Budget Plan for managing and spending money. Plan for managing and spending money. Governments create budgets to help them make decisions because of limited resources Governments create budgets to help them make decisions because of limited resources –aka SCARCITY!!

Budget continued… Two parts: Revenue and Expenditures Two parts: Revenue and Expenditures 1.Revenue: Money the gov’t receives 2.Expenditures: Money the gov’t spends Runs on a fiscal year: October 1- September 30. Runs on a fiscal year: October 1- September 30.

Nearly 100% of federal gov’t revenue comes from taxes Nearly 100% of federal gov’t revenue comes from taxes –Income tax and Social Security 80% of state gov’t revenue comes from taxation. 80% of state gov’t revenue comes from taxation. –Excise tax and sales tax 60% of local gov’t revenue comes from taxation 60% of local gov’t revenue comes from taxation –Property tax

Non-Tax Revenue The government will charge tolls for the use of roads and canals. The government will charge tolls for the use of roads and canals. The government will charge fees for driving, hunting, fishing, and getting married. The government will charge fees for driving, hunting, fishing, and getting married. Charge fines (ie. traffic) Charge fines (ie. traffic) The government will sell and rent land. The government will sell and rent land. Government run lotteries provide revenue, but they are controversial. Government run lotteries provide revenue, but they are controversial

Mandatory and Discretionary Mandatory Expenditures- funding entitlement programs such as: Mandatory Expenditures- funding entitlement programs such as: –Medicare/Medicaid, Food Stamps, and Welfare Discretionary Expenditures- Congress sets the level of spending for departments Discretionary Expenditures- Congress sets the level of spending for departments

Budget Deficits Deficits occur when expenditures exceed revenue in one fiscal year. Deficits occur when expenditures exceed revenue in one fiscal year. –Governments are expected to do more without raising taxes. This forces them to borrow money. This forces them to borrow money.

Gov’t Borrowing Money The government borrows money to make up for a deficit. The government borrows money to make up for a deficit. Most borrowing comes from the sale of government bonds. Most borrowing comes from the sale of government bonds. –The government pays off the bonds as they come due (mature).

National Debt The total amount the government owes on the money it has borrowed. The total amount the government owes on the money it has borrowed. Goes up with each deficit and accumulated interest. Goes up with each deficit and accumulated interest. –Interest: Fee paid for the use of money.

Debt vs. Deficit Deficit = One year of expenditures > revenue Deficit = One year of expenditures > revenue Debt = all deficits + interest Debt = all deficits + interest Bonds are the #1 reason for government debt Bonds are the #1 reason for government debt

Balancing the Budget Balanced Budget: Expenditures do not exceed revenue. Balanced Budget: Expenditures do not exceed revenue. –Republicans in the House of Representatives have approved a bill that would require a plan to balance the budget. The Senate is probably not going to pass the bill. State constitutions require balanced budgets with no borrowing. State constitutions require balanced budgets with no borrowing. balancing+plan+-+News+- +ReviewJournal.com&urlID= &action=cpt&partnerID=192612&cid= &fb=Y&url=http %3A%2F%2Fwww.lvrj.com%2Fnews%2Fhouse-votes-to-require-budget-balancing-plan html