The Federal Budget Ever expanding.

Borrowing money and the Federal Debt.  When the gov’t needs to borrow money the Treasury Dept. sells bonds guaranteeing to pay interest.  Who buys them?  Citizens, corporations, financial institutions, and other gov’ts  “Intergovernmental debt”  Borrowing Social Security money for expenses

The Debt  Current debt, about $15 trillion  Creates a burden for future taxpayers  7% of expenditures go towards paying off interest  Large debts can make the gov’t dependent on foreign investors  Can use lending as leverage.  Many people want a balanced budget  State that families have a balanced budget(many don’t)

Balance that budget  Your goal, do what the legislators can’t and decide on a balanced budget  10/11/13/weekinreview/deficits- graphic.html?_r=0 10/11/13/weekinreview/deficits- graphic.html?_r=0

Tax Expenditures  Tax Expenditures: Revenue losses that result from special exemption.  Taxpayers deduct charity contributions  Homeowners deduct mortgage interest costs from taxes  Businesses that invest in new plants and equipment to deduct these expenses.  These expenditures receive no review from Congress  Benefit middle and upper income levels, not the poor.

Reduce our taxes!  Tax reductions go through periods of popularity.  Reagan reduced taxes by indexing taxes.  Stopped inflation from reaching into higher tax brackets  Clinton then raised income tax to the top 2%, creating a budget surplus  In 2001 Bush then lowered tax rates over a period of 10 years.

Spend that money  1932 FDR spent $3 billion a year  Today, that is spent in a morning.  Big country = big budget  Governments (Fed, State, Local) spend 1/3 of the nations GDP  Federal makes up ¼ of GDP alone

Growing Government  Two Factors in government growth:  National Security State, and Social Service State  National Security State  A result of the growth in standing military from the Cold War  Decreased briefly and grew again with 9/11

Social Service State  Social Service State  Started with Social Security Act (1935)  3% tax on payroll  Formerly 50 workers support each beneficiary  Now 3 support a single beneficiary  Medicare: Program added to Social Security system. Gives healthcare insurance for the elderly.  Hospitalization  Doctors fees  Other health expenses

Summarizing the States  Social Security and Medicare account for a total of 1/3 of the Federal budget.  The National Security State and Social Security state together explain why the budget is the center of public attention.  National Security: Liberals would like to see more money going to the poor individuals  Social Security: Conservatives tend to see them as a economic drain