Federal Budget Process Each year, the president sends a federal budget to Congress. The budget undergoes a lengthy approval process until it is signed into law. VS 1

Section 2 Federal Government Expenditures (cont.) Federal budget leads to a budget deficit or a budget surplus.budget deficitbudget surplus The Federal Budget for Fiscal Year 2007

Section 2 Federal Government Expenditures (cont.) Federal budget expenditures include –Social Security—considered mandatory spendingmandatory spending –National defense—considered discretionary spending discretionary spending –Income security –MedicareMedicare

Section 2 Federal Government Expenditures (cont.) Federal budget expenditures include –Health—MedicaidMedicaid –Net interest on debt –Other expenditure categories Profiles in Economics: Alice Rivlin

Section 2 Unlike the federal government, some states have a balanced budget amendment.balanced budget amendment States must cut spending when revenues drop. State Government Expenditures (cont.)

Section 2 State government expenditures include –Intergovernmental expendituresIntergovernmental expenditures –Public welfare –Insurance trust and retirement –Higher education –Other expenditures State Government Expenditures (cont.) State and Local Expenditures

Section 2 Local governments’ expenditures are Local Expenditures (cont.) –Elementary and secondary education –Utilities –Public safety and health –Other expenditures The Global Economy & YOU: International Education Spending

VS 2 Major Budget Categories The major budget categories vary for federal, state, and local governments. The focus of the federal government is on nationwide programs and expenditures. States pass on much of their budget to local governments and spend the rest on state-level programs. Local governments focus their expenditures on local needs.

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Vocab10 federal budget annual plan outlining proposed expenditures and anticipated revenues

Vocab11 fiscal year 12-month financial planning period that may not coincide with the calendar year

Vocab12 appropriations bill legislation authorizing spending for certain purposes

Vocab13 budget deficit a negative balance after expenditures are subtracted from revenues

Vocab14 budget surplus a positive balance after expenditures are subtracted from revenues

Vocab15 mandatory spending federal spending authorized by law that continues without the need for annual approvals by Congress

Vocab16 discretionary spending spending for federal programs that must receive annual authorization

Vocab17 Medicare federal health-care program for senior citizens, regardless of income

Vocab18 Medicaid joint federal-state medical insurance program for low-income people

Vocab19 balanced budget amendment constitutional amendment requiring government to spend no more than it collects in taxes and other revenues, excluding borrowing

Vocab20 intergovernmental expenditures funds that one level of government transfers to another level for spending

Vocab21 ambiguity uncertainty about meaning or value

Vocab22 coincide to happen or exist at the same time or in the same position

Vocab23 deficit spending annual government spending in excess of taxes and other revenues

Vocab24 national debt total amount borrowed from investors to finance the government’s deficit spending

Vocab25 balanced budget annual budget in which expenditures equal revenues

Vocab26 trust fund special account used to hold revenues designated for a specific expenditure such as Social Security, Medicare, or highways

Vocab27 per capita per person basis; total divided by population

Vocab28 crowding-out effect higher than normal interest rates and diminished access to financial capital faced by private borrowers when they compete with government borrowing in financial markets

Vocab29 “pay-as-you-go” provision requirement that new spending proposals or tax cuts must be offset by reductions elsewhere

Vocab30 line-item veto power to cancel specific budget items without rejecting the entire budget

Vocab31 spending cap limits on annual discretionary spending

Vocab32 entitlement program or benefit using established eligibility requirements to provide health, nutritional, or income supplements to individuals

Vocab33 mandate to order or require

Vocab34 instituted put into action

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