GovernmentEnsure Public Safety – Police & Fire ProtectionPromote K-12 EducationPromote Public HealthRegulate the Use of Property through Zoning LawsPromote Local Economic DevelopmentProvide Water and Sewer ServicesRegulate Local Private Monopolies (e.g. Cable TV)

FEDERAL PROGRAMS

Provide for the National DefenseArmy, Navy, Air Force, , Marine Corps, Coast GuardNational GuardSpecial ForcesCIAMissile Defense Agency (MDA)State DepartmentAgency for International Development (USAID)Arms Control and International SecurityDefense Advanced Research Projects Agency (DARPA)Helsinki Commission (Commission on Security and Cooperation in Europe)National Aeronautics and Space Administration (NASA)National Security Council

Assist the Private Economy Establish Rules for Private Property Copyright Office Patent Office Adjudicate property disputes

Land, physical assets, intellectual property Commerce Department Federal Reserve System Bureau of the Engraving and Printing (Money) Antitrust Division Federal Trade Commission (FTC) Bankruptcy Courts Court of Federal Claims Economic Development Administration Export-Import Bank of the United States Farm Credit Administration Federal Deposit Insurance Corporation (FDIC) Federal National Mortgage Association (Fannie Mae) Federal Home Loan Mortgage Corporation (Freddie Mac) Government National Mortgage Association Federal Housing Finance Agency Federal Mediation and Conciliation Service

Provide for Basic Infrastructure Federal Highway Administration Federal Aviation Administration (FAA) Federal Railroad Administration Federal Transit Administration Maritime Administration AMTRAK Railway Stations Local Mass Transit Commuter Rail U.S. Postal Service Federal Communications Commission (FCC) Army Corps of Engineers Bonneville Power Administration Federal Maritime Commission

Enhance Human Capital & CulturePublic SchoolsOffice of Elementary and Secondary EducationEmployment and Training AdministrationVocational Training ProgramsEmployment ServicesCommission on Fine ArtsHolocaust Memorial MuseumJohn F. Kennedy Center for the Performing ArtsLibrary of CongressNational Science Foundation

Provide for HealthNational Institutes of Health (NIH)Agency for Healthcare Research and Quality (AHRQ)Animal and Plant Health Inspection ServiceCenter for Food Safety and Applied NutritionCenters for Disease Control and Prevention (CDC)Centers for Medicare & Medicaid Services (CMS)Food and Drug Administration (FDA)Food Safety and Inspection ServiceHealthy Homes and Lead Hazard Control OfficeIndian Health ServiceNuclear Regulatory Commission

Protect the Natural EnvironmentEnvironmental Protection AgencyNational ParksNational ForestsBureau of Land Management (BLM)Bureau of ReclamationFish and Wildlife ServiceForest ServiceMigratory Bird Conservation Commission

Provide Information to Citizens Food and Drug Administration Vehicle Safety Information Vehicle Efficiency Data Agricultural Research Service Agriculture Department Bureau of Consumer Financial Protection Bureau of Economic Analysis (BEA) Bureau of Labor Statistics Bureau of the Census Bureau of Transportation Statistics Congressional Budget Office (CBO) Consumer Financial Protection Bureau Consumer Product Safety Commission (CPSC) Government Accountability Office (GAO) Government Printing Office (GPO) Legal Services Corporation National Weather Service (NOAA)

Provide for Domestic Safety Federal Bureau of Investigation (FBI) Federal Bureau of Prisons Police Firefighters EMTs Building Inspectors Courts Jails Prisons Alcohol, Tobacco, Firearms, and Explosives Bureau Bureau of Prisons Civilian Radioactive Waste Management Federal Emergency Management Agency (FEMA) Federal Law Enforcement Training Center Federal Mine Safety and Health Review Commission Federal Motor Carrier Safety Administration (FMCSA) Federal Marshals Service Mine Safety and Health Administration National Highway Traffic Safety Administration (NHTSA)

Citizenship ServicesBureau of Citizenship and Immigration Services (USCIS)Bureau of Indian Affairs (BIA)Citizenship and Immigration Services (USCIS)Commission on Civil RightsEqual Employment Opportunity Commission (EEOC)Fair Housing and Equal Opportunity (FHEO)Federal Election Commission

So, What Does Government Do for You?

