The Federal Budget

Key Vocab Expenditures: gov’t spending Revenues: the financial resources of the gov’t Deficit: an excess of federal expenditures over federal revenues National debt: all the money borrowed by the federal gov’t over the years and is still outstanding

Taxing & spending Sources of federal revenue Where the money is spent In the past—tariffs and excise taxes Presently—income tax, payroll tax, borrowing Tax revolt Where the money is spent Nondiscretionary/mandatory—direct benefit payments to individuals Discretionary Net interest Entitlements Meet eligibility requirements Automatically spent each year without congressional review

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Taxing & spending IV. The budget process Executive branch—agencies prepare their estimates and present them to OMB. OMB makes recommendations to POTUS Congress House Ways & Means Senate Finance CBO Political influences Presidential action

Taxing & spending The budget process The President’s budget request - due 1st Monday in February, for fiscal year starting on October 1st Congressional budget resolution—bottom line for federal expenditures concurrent resolution, no presidential signature or veto possible, cannot be filibustered in the Senate due by April 15th but can pass a continuing resolution is passed which continues the last year’s funding levels very basic document, broad spending categories spending is then detailed by congressional committee with jurisdiction

Beginning national debt Taxing & spending Deficit-spending Budget deficits vs. national debt Budget Programs Balanced budget amendments Paygo President Beginning national debt Carter $653 billion Reagan $930 billion G.H.W. Bush $2.68 trillion Clinton $4.17 trillion G.W. Bush $5.66 trillion Obama $10.70 trillion

Managing the Economy Economic Policy

Types of Economic Policies Fiscal Monetary Taxing and spending considerations Budgeting Conducted by Congress and the President Regulation of money supply Adjusting interest rates to increase/decrease inflation Conducted by “the Fed”

History of Economic Policy Constitution gives Congress power to regulate commerce Industrial Revolution led to congress making greater use of economic regulatory powers Great Depression led to even greater regulation

Economic theories Keynesian Gov’t spending can help weather the ups and downs Gov’t can spend its way out of the Depression Provide jobs, get $ back in people’s pockets Increase demand Generally favored by Democrats

Economic theories Supply-Side Stimulate supply of goods, not their demand When gov’t spends too much/taxes too much/regulates too tightly it curtails economic growth Low taxes motivate individuals Generally favored by Republicans “Starve the beast”

Turn and talk Do you think either of these approaches is reasonable? If not, what would you envision as another option?

Economic Policy Making Council of Economic Advisers: professional economists sympathetic to the president’s view of economics Office of Management and Budget: prepares estimates of amounts to be spent by federal government agencies; negotiates department budgets Secretary of the Treasury: reflects the point of view of the financial community

The Federal Reserve Board Created in 1913 Members appointed by the president, confirmed by the Senate; serve a nonrenewable fourteen-year term Somewhat independent of both the president and Congress

Federal Reserve Board Regulates the supply and price of money Sets monetary policy: the effort to shape the economy by controlling the amount of money and bank deposits and the interest rates charged for money Too little money in circulation slows the economy Too much cash/credit in circulation inflates the economy

History of the National Debt