Our topic this week is policymaking. We will use examples in Week 7 to see the steps in the policy-making process, beginning with the identification of the problem, developing and selecting alternatives, implementing the policy, evaluation of it, and, finally, whether it needs to be changed or not.
Select one of the following public policy issues and assess its effectiveness. What changes may be needed and why?
1) Federal education policies (Every Student Succeeds, Race to the Top);
2) Corporate subsidies;
Use the textbook as one of the reverences and make sure it is within topic.
ALSO Read lesson 7 below:
Politics is partly the business of determining “who gets what, when, and how,” so it is important to consider several macro-economic issues in any introductory course to American government and politics. This area of study can be considered a “political economy.” Labor laws, entitlement programs, corporate welfare, globalization and outsourcing are all considered in this lesson. What can and should the federal government do about these issues?
Labors and Unions
LEFT COLUMN CONTENT
General Motors Headquaters
The labor movement is the story of “rise” and “fall.” A century ago, the labor union was in its infancy. While many people associate today’s labor movement with strong unions (and sometimes with unreasonable demands for higher wages and more benefits), the labor movement actually has its origins in fighting for basic work safety. It also fought against child labor.
Eventually, despite local, state and federal obstacles (including several Supreme Court decisions), the labor movement accomplished many of its goals. In fact, some economists argue that the labor movement became too successful as it was able to secure unsustainably-generous contracts from automobile manufacturers, for instance.
Indeed, the “fall” of the labor movement can be seen in the massive layoffs in the industrial sector. General Motors, for example, laid off more than 25,000 employees – largely because GM could no longer afford to pay them the wages and benefits that the United Auto Workers (UAW) had secured in the 1980s and 1990s.
Furthermore, union membership has been continually falling for several decades – measured as a percentage of the labor force. The right to strike is taken as a given. At the outset of the American Industrial Revolution, however, it was often illegal for workers to organize into unions and strike.
Labors and Unions Continued…
Additionally, union membership has been continually falling for several decades – measured as a percentage of the labor force. The right to strike is taken as a given. At the outset of the American Industrial Revolution, however, it was often illegal for workers to organize into unions and strike. Click on the slideshow to view some of the more memorable union strikes.
PULLMAN CARS STRIKE:
In the 1880s, George Pullman built the town of Pullman near Chicago to manufacture his famous railway cars. All buildings in the town were company-owned and rented to workers, churches, and stores. The company cut wages a number of times in the 1880s, but it failed to reduce the rent in the company-owned housing. Workers went on strike. Sympathetic railway workers across the country boycotted trains carrying Pullman cars. Federal troops were called in to keep the trains moving and to break the strike, prompting violence and looting in Chicago in 1894. With the arrest of the leaders in Chicago, the strike collapsed. A demonstration over an 8-hour working day in Chicago drew about 1,500 people in 1886. When police attempted to disperse the meeting, a bomb exploded and rioting ensued. Seven policemen and four other persons wee killed, and more than 100 persons were wounded. Eight “anarchist” leaders were convicted of inciting violence. Four were hanged, one committed suicide, and the remaining three were pardoned after seven years by the Governor of Illinois on the grounds that the trial had been unjust.
On April 20, 1914, 20 men, women and children were killed in the Ludlow Massacre. The coal miners in Colorado and other western states had been trying to join the UMWA for many years, but they were opposed by the Rockefeller-owned Colorado Fuel and Iron Company. Upon striking, the company evicted the miners and their families from their company-owned houses. The miners then set up a tent colony on public property. Colorado militiamen, coal company guards, and strikebreakers attacked the tent city, setting it ablaze and firing into the tents. The perpetrators were never punished, but many of the surviving miners were arrested. An event in Arizona influenced the labor movement throughout the United States. Over 1,000 striking workers, increasingly involved with the Industrial Workers of the World (I.W.W.), were forcibly deported from Bisbee, Arizona. The workers often reached other mining and industrial operations with the intent to organize labor.
