Policy Debates

This article focuses on economic policy debates. It provides an analysis of the main themes of current economic policy debates, the stakeholders involved in economic policy debates, and the root causes of economic policy debates. The role of values, ideology, and resource allocation choices in economic policy debates is introduced. The article provides examples of the types of organizations engaged in economic policy research and debate. The connection between policy debate and the economic policy making process is discussed. In addition, the environment versus the economic policy debate is addressed.

Keywords Competitiveness; Congress; Economic Growth; Economic Policy; Federal Government; Federal Register; Fiscal Policy; Globalization; Ideology; Inflation; Monetary Policy; Policy Cycle; Policy Debates; Policy making Process; Public Policy; Public Problems; Regulations; Resource Allocation; Rulemaking; Stakeholders; Values

Overview

Economic policies, which refer to government policies for maintaining economic growth and tax revenues, affect numerous stakeholders, including politicians, policy makers, businesses, the electorate, the regional and global environment, and the global population at large. Stakeholders, who are the individuals or groups most likely to gain or lose from the success or failure of an economic, social, and environmental system, are often in conflict with each other over the perceived need for a policy or the expected outcome of a policy initiative. Stakeholders debate the likely outcomes of implementing economic policies controlling federal spending, economic growth, labor policies, the environment, and business regulation. Stakeholders engage in policy debates to protect their interests and further their perspectives and positions. Economic policy debates incorporate resource allocation and value choices. Economic policy debates are a ubiquitous feature of government policy making. Economists, policymakers, and other related stakeholders participate in policy debates as one part of the overall policymaking process. In the United States, public involvement in public policy debates is considered to be a fundamental part of the democratic rulemaking or policy-making process.

Public Policy

Economic policies, a type of public policy, are created to solve public problems such as unemployment or budget deficits. Public policy refers to the basic policy or set of policies that serve as the foundation for public laws. Public policy is often characterized as a social goal, enabling objective, or social solution. The public policy process is a problem-solving activity that solves or resolves a problem or conflict in society. Public policy, requested by society and enacted by government, unites and mediates the relationship between society and government. Public policy is created within a specific historical context, socio-cultural context, budget, and political system. It encompasses and regulates nearly all areas of human and social behavior. One particularly large body of public policy concerns the economy. Economic policies are created and implemented to maintain economic growth and tax revenues.

Reasons for Policy Debates

Policy debates arise for the following reasons: a lack of information about the public problems and proposed policy solutions; contested social goals; and disagreement about economic theories that inform the policy. Policy debates, even ones over theory, are often informed by stakeholder values. Economic theories are not value-free. Economic theories are based, in part, on value judgments and social goals. Ultimately, policy debates may arise from differences in worldviews, ethics, principles, values, and factual interpretations (Tiemstra, 1998). National economic policy debates are often framed in terms of national ideologies and national values such as free enterprise and the market economy. For example, legislators use "free enterprise" concepts in congressional debates on major economic policy proposals to appeal to popular sentiment. Policymakers actively invoke the political symbolism of free enterprise/capitalism and constitutional democracy to create support for their policy initiative (Musolof, 1998).

Common Topics of Economic Policy Debates

Common topics for economic policy debates in the United States include the following: economic scarcity; public choice; opportunity cost; supply and demand; economics and the environment; government and the economy; income distribution and poverty; labor markets; market failure, regulation and public choice; monopolistic competition; monopoly; oligopoly; utility and consumer choice; employment, unemployment, and inflation; fiscal policy; monetary policy; money and the financial system; productivity and growth; taxes, spending, and deficits; comparative economic systems; developing and transitional economies; international finance; and international trade (Kane, 2004).

This article explores the main themes of economic policy debate occurring today in the United States, the main actors in the U.S. and global policy debates, and the root causes of economic policy debates. The following section provides an overview of the main organizations engaged in economic policy research and debate. This section serves as the foundation for later discussion of the connection between policy debate and the economic policy making process. In addition, the environment versus the economy policy debate is addressed.

Locating Economic Policy Debates

Independent Policy Research Centers

Multiple stakeholders, including politicians, policy makers, businesses interests, the electorate, and the global population at large, debate the economic policies controlling federal spending, economic growth, labor policies, the environment, and regulation. The most active and vocal actors in economic policy debates are policy research institutes such as the Roe Institute for Economic Policy Studies, the Economic Policy Institute (EPI), and the Center for Economic Policy Research (CEPR).

