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CHAPTER 21: SOCIAL and DOMESTIC POLICY 575 574-583 CH21S1-860053 12/3/04 11:59 PM Page 576 574-583 CH21S1-860053 12/3/04 11:58 PM Page 574 Impact of Policy National policy affects your economic decisions, your education, your health, and much more. This chapter describes the important policy choices that your government makes. It also examines how political issues affect social and domestic policy. To learn more about how social and domestic policy is established, view the Democracy In Action Chapter 21 video lesson: Social and Domestic Policies ★ ★ ★ ★ ★ ★ ★ ★ ★ ★ GOVERNMENT Chapter Overview Visit the United States Government: Democracy in Action Web site at gov.glencoe.com and click on Chapter 21–Overview to preview chapter information. 574 574-583 CH21S1-860053 12/3/04 11:59 PM Page 575 Section 11 Business and Labor Policy Reader’s Guide he Federal Trade Commission is just one of many government agencies involved in Key Terms regulating the American economy. Al- though free enterprise is the foundation mixed economy, laissez-faire, trust, monopoly, Tof the American economic system, ours is a mixed interlocking directorate, oligopoly, securities, collective bargaining, injunction economy—a system in which the government both supports and regulates private enterprise. Find Out ■ What are the overall aims of United States business policy regarding competition and Promoting and consumers? ■ How did the federal government help unions Protecting Business to organize and grow? Regulating business is a relatively recent Understanding Concepts function of the federal government, dating Free Enterprise Are government regulations back slightly more than 100 years. The active pro- consistent with the principle of free enterprise? motion and protection of business, however, has Explain your answer. been a major activity of United States government since George Washington was president. Wash- ington’s secretary of the treasury, Alexander Hamilton, claimed that emerging American man- ufacturers needed protection from foreign com- Scams petition. He first proposed a protective tariff in Scholarship 1791, but Congress shelved the request. After the EPTEMBER 1996 WASHINGTON, D.C., S War of 1812, British goods flooded American markets, threatening to destroy newly created in- he Federal Trade dustries. A member of Parliament in 1816 ex- TCommission (FTC) plained Britain’s advantage: has issued a consumer alert about crooked It was well worth while to incur a loss scholarship offers. The upon the first exportation, in order, by the that “ FTC cautions glut, to stifle in the cradle, those rising fraudulent companies students manufactures in the United States, which are promising the war has forced into existence, contrary scholarships in return Successful recipient of to the natural course of things. for an up-front fee. legitimate scholarship —Henry Brougham, Esq., 1816 Most offer a money- ” but back guarantee companies ask it difficult to get a refund. Some The United States responded to this threat with make confirm the stu- for a checking account number, “to higher tariffs. debit the account without dent’s eligibility,”and then Many scholarship services the student’s consent. Free Trade In recent years the federal gov- advises that a legitimate charge a fee, but the FTC ernment has emphasized lower tariffs and pro- a scholarship. company will never guarantee moted free trade for many items. The North American Free Trade Agreement (NAFTA), Yosemite Valley is preserved by the government. ▲ CHAPTER 21: SOCIAL AND DOMESTIC POLICY 575 574-583 CH21S1-860053 12/3/04 11:59 PM Page 576 annual tax returns. A second is government loans, or credit subsidies, that provide funds for busi- nesses at low interest rates. A third type of subsidy is free services, such as weather information, cen- sus reports, and other information valuable to businesses across the nation. Finally, the govern- ment provides direct cash payments to businesses whose products or services are considered vital to the general public. Businesses in the field of trans- portation often receive this type of subsidy. Commerce Department Aid to Business A separate department of the executive branch, the Department of Commerce, was formed in 1913 for the sole purpose of promoting business interests. Congress mandated that the department “foster, promote, and develop the foreign and domestic commerce of the United States.” The main functions of the Commerce Depart- ment are to provide information services, financial assistance, and research and development services. Several agencies within the Commerce Depart- ment supply businesses with valuable information Against NAFTA and subsidies, particularly the Bureau of the Cen- sus, which provides important economic data to Trade Policy Many Americans, especially businesses. supporters of labor unions, have strongly opposed NAFTA. Supporters of NAFTA, however, Help for Small Businesses Because compe- believe that the agreement will lower costs tition is important to the free-enterprise system, for consumers and expand U.S. markets. the federal government tries to help small busi- Why are labor unions opposed to NAFTA? nesses. An important independent executive agency outside the Commerce Department that aids businesses is the Small Business Administra- signed by Canada, Mexico, and the United States in tion (SBA). In addition to offering credit subsidies, 1993, was designed to gradually eliminate trade re- the SBA gives free advice and information to small strictions among the trading partners beginning in business firms. 