SAN FRANCISCO MARITIME STRIKE:
San Francisco’s maritime strike, led by militant labor leader Harry R. Bridges, was long and bitter. The International Longshoremen’s Association (ILA) demanded improved wages and working conditions, coast-wide bargaining rights, and the establishment of union-controlled hiring halls. On July 5, 1934, a thousand police officers attempted to clear the strikers from the waterfront so that strikebreakers could do the work instead. In the ensuing riot, 64 people were injured and two strikers were killed. The governor sent in the National Guard to prevent further violence. This strike was one of the first that was hugely successful for labor. Rather than walking off the job (which makes them vulnerable to being fired and replaced by strikebreakers), the workers at a Flint, Michigan, plant simply sat down and refused to leave. During the strike, women provided a first aid station, and, after hearing reports that the police were going to gas the factory, a group of women – the Emergency Brigade – smashed the factory’s window. The strike ended after General Motors accepted the U.A.W. as the bargaining agent. The Wagner Act was subsequently passed. This Act protected the rights of most workers to organize unions, to engage in collective bargaining over wages, hours, and terms and conditions of employment, and to take part in strikes and other forms of concerted activity in support of their demands. At first, the Supreme Court declared the Act unconstitutional. Then it reversed itself (5 to 4) in 1937 in the famous case: National Labor Relations Board v. Jones & Laughlin Steel Corporation (1937).
Labor and Unions Continued…
After 1937, unions around the country grew in size and strength. In fact, it might be argued that unions became so powerful that they demanded – and received – wages and benefits so high that companies like General Motors were eventually forced to move factories to other countries (under new free trade agreements) or shut them down all together. If there is logic to the above argument, then it might be reasonable to conclude that unions are necessary to improve minimum standards, wages and work conditions. But, if left unchecked, then unions could also force industries to slow their growth and export jobs. Unions and the activist groups representing workers were responsible for eliminating child labor. Child labor was common at the turn of the century, but it was not without its critics. The Keating-Owen Child Labor Act of 1916 was an attempt to outlaw child labor for humanitarian reasons. The Act was vigorously backed by women’s groups and progressives; it was opposed by industry and states’ rights advocates.
The Entitlement Society and Corporate Welfare
Who gets what? This is a basic question to any political system. Much of what happens in Washington revolves around the question “who gets what?” Does the federal government spend its revenue on “guns or butter?” How much national debt is acceptable? To what extent should there be social or corporate welfare? How high should taxes go to fund federal programs? One of the most enduring controversies of the 20th century, which continues to this day, is the issue of how much the government should help the poor – and how much it should stimulate business with subsidies or tax breaks.
An Entitlement Society
“Welfare” has a negative connotation because there is abuse in the system. Incidents of abuse and scams are regularly covered by the media, adding to the negative connotation. At the same time, civilized societies have some kind of safety net because no market system can adequately provide everyone with a job; and, some people are perpetually unemployable, such as the sick, the injured, the illiterate, children, etc… The current welfare system of the United States has its origins in the Great Depression, which was a near total collapse of the economic system. Certainly, the Great Depression left millions of Americans unemployed with no income, many of whom wandered the country desperately searching for work. The New Deal was President Franklin Delano Roosevelt’s response to the Great Depression. It is important because many of its basic assumptions remain with us today. High on that list is that people are “entitled” to government assistance in times of crisis. And, for better or for worse, entitlements (medical insurance, pensions, welfare) have increased steadily over the decades to keep up with inflation. The New Deal consisted of many different efforts to end the Great Depression. Many of these programs – and the agencies administering them – continued to expand even as the economy recovered. The fear is that we are moving towards a society in which people are “entitled” to payments from the federal government. The baby-boom generation threatens to take the notion of entitlements to new heights. Today, such social programs no longer just relieve pressing needs of hunger and malnutrition, but also invest in the educational development of the very young. “Head Start,” for example, is a federally-subsidized pre-Kindergarten program with popular support.
