Fiscal Policy and the Federal Budget How is the federal budget developed?

Fiscal Policy and the Federal Budget Federal Budget Federal government’s plan for the use of government revenues Creating the Federal Budget Wartime Spending (I) in spending Increased Corruption Political and Financial Corruption = (D) in spending Progressive Reform Government more accountable to public Late 1800’s – Early 1900’s New Budget Process President given power to formulate a budget 1921 Office of Budget Budget Process Today Budget predicts revenues and expenditures for several years Fiscal Year- 12 month financial period that typically does not duplicate the dates

Federal Budget Deficits Budget Deficit Government spends more money than it collects Budget Surplus Government revenues exceed government expenditures during the fiscal year Deficit spending Government policy of spending more money for its program than it is able to cover with its revenues Government relies on deficit spending 1- national emergencies 2- public goods 3- stimulate the economy

National Debt Total amount of money that the federal government has borrowed, and includes all deficits from pervious year Growth of the National Debt National Debt increases from year to year Debt Ceiling Legislates a limit on the size of the Natl. Debt Steadily raises

Balancing the Federal Budget Increasing Revenues Taxation (I) Decreasing Expenditures (D) Government Spending Legislating a Balanced Budget (1985) Balanced Budget and Deficit Reduction

Questions Describe the roles played by the President and Congress in developing the federal budget? Why does the government sometimes rely on deficit spending? Why do many policy makers want to balance federal Budget? How might they do this?