1. THE FEDERAL BUDGET  10 trillion and counting https://www.youtube.com/watch?v=pfZyffw7U6Ehttps://www.youtube.com/watch?v=pfZyffw7U6E https://www.uschamber.com/speech/10-truths-about-america%E2%80%99s- entitlement-programs-address-r-bruce-josten-executive-vice  www.whitehouse.gov/omb www.whitehouse.gov/omb  Solve the deficit  http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits- graphic.html?_r=0 http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits- graphic.html?_r=0  The Debt Clock:  http://www.usdebtclock.org/ http://www.usdebtclock.org/

3. GOVERNMENT WASTE: NOW YOU KNOW WHY AMERICAN TAXPAYERS ARE ANGRY  http://www.heritage.org/research/reports/2009/10/50-examples-of-government- waste http://www.heritage.org/research/reports/2009/10/50-examples-of-government- waste  https://www.youtube.com/watch?v=LFI8v6lUIp8 https://www.youtube.com/watch?v=LFI8v6lUIp8  I would encourage you to watch this and understand.

4. THE FEDERAL BUDGET Unit 7.2

5. I. BUDGET AND SPENDING A.Executive Branch -President submits a new budget every year 1.Office of Management and Budget (OMB)- Runs the numbers on the President’s budget. 2.Huge political statement about priorities of gov’t 3.CBO: Congressional Budget Office- analyzes Congress and President’s budget numbers.

6. B. LEGISLATIVE BRANCH 1.Congress receives a proposed budget from the executive branch - power of the purse- all tax and budget bills must start in the House of Representatives (Article I) a.B/w March – October b.Each branch of Congress must pass bills for discretionary spending c.Appropriations –bills that assign spending money on a specific program, project or government department d.12 subject areas i.EX: Defense, Agriculture, Transportation & Housing and Urban Development

7. C. FISCAL POLICY 1.Fiscal Policy –use of gov’t revenue collection and expenditures to influence the economy 2.Discretionary -spending optional spending that is approved thru an appropriations bill a.12 departments/committees are subject to this funding 3.Mandatory spending -spending required by existing law 4.Currently 60% of US budget  Social Security  Medicare/Medicaid  Other entitlements

8. D. Budget breakdown 1.entitlement programs (social security, Medicare, welfare): ~50% of budget 2.defense- 21%, interest on debt 9% 3.deficit (spending more than the revenue collected) 4.total debt: $10.8 trillion, >$200 billion in interest

9. II. GOV’T INTERVENTIONS  Entitlement programs  Medicaid, Food Stamps, WIC, FDC payments, federal jobs programs & training  Gov’t subsidized loans for college education  Federal Reserve  lowering interest rates so that companies can expand businesses & hire more workers  Taxation  Progressive tax rate & Income tax credit

10. UNEMPLOYMENT AND POVERTY A.Cyclical Employment- unemployment rises during economic downturns and falls when economy improves B.Full Employment- unemployment rate 4-5% C.Underemployment- people working at a job in which they are overqualified or part-time

11. CLOSE  Give a situation in which someone is underemployed.  What is fiscal policy? Why do you think both the executive and legislative branches participate in shaping it?

12. FUNDING GOVERNMENT PROGRAMS  Taxes are required payment to a local, state, or national government to pay for Entitlement programs like Social Security, Medicaid, and Medicare.  Revenue: is the income received from taxes and nontax sources to fund the gov’t.  Tax Structures  A: Proportional Tax= all taxpayers pay the same percentage no matter what their income ( known as a flat tax)  B: Progressive Tax= the higher the earnings, the higher the rate of taxation Ex: Income Tax.  C: Regressive Tax= the percentage of income paid in taxes decreases as income increases Ex: sales tax, excise tax (gas)

13. TAXES; FEDERAL, STATE AND LOCAL  Federal Taxes  Personal Income Tax: Paid by individuals –progressive  Payroll Tax: employers deduct tax from employees paychecks for Entitlements  Capital Gains tax: tax on profits made from sell of assets  Excise Tax: tax on goods ( sin tax) cigarettes, gas, alcohol: regressive  Tariff: Tax on imported goods  Corporate Income Tax: Income tax on profits  Estate Tax: Tax on inheritance

14. STATE AND LOCAL TAXES  State:  State individual income tax: progressive- largest source of revenue for the state  Corporate income tax:  Estate Tax  Sales Tax: Tax on goods and services – regressive  Excise Tax:  Licenses/ Permits:  Fees/ fines:  Local :  Property Tax: Largest source of revenue for a local cities  Sales tax:  Licenses, fees, permits, fines

15. WHAT ARE AUTOMATIC STABILIZERS?  Automatics stabilizers are expenditures by the Federal Budget to offset the negative affects of a slowdown in the economy.  Examples are Unemployment benefits, foods stamps and other public assistance programs.  These programs help people supplement their incomes.

16. BALANCING THE BUDGET  A: What is a balanced budget? 1.In a balanced budget, revenues equal spending. 2. Budget Surplus: occurs when revenues exceed expenditures 3. Budget Deficit: occurs when expenditures exceed revenues The United States currently has a budget deficit. B: Creating Money We cannot solve a budget deficit by creating money 1. When the gov’t creates more money it increases the amount of money in circulation-this leads to inflation.

17. WHAT IS INFLATION?  Inflation is a general rise in prices. Prices rise in the economy when you put more money in circulation.  ( there is still the same amount of goods and services (supply) but if people have more money, the prices of those goods and services will rise) “Too much money chasing too few goods.”  Covering very large deficits by printing more money can cause VERY high inflation called hyperinflation.  US Savings Bonds : Allow people to lend money to the Federal Government  1. the Gov’t uses the money to pay for public works projects.  Municipal Bonds: are issued by state and local govts to finance highways, libraries, stadiums, schools etc…