Defenders of “corporate welfare” would not even use that phrase to describe it. Senators and Representatives who favor the infusion of government funds into the private sector justify it in terms of stimulating business and commerce. But, at the end of the day, critics claim the federal government ends up transferring money from taxpayers to businesses and corporations in the form of export subsidies, agricultural subsidies and tax breaks. It’s important not to conflate subsides with tax break, however. While both can assist a business or industry, a subsidy is when the government hands out tax money to company. A tax break is when a company pay taxes to the government still, only less then they would have without the reduction. Politicians sometimes intentionally conflate the two, such as claming oil companies get ‘handouts’ because of certain tax deductions when in reality they still pay billions of dollars in taxes. Liberal Democrats come out against corporate welfare most often, so it is useful to consider the arguments against such payments by a libertarian-Republican from Texas, Ron Paul.
NO CORPORATE WELFARE BY CONGRESSMAN RON PAUL (R-TX)
Mr. Chairman, we are here today to reauthorize the Export-Import Bank, but it has nothing to do with a bank, do not mislead anybody. This has to do with an agency of the government that allocates credit to special interests and to the benefit of foreign entities. So it is not a bank in that sense. To me it is immoral in the fact that it takes from some who cannot defend themselves to give to the rich who get the benefits. And I just do not see that as being a very good function and a very good program for the U.S. Congress. Besides, I would like to see where somebody gives me the constitutional authority for doing what we do here and we have been doing, of course, for a long time. But I do not want to talk about the immorality of this so-called bank or the unconstitutionality of it. I want to talk just a second or two about the economics of it. It is really bad economics. It is pointed out that it helps a company here or there, but what is never talked about what you do not see. This is credit allocation. In order to take billions of dollars and give it to one single company, it is taken out of the pool of funds available. And nobody talks about that. There is an expense. Why would not a bank loan when it is guaranteed by the government? Because it is guaranteed. So if you are a smaller investor or a marginal investor, there is no way that you are going to get the loan. For that investor to get the loan, the interest rates have to be higher. So it is a form of credit allocation, and it is also a form of protectionism. We do a lot of talk around here about free trade. Of course, there is a lot of tariff activity going on as well, but this is a form of protectionism. Because some argue, well, this company has to compete and another government subsidizes their company so, therefore, we have to compete. So it is competitive subsidization of special interest corporations in order to do this. Now, it seems strange that we here in the Congress are willing to give the beneficiary China the most number of dollars. They qualify for nearly $6 billion worth of credits. And that just does not seem like the reasonable thing for us to do. So I strongly urge a no vote on this bill… Enron provides a perfect example of how Eximbank provides politically-powerful corporations competitive advantages they could not obtain in the free market. According to journalist Robert Novak, Enron has received over $640 million in taxpayer-funded “assistance’’ from Eximbank. This taxpayer-provided largesse no doubt helped postpone Enron’s inevitable day of reckoning… It is not only bad economics to force working Americans, small business, and entrepreneurs to subsidize the export of the large corporations: it is also immoral. In fact, this redistribution from the poor and middle class to the wealthy is the most indefensible aspect of the welfare state, yet it is the most accepted form of welfare. Mr. Speaker, it never ceases to amaze me how members who criticize welfare for the poor on moral and constitutional grounds see no problem with the even more objectionable programs that provide welfare for the rich… http://www.counterpunch.org/paul0506.html
FARM PROGRAM PAYS $1.3 BILLION TO PEOPLE WHO DON’T FARM BY DAN MORGAN, GILBERT M. GAUL AND SARAH COHEN WASHINGTON POST STAFF WRITERS, JULY 2, 2006
EL CAMPO, Tex. — Even though Donald R. Matthews put his sprawling new residence in the heart of rice country, he is no farmer. He is a 67-year-old asphalt contractor who wanted to build a dream house for his wife of 40 years. Yet under a federal agriculture program approved by Congress, his 18-acre suburban lot receives about $1,300 in annual “direct payments,” because years ago the land was used to grow rice. As Congress prepares to debate a farm bill next year, The Washington Post is examining federal agriculture subsidies that grew to more than $25 billion last year, despite near-record farm revenue. Matthews is not alone. Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post. Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709. “I don’t agree with the government’s policy,” said Matthews, who wanted to give the money back but was told it would just go to other landowners. “They give all of this money to landowners who don’t even farm, while real farmers can’t afford to get started. It’s wrong.” The checks to Matthews and other landowners were intended 10 years ago as a first step toward eventually eliminating costly, decades-old farm subsidies. Instead, the payments have grown into an even larger subsidy that benefits millionaire landowners, foreign speculators and absentee landlords, as well as farmers. Most of the money goes to real farmers who grow crops on their land, but they are under no obligation to grow the crop being subsidized. They can switch to a different crop or raise cattle or even grow a stand of timber — and still get the government payments. The cash comes with so few restrictions that subdivision developers who buy farmland advertise that homeowners can collect farm subsidies on their new back yards. The payments now account for nearly half of the nation’s expanding agricultural subsidy system, a complex web that has little basis in fairness or efficiency. What began in the 1930s as a limited safety net for working farmers has swollen into a far-flung infrastructure of entitlements that has cost $172 billion over the past decade. In 2005 alone, when pretax farm profits were at a near-record $72 billion, the federal government handed out more than $25 billion in aid, almost 50 percent more than the amount it pays to families receiving welfare. The Post’s nine-month investigation found farm subsidy programs that have become so all-encompassing and generous that they have taken much of the risk out of farming for the increasingly wealthy individuals who dominate it. The farm payments have also altered the landscape and culture of the Farm Belt, pushing up land prices and favoring large, wealthy operators. The system pays farmers a subsidy to protect against low prices even when they sell their crops at higher prices. It makes “emergency disaster payments” for crops that fail even as it provides subsidized insurance to protect against those failures. And it pays people such as Matthews for merely owning land that was once farmed.
Globalization and Outsourcing
The United States used to be virtually a world unto itself. With the exception of sugar and rum from the Caribbean and some finished goods from England, the United States grew or manufactured almost everything it consumed. Over the course of the 20th century, however, more and more of America’s goods and services were exchanged, in both directions, on the international market. Imports and exports became considerably more central to the U.S. economy. The American economy has undergone a radical transformation in the past few decades. First, the U.S. witnessed a rapid transition from manufacturing to service-oriented business. Industrial factories closed down to relocate overseas, and imports became more common. The epitome of this phenomenon, at least symbolically, is Walmart, where 70% of its products are imported from China (although this may be changing now). In the past decade, this trend toward economic integration has accelerated in a process often termed “globalization.” Within globalization, there is a smaller, separate trend towards “outsourcing,” which means the contracting of workers in lower-wage countries. The North American Free Trade Agreement (NAFTA) integrated the U.S., Canada and Mexico economically. Then, the rise of China as an industrial power meant that cheaply-produced Chinese goods could replace more expensive American ones. Because China represents such a large portion of U.S. exports, this means that the U.S. is exporting far less than it is importing, overall. Whether or not this is good or bad (for the U.S.) is a point of debate among economists. Some economists, like Thomas Friedman, tend to see the positive side of globalization. While the U.S. may lose manufacturing jobs, even as U.S. companies relocate overseas or use contracted labor (outsourcing), it gains jobs in service and in high-tech research. Other economists tend to see a general hollowing out of the American economy in all sectors. First, they say, manufacturing jobs were offshored, and now, they claim, service and information jobs are also moving overseas. These economists point to the fact that personal debt in the United States is at record levels, and that growth in the U.S. domestic economy largely comes through debt spending. Perhaps the best example of how globalization and outsourcing works (or doesn’t) is Walmart, which now accounts for about 10% of the U.S. gross domestic product. A decade ago, many of these goods were produced somewhere in the U.S., but production has shifted to other countries with cheaper labor, and the products have been imported. Walmart argues that its stores provide customers with high-value and low-cost goods, that they create jobs, and that they stimulate the economic activity of their adjacent areas, adding to overall economic growth and prosperity. By some estimates, Walmart saves consumers some 200 billion dollars a year. Besides, Wal-Mart is a private company, a corporation, and its primary obligation is to make profit for stockholders. Critics of Walmart tend to argue that the chain is replacing “mom-and-pop” stores, hollowing out the economy and mistreating its workers with low-pay and low-benefit jobs, sometimes even violating codes of employment.