• The Roe Institute, part of the conservative Heritage Foundation, conducts research on economic issues such as federal spending, economic growth, labor policies, the environment, and regulation. The Roe Institute prepares policy reports and distributes them to policymakers, the media, and related stakeholders. These policy reports are intended to brief policymakers on a wide range of economic issues and encourage policy debate.
• The Economic Policy Institute, a nonprofit, nonpartisan think-tank founded in 1986, is dedicated to facilitating public debate about strategies to achieve a more prosperous and fair economy. The Economic Policy Institute focuses its efforts on economic policy affecting the interests of low and middle-income workers. For example, the Economic Policy Institute engages in policy research and debate in areas such as global competition, wage equality, living standards, labor markets, government and the economy, globalization and trade, and education. Specific policy concerns are trends in wages, incomes, and prices; part-time and contingent work; welfare reform; labor market problems; work organization; budget, tax, and fiscal policies; health care; education; the consumer price index; Medicare; Social Security; rural and urban policies; state-level economic development strategies; trade and global finance; comparative international economic performance; the health of manufacturing and other key sectors; competitiveness, jobs, and the environment; and urban sprawl. The Economic Policy Institute makes policy recommendations to policymakers and related stakeholders based on the findings of its research.
• The Center for Economic and Policy Research is a network of over 700 primarily European researchers. The London Center for Economic and Policy Research focuses on the following policy topics: migration; the European Central Bank (ECB) and the euro; the International monetary Fund (IMF); World Bank; World Trade Organization (WTO); European Monetary Union; global financial crises and Asia; monetary policy; globalization, regionalism, and trade; economic transformation of central and eastern Europe; economic integration; European Union enlargement; economic growth and fluctuations; the transformation of European financial markets; European competition policy; European labor markets; and regulation of European network industries. The Center for Economic and Policy Research facilitates policy debate throughout the European Union.

Academic Policy Research Institutes

In addition to independent policy research centers, numerous colleges and universities in the United States and around the world have founded economic policy groups and think tanks to lead, focus, and participate in economic policy debate at the national and global level. Examples of academic policy research institutes include the New School's Schwartz Center for Economic Policy Analysis, the Stanford Institute for Economic Policy Research, and the Princeton Center for Economic Policy Studies.

• The New School's Schwartz Center for Economic Policy Analysis (CEPA) focuses on economic growth, employment, and inequality in the U.S. economy. Economic growth research and debate includes topics such as outsourcing and structural change; U.S. fiscal policy; demand and growth in developing countries; trade models; new labor market indicators; U.S. trade balance; European unemployment; standard of living; and inequality and the U.S. trade deficit.
• The Stanford Institute for Economic Policy Research (SIEPR), founded in 1982, unites Stanford's economic scholars to gather and discuss their economic policy research. The Stanford Institute for Economic Policy Research connects these economists with leaders in business, technology, and government to analyze, discuss, and debate economic topics. The Stanford Institute for Economic Policy researchers study a variety of economic policy issues and contribute their research and ideas to policymakers.
• Princeton’s Griswold Center for Economic Policy Studies, founded in 1989 to support economic policy-related research in Princeton's Department of Economics, promotes and facilitates communication among leaders in the academic, business, and government communities about economic policies and their related issues.

Debate & the U.S. Policymaking Process

Policy debates, facilitated and encouraged by economic policy research institutes, are an active part of the democratic process. The U.S. federal government invites debate as part of the policymaking process. For example, the federal government's policymaking process, also referred to as the rule-making process, includes a stage of formalized public policy debate. The rulemaking or policymaking process refers to the process followed by federal agencies to formulate, amend, or repeal a regulation. The rulemaking process includes two main stages: the proposed rule stage and a final rule stage. In the proposed rule stage, the regulatory agency provides notice of a proposed regulation. During a set period, any person or organization may review this document and submit comments on it in writing to the regulatory agency. The regulatory agency is legally bound to consider the public comments received on the proposed regulation. In the final rule stage, the regulatory agency incorporates a response to the significant issues raised by those who submitted comments, discusses any changes made to the regulation, and publishes the complete text of the final regulation in the Federal Register. The relationship between policy debates and the economic policy making process is described in greater detail in the following section.

Applications

Policy Debate & the Economic Policy-Making Process

U.S. Economic Goals

The economic goals of the United States government include maintaining high levels of employment, establishing stable prices for goods and services, and controlling the pace of economic activity. Stakeholders disagree about how best to accomplish these goals. Economic policy stakeholders disagree and engage in debate about economic policy for multiple reasons. For example, economists often disagree about economic theories, policies, and methodologies. Interest groups lobby for their preferred issues and causes. Stakeholders recognize that economic policy is a tool used to address public needs and allocate resources. Stakeholder consensus is rare and debate is common, possibly even necessary, in the economic policymaking process. Economic policy stakeholders disagree about how to solve public problems and direct public resources. Common areas of policy debate include economic growth, foreign aid and development, public budgeting, role of cost benefit analysis, labor practices, competition, intellectual property, healthcare reform, and tax reform (Tiemstra, 1998)

Use of Fiscal & Monetary Policy

The United States government uses the tools of fiscal policy and monetary policy to manage the economy and achieve their economic and social goals. Fiscal policy refers to expenditures by federal, state, and local governments and to the taxes levied to finance these expenditures. Fiscal policy supports and funds the federal budget, aids the federal government's social policies, and promotes overall economic growth and stability. Federal spending includes contracts, grants, loans, and direct payments such as social security. Stakeholders engage in policy debate concerning the fair and appropriate allocation of federal resources. For example, current common policy debates in American government and society about income tax include issues such as the appropriate overall level of taxation and the extent to which taxes should be used to promote social objectives.

