ASSIGNMENT

Financial Feasibility for the Research Paper

Now, so here you are in week eight, you're ready to start your final research paper. Congratulations. Now the research paper is basically the policy brief writ large. In other words, it's a, it's a much larger paper. There's a lot more analysis required. You're doing analysis of two pieces of legislation, so you're comparing them to one another. And so while the basic format is the same, define the problem may, can and should analysis then make your recommendation. The process itself is much more involved in this is no truer than in the financial feasibility portion of the Ken analysis. And so let's just talk about that. We've got some great resources easier for you. Now if you look at the current rubric, you can see that it is essentially the same as the policy brief rubric. You know, obviously it's going to be much more in depth, but you always have to do root causes of the problems that you can then discuss impacts. The MAY is still the same biblical analysis is really when you get here under Ken and you look at financial feasibility and you see three items here that you did not have to discuss in your policy brief, the cost of action versus no action for each piece of legislation. The cost of one piece of legislation versus another. In the cost-benefit analysis for each piece of and now at face value, that can sound like three huge tasks and three separate pieces of analysis for each bill. But in fact, really it's the same, but there's a lot of overlap. And we're going to discuss how you can do that and, and, and be much more efficient in your analysis. So there are three steps share to remember when we use this financial analysis spreadsheet. The first is you gotta find a policy problem with extensive research and data. Specifically, you've gotta know the financial impacts of that problem. If you have a problem for which there's not a lot of financial data is going to be very difficult to do the rest of the financial analysis for the legislation. Well, so that tells you to choose wisely, don't choose a vague problem that is hard to define economically. Now, obviously problems have more than just financial impacts. We understand that obviously problems are spiritual and moral and they have cultural impacts, all of those things. But any problem that you're going to be using for your paper must have policy implications. Therefore, it must have economic implications. So make sure you find a good problem that achieves that. Secondly, and likewise, you must find two pieces of legislation that also have a lot of research and data that also have intelligence. Researchers that you can read that or discussing financial impacts of those bills, costs, benefits, things of that nature. The Congressional Budget Office does that for all major bills. Their analysis is not perfect. They do the best they can. They interpret things differently than the lawmakers, and then they interpret them differently than economists might. There's always competing interpretations in terms of costs and future impacts. But the Congressional Budget Office is a great place to start. That's why you should continue to use that funding legislation document as you've been using for all of your policy briefs. But if you're not finding additional sources and documents that also discuss costs of these bills and proposed benefits, specifically economic benefits, then you probably need to find different bills. Now obviously again, just like the problems, these bills will purport solutions that are not just economic, they go beyond just economic impacts and that's wonderful. We want that. But you still need those economic impacts discussed in terms of costs and benefits. And then finally, you need to use the financial analysis spreadsheet. As mentioned previously. We're going to discuss that on the next slide. And you'll find that it's a very easy way to summarize all the data that you'll be collecting in terms of those costs and those financial benefits. So let's get started. So here we have the financial analysis spreadsheet, and I want you to look at two things. First, we're on the Summary tab. The summary tab is not where you enter the data. The summary tab actually pulls the data from the other two tabs here, which is wonderful and makes your life a lot easier. Secondly, look at the first category here, cost of one versus another. There is no tabulation for this category because essentially the cost of action is the cost of the bill. And so when we do this one, the cost of action versus no action, we're essentially doing the first one, which again is wonderful and makes your life easier. As we look at costs of action versus no action, again, we're comparing the cost of the bill to the cost of the problem. And then we're looking at the net result for that, for both bills. So let's look at that first. And here we have action versus no action. Now, for the purposes of this exercise, these categories have been included. First, we start with the costs, the problem conceivably a policy problem, as mentioned earlier, is going to add policy costs. There's going to be policy impacts, things like environmental damage, infrastructure damage, social costs, welfare. Conceivably, the cost of bills are going to involve things like technology, manpower, implementation costs, but these are all generic categories that you do not have to use. In fact, the spreadsheet that you get will not include these categories. You'll be creating those categories based upon your own research. So happy researching. But for the purposes of this exercise, we're going to go ahead and use this. And so we'll start with defining the problem. We're going to use very simple dollar amounts that would not reflect the real world. But again, for simplicity sake, let's say environmental damage was at 25 bucks, an infrastructure damage was at 45 dollars. Social cost, in other words, programs administered as by the state, let's say $75. All right, so your total cost of the problem is a $145. If you did nothing, if you implemented know Bill, that's the costs that society would be pain specifically through the government. Okay, now let's look at the cost of implementing below one. Let's say for technology we're at $35, manpower at 45, and the cost of implementation would be at 60. All right, You're at a $140 for Bill to let's say technology is $55, manpower is $75. And implementation is that, let's say $60. Okay, so now we've got our numbers. Let's go back to the summary tab. Let's look at the net result. Uh, oh, one is fine. It's actually cheaper, not by much, but it's cheaper than the cost of no action. In other words, it's cheaper than the problem it's trying to solve. But Bill 2, in this case, the cure is worse than the sickness because it costs more than just leaving the problem as is. Okay, So this is kind of an important baseline criteria. And if your bill costs more than the promise trout trying to solve, it's not a very good bill, at least from a financial standpoint. Okay, now let's go to cost-benefit analysis. Okay? Again, I'm just discussing some some broad categories here that may or may not be the case for the legislation that you've chosen. Okay? So let's, let's assume that there's a positive environmental impact of $55. Let's assume infrastructure improvements savings is $25. Let's assume the reduction social costs and social benefits is that $55, okay. For Bill to environmental impact is a benefit of $55. Infrastructure improvement is a 65 in reduction and social costs will say is a whopping $75. Okay, we enter that in and go back the summary page. Now this is very interesting in this case. Bill to outperforms below one to the tune of $5. Okay? It loses in terms of it being more expensive, but it gains in terms of the benefits. Okay? So then the next question is, does that, do the gains outweigh the negatives? In this case? Probably not because it's still more expensive than the cost of doing nothing. Bill one, however, is about break-even. It does a better job financially of solving a problem. All right, In the real policy world, you wonder you have to ask yourself, how, how easy is it to get an obvious win in terms of benefits? In the previous slide, we discussed how the Congressional Budget Office makes estimations that are wrong. Often not because they're stupid, but because there's a lot of data to try to, to factor in, There's a lot of assumptions that one has to consider wisely and that is easier said than done in a complex political policy environment. In other words, in the real-world. But this is the type of disciplinary thinking. Discipline thinking rather that you need to discuss and focus on when you do your financial analysis, okay, so this will hopefully help you as you complete your paper, have fun. Thank you.