Part I: the ap united states government course examination

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One of government’s primary roles is to make policy that will solve society’s problems. In the United States all three branches of government and the bureaucracy make policy. Many other organizations try to influence government decisions and programs, including special interest groups, research institutes, corporations, state and local governments, as well as individual citizens.


The policymaking process regularly makes news headlines, but it is not easy to understand how the overall process works. Every policy has a unique history, but each one generally goes through five basic stages:

  1. Recognizing the problem/agenda setting - Almost no policy is made unless and until a need is recognized. Many different groups and people may bring a problem or issue to the government’s attention through interest group activities or court cases. People within the government itself have their own agendas that they push, including the president, bureaucratic agencies, and members of Congress. Of course, these sources do not agree on which issues are most important, so getting the government to set an agenda that prioritizes problems is quite a challenge.

  1. Formulating the policy ö If enough people agree that government needs to act, then a plan of action must be formulated. At this stage, generally several alternative plans from various political groups are formed. For example, if the issue is gun control, interest groups from both sides will push for different solutions, and reaching a solution almost always involves compromise all around.

  1. Adopting the policy - In this third stage, the policy becomes an official action by the government. It may take the form of legislation, an executive or bureaucratic order, or a court decision. Policy is often built in a series of small steps passed over time, so this stage may be quite complex.

  1. Implementing the policy ö For an adopted policy to be effective, government must see that it is applied to real situations. For example, if new gun control laws are set in place, government officials must make sure that the general public knows about them. They must also put enforcement in place and see that violators are punished appropriately.

  1. Evaluating the policy ö Evaluation of the good or the harm created by a policy usually takes place over an extended period of time. Policies that may seem sound at the start may have unforeseen negative consequences or unexpected costs. Inevitably, some will call for changes and/or corrections, and others will disagree. The whole process occurs again, starting with recognition ö or re-recognition ö of the problem. As a result, policymaking is a continuous process, and government at any given time is at various stages with numerous issues.


How much responsibility should the government have for keeping the United States economy healthy? That question has been answered in many different ways throughout our history. Until the twentieth century the country followed the laissez-faire (literally, to leave alone) policy, which required a free market without any intervention from government. With President Franklin Roosevelt’s New Deal era of the 1930s came Keynesian economics, or the opposite belief that the government should manage the economy. Today the U.S. economic policy lies somewhere in between - government should regulate and sometimes manage, but should allow a free market whenever possible. Political and business leaders disagree on how much control is enough.

The budgeting of public funds is one of the most important decision making processes of government. Nothing reflects the growth in public policy and the rise of big government more clearly than the increased spending by the federal government. For example, in 1933, the annual federal budget was about $4 billion. Today the national budget is more than $2.5 trillion, or about 20 percent of the gross domestic product. The national debt is about $4 trillion, and in 2004 the deficit (amount overspent in a given year) was about $412 billion.


Fiscal policy affects the economy by making changes in government’s methods of raising money and spending it.

Where the Money Comes From

Not surprisingly, most government revenue comes from taxes, but some comes from interest, fees, and borrowing.

  • Federal Income Taxes- The income tax is the largest single source of federal revenue today, providing almost 40% of the national government’s total revenues. It is a progressive tax- the higher the income and ability to pay, the higher the tax rate. Not only individuals pay income taxes, corporations do, too. About 10 percent of federal government revenues come from corporate income taxes. Today tax codes are so complex that most ordinary citizens don’t understand them. As a result, many critics have called for tax codes to be simplified.

  • Social Insurance Taxes- The largest social insurance taxes are for Social Security and Medicare. Employers apply these taxes to their employees, who are then eligible to receive Social Security benefits when they get older. Social insurances taxes fund the Social Security and Medicare programs. These taxes account for almost 1/3 of the total federal government revenues collected.