1994. The United States plays a leading role in pro- Regional offices of the SBA offer government- moting free trade around the world. sponsored classes on sound management practices Consumers benefit from the lower cost of for owners of small businesses. Businesses may many imported goods. Although current rates are also seek advice from the SBA on how to overcome at an all-time low, tariffs are still used to protect their problems, and the SBA also conducts pro- American industries from foreign competition. grams to help women and minorities in business. The government also restricts some products through quotas, or limits on the number that may be imported. Regulating Business Some Americans believe that government Types of Federal Subsidies Today the fed- regulation of the economy is at best a mixed eral government provides four types of subsidies, blessing. These people usually agree with the fol- or aids to business. One is tax incentives that allow lowing sentiments expressed by economist Arthur businesses to deduct certain expenses from their B. Laffer: 576 CHAPTER 21: SOCIAL AND DOMESTIC POLICY 574-583 CH21S1-860053 12/4/04 12:00 AM Page 577 Those who advocate, in their desperation, from the regulation. Nevertheless, federal regula- “more government to solve the problems of tion of economic activity springs from a constitu- our society are demonstrably wrong. tional provision. The solution rests in less—not more— government! Constitutional Basis of Regulation The ” —Arthur B. Laffer Constitution grants Congress the power to “lay and collect taxes” for the general welfare and to Writer Victor Kamber expressed the opposite “regulate commerce . among the several states.” point of view. In Kamber’s opinion: Most regulatory laws enacted in the twentieth cen- tury are based upon these two powers. Many Americans have forgotten that we set The commerce clause in Article I, Section 8,1 “up regulatory agencies in the first place to provides the primary constitutional basis for gov- protect the public interest. Industries con- ernment regulation of the economy. The Founders sidered vital to the public—such as trans- designed this clause to allow the federal govern- portation, food, finance, communications, ment to control interstate commerce, eliminating and nuclear power—were regulated in one major deficiency of the Articles of Confedera- order to provide the public a steady flow of tion. Over the years the Supreme Court has broad- safe products in a stable environment. ened the interpretation of interstate commerce to —Victor Kamber, July 1984” include a wide variety of economic activities. For example, interstate commerce today covers the Whether a person agrees with one point of view or the other sometimes depends upon wheth- See the following footnoted materials in the Reference Handbook: er the person is being regulated or is benefiting 1. The Constitution, pages 774–799. fter serving for 36 years, and pushing an overhaul of 81-year-old Democratic banks’ deposit insurance system. Making a Difference Arepresentative Henry B. His passionate commitment, Making a Difference Gonzalez retired in 1997. though, was in ensuring afford- Gonzalez arrived on Capitol Hill able housing for the poor. Henry B. Gonzalez in 1961 where he quickly earned When some Democratic lead- a reputation as an unpredictable ers tried to topple Gonzalez from maverick who often refused to his ranking spot on the Banking work within established tradi- and Finance Committee, Gonza- tions. In his hometown, however, lez’s supporters rallied. Joseph he is celebrated as a defender of Kennedy of Massachusetts pro- the downtrodden. Raul Yzaguirre, nounced, “What are we going to president of the National Council do, take away a ranking member- of La Raza, summarized Gonza- ship from a guy who is a folk hero lez’s character: “He was a among Democrats?” Gonzalez pioneer. In the bad old ‘40s and made a masterful speech in his ‘50s, political courage to stand own defense, saying, “I say to up to segregation and racism you, I have served with honor was not real evident. Henry and integrity and success. I have B. stood out like a giant.” never failed myself and I have Gonzalez is credited never failed you.” Gonzalez Texas with crafting tough savings- received two standing ovations state seal and-loan bailout legislation and retained his seat. CHAPTER 21: SOCIAL AND DOMESTIC POLICY 577 574-583 CH21S1-860053 12/4/04 12:00 AM Page 578 production and transportation of goods, commu- charge higher rates for farmers than for manufac- nications, mining, and the sale of stocks and turers. Because of these abuses, Americans began bonds. Citing the commerce clause, Congress has to demand government regulation of business.
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