Federal Budget and Debt

Introduction- Basic Terms Budget: A policy document allocating burdens (taxes) and benefits (expenditures). Deficit: An excess of federal expenditures over federal revenues. Expenditures: What the government spends money on. Revenues: Sources of money for the government. No need to write these down, I will give you a handout- just wanted to show you some things before I pass it out.

Sources of Federal Revenue Income Tax Shares of individual wages and corporate revenues. The 16th Amendment permitted Congress to levy an Income tax. The individual income tax (not businesses) is the largest single revenue source for the government. Our income tax is progressive: those with more income pay higher rates of tax on their income. is it confusing, unfair, or evil? Death and Taxes: Stephen Colbert

Sources of Federal Revenues Cont.. Borrowing The Treasury Department sells bonds - this is how the government “borrows” money. The federal debt is the sum of all the borrowed money that is still outstanding. The government competes with other lenders. Government does not have a capital budget, therefore the Federal Budget is NOT like a household budget Debt Limit- the limit of legally allowable debt set by Congress How many times has the debt ceiling been raised? They sell government bonds to people who are looking for a safe place to invest their money Some have proposed a balanced budget amendment. If we reach and do not raise our debt limit, we cannot borrow anymore money and we default Infographic on next slide Family Budget 1. Income determined 2. Expenses planned 3. Savings invested (or deficit borrowed) Federal Budget 1. Expenses planned 2. Borrowing planned 3. Income determined (tax revenue) Click for Debt Ceiling Graphic

Sources of Federal Revenue Cont… Taxes and Public Policy Tax Loopholes: Tax break or benefit for a few people Tax Expenditures: Special exemptions, exclusions or deductions - lots of money is lost. Tax Reduction: The general call to lower taxes. Tax Reform: Rewriting the taxes to change the rates and who pays them. Think back to the Colbert: Death and Taxes video clip Tax Expenditures Examples: The government permits taxpayers to deduct their contributions to charities from their income, thus encouraging charitable donations The government permits homeowners to deduct from their income what they pay in mortgage interest; this is billions (collectively) each year, encouraging homeownership The government allows businesses that invest in new plants and equipment to deduct these expenses from their taxes at a rapid rate (all business can deduct expenses, but usually it is over a long period of time. For example, if you are a home daycare provider and put up a new fence, you can deduct a percentage each year, for up to about 20 years).

Federal Expenditures Big Governments, Big Budgets A big government requires lots of money. As the size of government increases, so does its budget. The Rise and Decline of the National Security State In the 50’s & 60’s, the DOD received more than half the federal budget. Defense now constitutes about one-sixth of all federal expenditures. Since the Great Depression, the size of our government has grown. When the government grows, our budget grows. The government grows in response to the public’s preference. No politician really wants to cut the size of government, even Ronald Reagan only slowed the growth, but the size of government has still risen. Pensions and payroll continues to rise in the DOD, adding to their budget

Federal Expenditures Cont. … The Rise of the Social Service State The biggest part of federal spending is now for income security programs. The biggest of these is Social Security. Social Security has been expanded since 1935 to include disability benefits and Medicare. These benefit programs face financial problems with more recipients living longer. Intended to provide minimum level of sustenance to older Americans, saving them from poverty In the 1950’s, disability became part of Social Security In 1965, LBJ expanded SS to include Medicare (hospital and physician insurance to the elderly) About 56 million Americans receive SS benefits

HDI: 0.923 IHDI: 0.856 GDP per Capita: ≈ $42,000 Human Development Reports HDI: 0.915 IHDI: 0.76 GDP per Capita: ≈ $52,000

Americans typically Want… Less overall spending More specific spending All with All with… lower taxes How will the new Tax law affect me?

PAUSE Distribute Budget/Debt Handout

Federal Budget and Spending This pie chart represents the total federal revenue from 2015. Having federal expenditures greater than the federal revenue will create a deficit for the year. This pie chart represents the total federal expenditures for 2015, broken into 3 separate categories.

Federal Budget and Spending This pie chart represents the total federal expenditures for MANDATORY spending for 2015 This pie chart represents the total federal expenditures for DISCRETIONARY spending for 2015

Trump’s First Budget Total tax revenues are not known, but they are estimated at 3.34 trillion This pie chart represents the total federal expenditures for 2018, broken into 4 separate categories. Up to date numbers for 2018 are not yet available in neat chart form, because the year just ended, but I wanted you to have some reference points for President Trump’s first Budget. That budget was also determined after a weekend government shutdown. Numbers can be deceiving… is there bias in these charts when shown without explanation?

This pie chart represents the total federal expenditures for MANDATORY spending for 2018

This pie chart represents the total federal expenditures for DISCRETIONARY spending for 2018

What does this chart say to you?

Trump’s Proposed Budget Which States might be negatively affected?

What’s the Budget Process? HOMEWORK: VIEW and understand “Creating The Budget” PowerPoint on www.juarezapgov.weebly.com

Article on Website- China Does NOT Own Us!

How Do You Balance a Budget? You spend less (or same) or tax more Spend less = fewer government programs Tax More = people have less money to spend

What is our National Debt anyway? National Debt Clock

How people generally want to cut the budget Some Favorite Targets For Budget Cuts Science, Space And Technology Total savings: $25.6 billion, less than 1 percent of the budget. The Arts and Humanities: Total savings: NEA, $124 .4 million, NEH $141 .1 million, less than .01 percent of the budget Foreign Aid And International Relations Total savings: $28.5 billion, 1 percent of the budget The Program Formerly Known As Welfare Total savings: Temporary Aid to Needy Families; food and nutrition assistance, including food stamps: $65.5 billion, 2.39 percent And it all adds up to? A grand total of a little over 4 percent of the budget. If we have time: TED Talk linked on my website Next Slide- What is our National Debt? 23