  • Borrowing- The government regularly borrows money ö most of it from its own taxpayers ö to fund its expenses. Deficit spending occurs when the government spends more money than it takes in within any given fiscal year. Starting in the early 1990s Congress began considering required balanced budget amendments/ legislation in order to cut the national debt. With increased tax revenues from the economic boom of the 1990s, deficit spending decreased and turned into a surplus, but governments generally borrow more money during wartime than during peace, so the war on terrorism and the war in Iraq put the country back into deficit spending during the early 2000s.

        Other Taxes - A small percentage of revenue comes from other taxes, such as excise taxes, estate taxes, customs, duties, and tariffs. Excise taxes are levied on goods and services, such as liquor, gasoline, cigarettes, air travel, and telephones. These are regressive taxes, meaning that they are the same for everyone, and are not based on income. Estate taxes are levied on the money and property that are inherited when an individual dies, but are generally only levied on large estates. Customs, duties, and tariffs are levied on goods imported into the United States.

Where the Money Goes

The government now spends more that $2.5 trillion a year, as provided in the federal budget. Each year the President submits a federal budget for approval by Congress for money to be spent starting in October of that year. Government spends its revenue on many different things, but three major categories are entitlements, national defense, and the national debt.

        Entitlement Programs- These payments are required by law, and are given to people meeting particular eligibility requirements. The largest programs are Social Security (pensions for older Americans), unemployment insurance, Medicare (medical benefits), and federal retirement pensions. Social Security and Medicare amount to about 41 percent of federal spending per year.

        National Defense - The second largest amount goes for national defense. Today about 18 percent of the total budget goes for defense, in contrast to 28 percent in 1987, when the cold war was still going on. However, the current war on terrorism and the war in Iraq have escalated defense expenditures again, up from about 16% in 2001.

        National Debt - The third largest amount ö about 8 percent ö pays interest on the national debt, a figure that has also decreased in recent years.

Other expenditures are highway construction, education, housing, and foreign aid.


Monetary policy is the government’s control of the money supply. The government can control how much or how little is in circulation by the amount of money that they print and coin. If too much money is out there, it tends to cause inflation, or the devaluation of the dollar. Too little money in circulation and the opposite, deflation occurs.

The powerful arm of government that controls the money supply is the Federal Reserve System, which is headed by the Federal Reserve Board. The board is designed to operate with a great deal of independence from government control. One important way that the Fed controls the money supply is by adjusting interest rates high rates discourage borrowing money, and low ones encourage it.

The Federal Reserve Board’s seven members are appointed by the president and are approved by the Senate for 14-year, nonrenewable terms, and the president may not remove them from office before their terms are up. The chair is elected by the board for four years, and may be reelected. The Board heads the Federal Reserve System, which was created by Congress in 1913 to regulate the lending practices of banks. It consists of 12 regional banks, which in turn supervise a total of about 5,000 banks across the United States.


Until the 20th century, the United States was generally guided by an isolationist foreign policy, or the philosophy that we should avoid entangling alliances (the words of George Washington) whenever possible. Then, in the 20th century our involvement in World War I and World War II thrust us onto the world stage.

In the years after World War II, the United States was guided generally by containment, the policy of keeping communism from spreading beyond the countries already under its influence by about 1950. The policy applied to the United States’ role in the cold war, a struggle between the United States and the Soviet Union for world power. With the collapse of the Soviet Union in 1991, containment no longer made sense, so in the past ten years, the U.S. has been redefining its foreign policy.

We have been active participants in many international organizations, such as the United Nations, but Americans disagree on just how much world involvement is appropriate. And then with the September 11 attacks on the World Trade Towers and the Pentagon, the United States finds itself spearheading an international war on terrorism. These developments conjure up the old questions within a very different set of circumstances. How actively should we fight terror? What, if any, are the limits? President Bush’s decision to invade Iraq in 2003 to remove Saddam Hussein from power was controversial, and remains so, especially as the coast of the war has escalated.


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