Government policy describes courses of action that are formulated by public or private groups with regard to a political issue. It is the broad strategy government uses to do its job and is often a result of considerable debate, compromise and refinement that occurs over years. Policy outcomes can influence how much tax you pay, immigration status and laws, pensions, parking fines, where you go to school, and many other aspects of your life.
The process of policymaking is complex and involves various institutions, stakeholders, and influences at the local, state, national and international levels. A key challenge is identifying the issues that require policy attention. The agenda-setting process includes defining the problem, assessing different solutions and choosing policy instruments.
Distributive policies aim to distribute goods and services fairly within society. Examples include funding education programs, implementing social safety nets like unemployment benefits and financial aid, and ensuring workers are paid a living wage. Redistributive policies compel certain behaviors from individuals and groups, such as recycling, voting or not smoking, while discouraging others. Regulatory policies ensure industries operate ethically, such as setting emissions standards, regulating food quality and safety, and overseeing banks.
Fiscal policy aims to stabilize economic activity by expanding spending or cutting taxes when output slows down, and contracting expenditures or raising taxes when economic growth is strong. This can be accomplished through automatic stabilisers like adjusting tax rates or unemployment benefits and through discretionary measures like building infrastructure or boosting economic demand by lowering interest rates.