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We the People Book Cover
We the People: A Concise Introduction to American Politics, 4/e
Thomas E. Patterson, Harvard University

Economic and Environmental Policy

Chapter 15 Summary

Although private enterprise is the main force in America's economic system, the federal government plays a significant role through policies it selects to regulate, promote and stimulate the economy.

Regulatory policy is designed to achieve efficiency and equity, which require government to intervene, for example, in order to maintain competitive trade practices (an efficiency goal) and to protect vulnerable parties involved in economic transactions (an equity goal). Many of the regulatory decisions of the federal government, particularly those of older agencies, are made largely in a context of group politics. Business lobbies have an especially strong influence on regulatory policies that affect them. In general, newer regulatory agencies have policy responsibilities that are broader in scope and apply to a larger number of firms than those of older agencies. As a result, newer agency policy decisions are more often made in a party politics context. Republican administrations are less vigorous in their regulation of business than are Democratic administrations.

Business is a major beneficiary of federal government efforts that promote economic interests. A large number of programs, including those that provide loans and research grants, are designed to assist businesses, which are also protected from failure through such measures as tariffs and favorable tax laws. Labor, for its part, gets government assistance through laws concerning such matters as worker safety, the minimum wage and collective bargaining. Yet America's individualistic culture tends to put labor at a disadvantage, keeping it less powerful than business in its dealings with government. Agriculture is another economic sector that depends substantially on government's help, particularly in the form of income stabilization programs, such as those that provide subsidies and price supports.

The U.S. government pursues policies that are designed to protect and conserve the environment. A few decades ago, the environment was not a policy priority. Today, there are many programs in this area, and the public has become an active participant in efforts to conserve resources and prevent exploitation of the environment.

Through its fiscal and monetary policies, Washington attempts to maintain a strong and stable economy--one that is characterized by high productivity, high employment and low inflation. Fiscal policy is based on government decisions about spending and taxing, which are aimed at either stimulating a weak economy or dampening an overheated (inflationary) economy. Fiscal policy is worked out through Congress and the president and is consequently responsive to political pressures. However, since it is difficult to raise taxes or cut programs, government's ability to apply fiscal policy as an economic remedy is limited. Monetary policy is based on the money supply and works through the Federal Reserve System, which is headed by a board whose members hold office for fixed terms. The Fed is a relatively independent body, a fact that raises questions about whether it should have such a large role in national economic policy.