1. The Budget

2. Review terms: Budget: Expenditures: Revenues:
A policy document allocating burdens (taxes) and benefits (expenditures).
Expenditures:
What the government spends money on.
Revenues:
Sources of money for the government.

3. I. Federal Expenditures
A. National Security – 20%
B. Social Services – makeup nearly 2/3 of budget!
C. Uncontrollable Expenditures <why?>
Entitlements
Social Security/ Medicare
Interest on Debt -

4. D. Incrementalism v. zero based budgeting
Incrementalism – taking last year’s budget and increasing it in a small increment, amount, to minimize increased spending.
Zero-based Budgeting – Mandates the budget request be re-evaluated completely starting from the zero-base

5. II. Federal Debt 2000 debt – $5.6 Trillion 2004 debt - $ 7.4 Trillion
2016 debt - $19.24 Trillion (as of 2PM)
So what is the difference between debt and deficit?

6. A. Deficit v. debt
Deficit: An excess of federal expenditures over federal revenues in a single year
Debt: The accumulation of deficits over time.
Deficit by year: $377 billion
2007 $160 billion deficit = $1.4 Trillion
2011 $1.3 Trillion = $680 Billion
Projected next 5 years = avg. of 580 Billion
People often confused when they hear the “deficit is being reduced” when they think it is the debt.

7. B. Balanced Budget Amendment Gramm-Rudman-Hollings
The 1985 law provided for automatic spending cuts to take effect if the president and Congress failed to reach established targets.
Attempted to slow down federal spending but has failed to do so.
Why would Congress not vote to cut programs instead?

8. C. Current Debt/ Fiscal Cliff
As of April ,206,395,000,000
Spending 1.5 million per minute we do not have!
Fiscal cliff was part of the deal to raise debt limit. In exchange for increasing the limit both parties agreed that if no agreement on the budget/spending was reached in 18 months automatic spending cuts “sequestration” would occur Jan 1, 2013.
At the same time the 2001 tax cuts, extended by president Obama in 2011, were set to expire Jan 1, 2013
Fact – the US actually has promised 95 TRILLION dollars in SS, Medicare, pension, health care

9. III Budgetary Process Budget and Accounting Act 1921
President must submit budget to Congress
Congressional Budget and Impoundment Control Act of 1974.
Creates Fiscal Year = Oct 1 to Sept 30.
Creates CBO
Creates budget committee in each house

10. A. OMB Stands for? How does the OMB make the budget?
Gives the Budget to the president, president adds items, submits to Congress
10/16

11. B. House Ways and Means and Senate Finance Committee
House Ways and Means – writes tax code. All revenue bills must originate in the House!
Senate Finance Committee – Works with HWM to pass tax codes.

12. C.CBO
Created in 1974 by Congressional Budget and Impoundment Control Act of 1974
Works to “score” / budget bills
Helps determine revenue and expenditures over time/ projections on spending

13. D. Budget Resolution
Agreed upon by the House and Senate near the start of the budgetary process that will create an agreed upon spending limit. Then Congress may work towards adding additional spending items on the budget.

14. E. Appropriations Committees
One of the most powerful committees in Congress.
Determine “who gets what” with spending.
Will hold hearings on agency/department requests.

15. F. Continuing Resolution
This is how the U.S. government has functioned (primarily) with regards to a budget from present. When the two houses can not agree, they pass this!
Defined – Resolutions that set appropriations for a specified amount of time.
Example – A CR that sets spending at 2014 levels +2% for 3 months.

16. IV. Revenue 16th Amendment – Largest source of federal revenue?
Payroll taxes collected for ????
Tax expenditures – what are these?
Sample Questions

17. SAMPLE AP QUESTION #1 The largest source of federal revenue is the
 A. capital gains tax
B. Social Security tax
C. property tax
D. income tax
E. sales tax

18. Sample Question #2
Federal spending for which of the following is determined by laws that lie outside the regular budgetary process?
A. Military procurement
B. Regular agency spending funding
C. Government-subsidized housing programs
D. Educational assistance programs such as student loans
E. Entitlement programs such as Social Security

19. MC # 3
To which of the folowing congressional committees would a proposal to reform the national income-tax system initially be sent?
A. House Appropriations Committee
B. Senate Finance Committee
C. House Budget Committee
D. Joint Committee on the Budget
E. House Ways and Means Committee

20. FRQ
No FRQ solely focused on the budget. Used in conjunction with policies (Social Security, fiscal policy, monetary policy) and the impact the budget will have on groups (elderly, poor, minorities, military)
Often used as part of an answer to “what can Congress do to ?” since restricting or increasing funding can impact programs, policies, etc.
Examples?

21. END

22. Examples of partial FRQs
Example: of part of one “. . . Identify and explain two other powers Congress has over war making.”
In another year
“Define mandatory spending and explain how it limits the president’s ability to influence domestic policymaking in Congress”