Federal Fiscal Policy

Federal fiscal policy is created annually in collaboration between the president and Congress. The president proposes a budget, otherwise known as a spending plan, to Congress in February and Congress spends approximately six to eight months engaged in the following decision-making process: Congress decides the overall level of spending and taxes; Congress divides that overall budget amount into separate categories such as national defense, health and human services, and transportation; and Congress creates individual appropriations bills which detail how the funds in each category will be spent. The federal government depends on taxes to cover almost half of the expenses included in the federal budget. The main income generating taxes are income tax, payroll tax, and tax on corporate profits. State and local governments collect the majority of their tax revenue from property taxes. Areas of concern and debate for urban fiscal policy makers include the causes and consequences of the urban fiscal crisis, the design of optimal tax and spending policies for local governments, and funding of public infrastructures.

The Policy Cycle Process

Public policy, including all economic policy, is created within or through a policy cycle. The policy cycle process involves both politics and administration. The public policy process includes four major stages: agenda setting; policy formulation; implementation; and evaluation. These steps are usually (though not always) sequential. Policy debates occur in the agenda setting stage. There are numerous actors involved in each stage of the policy cycle. There is little agreement on the essences of these roles. The major players in the policy process are referred to as policy entrepreneurs, social entrepreneurs, issue initiators, policy brokers, strategists, fixers, brokers, or caretakers. While public policy is created by politicians and legislative representatives, public administrators are responsible for policy implementation. In policy implementation, administrators are granted varying degrees of discretion in details, range, and scope of the policy. Examples of discretionary choices made by public policy administrators include rule making, adjudication, law enforcement, and program operations. In addition to the influence provided by implementation discretion, policy administrators may provide advice and counsel to political officials and encourage policy debate through reports, testimony, recommendations, monthly economic indices, and legislative proposals (Skok, 1995).

Interest Groups & Nonprofit Policy Organizations

In addition to the influence that public administrators exert on public policy formation and implementation, there are, at least, two other main policy-influencing groups: industry-driven interest groups and nonprofit policy organizations. Interest groups and policy organizations are most often private sector rather than public sector, governmental entities. Interest groups refer to nongovernmental organizations actively trying to influence public policy. For example, the Institute of Electrical and Electronics Engineers created their policy-focused unit, IEEE-USA, in 1973 to support the public policy interests of their members. IEEE-USA's public policy priority issues for 113th Congress, 1st Session (2013) included innovation and competitiveness, energy independence, critical infrastructure protection, immigration reform, engineering workforce security, e-health, and transportation and aerospace.

Non-profit policy organizations, such as the Cato Institute, Heritage Foundation, Urban Institute, and Brookings Institution, serve as a link between politicians, academic research, and public policy. Policy organizations, often referred to as think tanks, engage in academic research on public policy issues in a time-sensitive manner as well as translate the research into understandable, nontechnical language for nonspecialists. Policy organizations may have policy agendas, but their nonprofit status separates them from the commercial interests of industry special interest groups such as IEEE-USA (Schuyler, 2006). Policy organizations and interest groups facilitate and promote policy debate to further their respective policy agendas.

Issues

The Environment & the Economy

Economic policies that affect the environment are one of the most intensely debated policy areas. Stakeholders debate the need and cost involved in recycling waste, reducing greenhouse gases, using sustainable materials for production, and investing in environmental research. The policy debate, which is complex, is often mistakenly reduced to a two-sided, win-or-lose battle between the environment and the economy. In practice, the environment-versus-the-economy debate has numerous sides, perspectives, and stakeholders (Hoffman & Ventresca, 1999). Business interests argue that environmental regulations create prohibitive barriers to business operations and economic growth. For example, the economic costs and environmental impact of climate change policy are debated by businesses, governments, citizens, and environmental protection groups. The estimates of the economic costs of implementing climate change policy, such as the Kyoto Protocol, often ignore the substantial environmental and financial benefits associated with the greenhouse gas mitigation measures (Golub, 2006).

