THE FEDERAL BUDGET How much power does the President have over the federal budget?

THE FEDERAL BUDGET:  Is a plan for how the government spends taxpayers’ money  The plan is proposed by the President and approved by Congress

HOW BIG IS THE FEDERAL BUDGET?  $3.5 trillion/year  $291 billion/month  $9.7 billion/day  $405 million/hour  $6.8 million/minute  $112,500/second

SO WHERE DOES ALL THAT MONEY COME FROM?

AND THEY CREATE DEBT  40 cents of every dollar spent is created by debt  The federal government has to raise the “debt ceiling” in order to borrow money to for items already approved by Congress  The “debt ceiling” is the amount of money the federal government can have as debt – currently that is $16.7 trillion

WHAT WILL HAPPEN IF CONGRESS DOES NOT RAISE THE DEBT CEILING?

DEBT CEILING VIDEOS  Investopedia Investopedia  The Debt Ceiling Explained The Debt Ceiling Explained

IF THE DEBT CEILING IS NOT RAISED:  The government cannot pay its bills Social Security checks, Medicare, Medicaid, etc.  Bond holders do not get paid This is us! And China  Banks could become insolvent  Dollar could lose value  Interest rates could rise  Stock market could fall

WHAT IS THE NATIONAL DEBT?  Amount owed by the federal government to all sources as a result of borrowing Amount owed by the federal government to all sources as a result of borrowing  Approximately $16.9 trillion 4 inch stack of $1,000 bills = millionaire 1 trillion = stack would be 67 miles high!  Everybody has a share $53,000 per person $148,000 per taxpayer

DEBT, OVERTIME, AS A % OF GDP

SO HOW MUCH DO THEY SPEND?  2010 The government will spend 3.5 trillion The government will take in 2.3 trillion What is the difference? The difference between how much Congress spends and how much they take in (in one year) is called the deficit. The government will add 1.2 trillion in deficit spending to the national debt

DEFICITS AND SURPLUSES

 Deficits and Surpluses Deficits and Surpluses

$3.5 TRILLION: WHAT DO THEY SPEND IT ON?

NO REALLY, HOW DO THEY SPEND ALL THAT MONEY?  Mandatory (uncontrollable) spending is required by LAW:  Examples: Interest payments on the national debt Entitlements (Social Security and Medicare) About 60% of the overall budget  Discretionary (controllable) spending is decided upon yearly by Congress and the President  Examples: Defense (20%) Everything else: Education, NASA, Foreign Aid, Science, Research, etc. (19- 20%)

SO HOW MUCH GOES WHERE?

IS THE BUDGET MISMANAGED?  60 Minutes Disability Spending 60 Minutes Disability Spending  On the back of your paper, answer this question: What more could be done to ensure there is less fraud in government spending?

HERE’S ANOTHER WAY TO LOOK AT IT: This graphic is just discretionary spending

THE BOTTOM LINE:  The president proposes a budget for discretionary spending only (39-40% of the total budget) every year.  Congress must pass the proposal and the President must sign it for the budget to go into effect  60% of the budget is authorized by permanent laws, and not affected by the President or Congress!

WHAT IS THE “SEQUESTER”?  $85 billion in mandated spending cuts  Only for discretionary spending (40% of the budget)  2.4% of total spending  6% of total discretionary spending

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YOUR BUDGET ESTIMATE

THE ACTUAL BUDGET 

SO WHAT DOES THIS MEAN?  As my cabinet, you must make the best use of your budget A portion of the red slice (19%) is yours Unless you are the Department of Defense  You are responsible to the American people for your agency's fiscal management  You must prepare a proposal outlining your most pressing needs