We fail to recognize more than 10% of all the things we ask government to do for us.

If citizens understood all the things government does for us, would they be as quick to criticize government and ask to see it shrink?

If citizens who argue for “cutting government” were given a choice, which agencies would they overwhelmingly wish to eliminate?

ARTHUR OKUNThe Godkin Lectures on the essentials of free government and the duties of the citizen

Harvard university

1975

Political InstitutionsProvide universally distributed rights and privileges that

proclaim the equality of all citizens

Acquired at no monetary costViolate law of comparative advantage – People with great stake in a

certain right have no more right to it than othersEqual without regard to ability or intelligenceNot distributed as incentivesViolates equity and freedom – Everyone must pay for right regardless of

who uses itCannot be bought and sold

Our rights can be viewed as inefficient, because they:

Preclude prices that would promote economizingSince no price for free speech, too many people use it too freely!

Violate the law of comparative advantageWe academics who are so smart have no more right to free speech than

those who have flunked out of elementary school!Incentives that would augment socially productive effort

If speech were a market good, people would work harder to obtain itTrades that potentially would benefit buyer and seller alike

Starving person cannot trade his vote for a loaf of bread

Economic InstitutionsRely on market-determined incomes that generate substantial

disparities among citizens in material welfare

Differentials in income are meant to serve as incentives – rewards and penalties – to promote efficiency in the use of resources and generate growth in output

The Big Tradeoff “Equal rights and Unequal Incomes generate tensions between

the political principles of democracy and the economic principles of capitalism”

“Uneasy compromise rather than a fundamental inconsistency”

Reasons for RightsLiberty

Protect individuals from encroachment by the statee.g. “Freedom of Speech”Universal and identifiable criteria used rather than discretionary – Bill of

Rights Pluralism

Rights are a protection against intervention of market in all parts of society … “need to keep the market in its place” … so that everything does not become a market commodity with a price, but no social significance – e.g. Olympic Medals

HumanismStress on human dignity – Mutual respect without a quid pro quo

“Rights” vs. “Marketable Commodity”How far should we go in ensuring rights?

Free speech?Free public education?Right to pollute?Free housing?Public welfare?Right to a job?

Bans on Exchange

“By prohibiting your sale of rights, society is encroaching on your freedom, but it is also protecting you from others who might to take your rights away”

Child labor laws prohibit some families from making ends meetMinimum wage laws prohibit workers from offering their labor at any

wage they choose

Transgressions of Dollars on Rights

Buy better legal services – receive preferential treatment before the law

Buy better political platform – campaign financing

Lobbying by means of pecuniary offers

Rights/Market Goods Continuum

j

IncentivesQuid pro QuoInequality

No IncentivesNo Quid pro QuoEquality

The “Big Tradeoff”


Freedom of SpeechFreedom of AssemblyFreedom of Religion

X


Diamond Pinky Rings

X


Freedom of SpeechFreedom of AssemblyFreedom of Religion

Diamond Pinky Rings

X X


Food - 1920

X


Food – 1930County WelfareWorker – Commodity Distribution

X


X

Food – 1960“Food Stamp Program”


Housing

X


X

Public Housing


Section 8 Housing

X


Homeownership

X


Homeownership:FHA, VA, Fannie Mae, Freddie MacMortgage Interest Deduction

X


Homeownership:Diminish Fannie Mae, Freddie Mac?Eliminate Mortgage Interest Deduction?

X X


X

Health Care:1950


X

Health Care:1960Medicare,Medicaid


X

Health Care:2010“Obamacare”


X

Health Care:2012-2016

??


Job

X


Job

X

?


X

Freedom of Speech


X

Freedom of Speech

Citizens United Supreme Court Ruling

All Political Discourse …

Where on the continuum do you place something?Conservatives generally favor keeping as much as

possible as “market goods”Liberals generally favor expanding “rights”Today that battle is perhaps more divisive than ever

POLARIZATION OF POLITICS

Documents

Welcome and Introduction to the Course Policy Advice to the President School of Public Policy & Urban Affairs | Northeastern University Joan Fitzgerald