Environmental Management

Businesses of all sorts, such as airlines, oil producers, car manufacturers, and paper mills, impact the environment. Prior to the 1960s, there was no corporate accountability for the costs of environmental damages. Environmental costs were externalized to national governments and local communities. The practice of environmental management began, as a legislated activity and requirement of corporate behavior, in the 1960s and 1970s in response growing concern about environmental pollution highlighted and publicized by pollution in Lake Erie, smog levels in Los Angeles, and the Rhine River catching fire from contaminants and pollutants. Government agencies, such as the United States Environmental Protection Agency (EPA), established in 1970, were formed, as explained by the Environmental Protection Agency's mission statement, to protect human health and to safeguard the natural environment—air, water, and land—upon which life depends. The EPA oversees environmentally focused federal research, monitoring, standard-setting, and enforcement activities to ensure environmental protection (Anderson, 1999).

Common Corporate Environmental Management Practices

While the environment and the economy debate is often oppositional, common corporate environmental management practices have resulted in numerous gains for businesses. Common corporate environmental management practices include clean production and ecologically sustainable development. Clean production refers to the initiatives undertaken by businesses to reduce the environmental impact of production activities. Examples of cleaner production approaches include the conservation of energy, reduced consumption of raw materials, decreased use of and production of hazardous materials, and reduced waste production. Benefits of cleaner production approaches include improved community relations as well as reduced operating costs and liability risks. Ecologically sustainable development refers to the business practice of using, conserving, and enhancing the community's resources so that vital ecological processes are maintained for present and future generations. Ecologically sustainable development, which requires environmental, social, and economic cooperation, necessitates changes in the nature of production and consumption. Maintaining and conserving biodiversity, one of the main goals of ecologically sustainable development, refers to the variety of life forms and the ecosystems in which they live (Toman, 1994).

Benefits of Environmental Management Systems

According to the Environmental Protection Agency, environmental management systems, and environmental policies and regulations in general, benefit corporate stakeholders in numerous ways. Environmental management systems help an organization to comply with its regulatory responsibilities and provide a means for addressing unregulated environmental aspects such as energy efficiency and resource conservation; facilitate assessment of risks and liabilities; increase operating efficiency, create standard operating procedures, and capture institutional knowledge of experienced employees; increase employees' environmental awareness and involvement throughout the organization; offer potential environmental and financial benefits; provide a competitive edge and improve public relations (Johnson, 2005). Ultimately, despite corporate protestations about the unbearable expenses of complying with environmental regulations, environmental management systems are a generally cost-effective approach to improving environmental performance. The environment-versus-the-economy debate illustrates the complex and multifaceted relationships that exist between stakeholders engaged in economic policy debates.

Conclusion

In the final analysis, economic policy debates tend to include multiple stakeholders with multiple interests and viewpoints. Policy research groups play an active part in educating the public on economic policies and their related issues. This education effort facilitates the participation of citizens in the democratic policymaking process. Ultimately, policy debates, particularly those surrounding the environment and the economy, cannot be reduced to purely dichotomous or oppositional sides. While policy debates are informed by ideology and values, successful economic policy is complex and requires collaboration and cooperation of all stakeholders.

Terms & Concepts

Congress: The United State government's legislature, granted the power to make laws.

Economic Growth: The quantitative change or expansion in a country's economy.

Economic Policies: Government policies for maintaining economic growth and tax revenues.

Federal Government: A form of government in which a group of states recognizes the sovereignty and leadership of a central authority while retaining certain powers of government.

Federal Register: The official daily publication for rules, proposed rules, and notices of federal agencies and organizations, as well as executive orders and other presidential documents.

Fiscal Policy: The expenditures by federal, state, and local governments and the taxes levied to finance these expenditures.

Globalization: A process of economic and cultural integration around the world caused by changes in technology, commerce, and politics.

Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Monetary Policy: A tool used by the federal government to control the supply and availability of money in the economy.

Policy Cycle: The four major stages of the policy making process including agenda setting, policy formulation, implementation, and evaluation.

Public Policy: The basic policy or set of policies that serve as the foundation for public laws.

Regulations: The use of laws or rules by a government regulatory agency to protect consumers and investors as well as provide orderly and predictable business procedures.

Rulemaking: The process followed by federal departments and agencies to formulate, amend, or repeal a regulation.

Stakeholders: Individuals or organizations who stand to gain or lose from the success or failure of a system.

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Suggested Reading

Aslanbeigui, N., & Wick, A. (1990). Progress: Poverty or prosperity? American Journal of Economics & Sociology, 49, 239–256. Retrieved August 11, 2007, from EBSCO Online Database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=9705153060&site=ehost-live

Cebula, R. (2012). Contemporary economics and policy issues in the U.S. International Advances in Economic Research, 18, 131–137. Retrieved November 21, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=75563593

White, Lawrence H. (2012). The Clash of Economic Ideas: The Great Policy Debates and Experiments of the Last Hundred Years. New York: Cambridge University Press.

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McIntyre, R. (1989). Economic rhetoric and industrial decline. Journal of Economic Issues, 23, 483–491. Retrieved August 11, 2007, from EBSCO Online Database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=4679922&site=ehost-live