1. The Congress, the President, and the Budget: The Politics of Taxing and Spending

2. Introduction
Budget:
A policy document allocating burdens (taxes) and benefits (expenditures)
Deficit:
excess of federal expenditures over federal revenues (in a given year)
Expenditures:
Government spending
Revenues:
Sources of money for government
The National Debt is total amount owed by the federal government

3. The National Debt

4. Sources of Federal Revenue

5. Sources of Federal Revenue
Income Tax
16th Amendment permits Congress to levy an Income Tax
Individual and corporate income tax is the largest single revenue source for the government.
It’s progressive: Those with more income pay higher rates of tax on their income.

6. Sources of Federal Revenue
Social Insurance Taxes-
Additional taxes for specific fund: Social Security and Medicare
Figure 14.1

7. Sources of Federal Revenue
Borrowing
Federal Debt is the sum of all outstanding borrowed money
Bonds: sold by Treasury Dept.
Government competes with other lenders

8. Taxes and Public Policy
Tax Loopholes: Tax break or benefit for a few people
Little revenue loss
Tax Expenditures: Special exemptions, exclusions or deductions, like mortgage interest,
significant loss
Tax Reduction: general call to lower taxes.
Tax Reform: Rewriting taxes to change the rates and who pays them.

9. Federal Expenditures

10. The Rise and Decline of the National Security State
Federal Expenditures
The Rise and Decline of the National Security State
In the 50’s & 60’s, the DOD received more than half the federal budget.
that number declined due to the “peace dividend.”
The wars in Iraq and Afghanistan increased military spending.

11. Federal Expenditures
Trends in National Defense Spending (Figure 14.4)

12. Federal Expenditures The Rise of the Social Service State
Top federal spending
income security/Social Security programs
Expanded since 1935 to include disability benefits and Medicare.
Current Issues?
Baby boomers
Longer life expectancy rates

13. Federal Expenditures “Uncontrollable” Expenditures
determined by the number of recipients (unknown)
not a fixed amount
How do we control?
change the rules
Mandatory spending is spending on programs required by current law.

14. Federal Expenditures
Trends in National Defense Spending (Figure 14.4)

15. Incrementalism Federal Expenditures
Previous budget is the best predictor for next budget, plus some more.
Agencies can safely assume they will get at least what they got last year.

16. The President and the Budget
Presidents did not originally play a role in the budget.
Now budget requests Office of Management and Budget (OMB) and President before going to Congress.
Time consuming, starting a year in advance
Several negotiations occur between all

17. Congress and the Budget
Congressional Budget and Impoundment Control Act of did much to reform the process.
Budget should be considered as a whole.
Budget resolution sets the bottom line for the budget.
Current budget is then reconciled (adjusted to meet the resolution).
The new budget is authorized and appropriated.

18. Congress and the Budget
The Success of the Reforms.
From 1974 to 1998, every budget was a deficit budget.
Congress misses most of its own deadlines.
Congress passes continuing resolutions to keep the government going until it passes a new budget.
Omnibus budget bills often contain policies that can’t pass on their own.

19. The Budgetary Process