1. The Federal Budget

2. Key Vocab Expenditures: gov’t spending
Revenues: the financial resources of the gov’t
Deficit: an excess of federal expenditures over federal revenues
National debt: all the money borrowed by the federal gov’t over the years and is still outstanding

3. Taxing & spending Sources of federal revenue Where the money is spent
In the past—tariffs and excise taxes
Presently—income tax, payroll tax, borrowing
Tax revolt
Where the money is spent
Nondiscretionary/mandatory—direct benefit payments to individuals
Discretionary
Net interest
Entitlements
Meet eligibility requirements
Automatically spent each year without congressional review

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8. Taxing & spending IV. The budget process
Executive branch—agencies prepare their estimates and present them to OMB. OMB makes recommendations to POTUS
Congress
House Ways & Means
Senate Finance
CBO
Political influences
Presidential action

9. Taxing & spending The budget process The President’s budget request
- due 1st Monday in February, for fiscal year starting on October 1st
Congressional budget resolution—bottom line for federal expenditures
concurrent resolution, no presidential signature or veto possible, cannot be filibustered in the Senate
due by April 15th but can pass a continuing resolution is passed which continues the last year’s funding levels
very basic document, broad spending categories
spending is then detailed by congressional committee with jurisdiction

10. Beginning national debt
Taxing & spending
Deficit-spending
Budget deficits vs. national debt
Budget Programs
Balanced budget amendments
Paygo
President
Beginning national debt
Carter
$653 billion
Reagan
$930 billion
G.H.W. Bush
$2.68 trillion
Clinton
$4.17 trillion
G.W. Bush
$5.66 trillion
Obama
$10.70 trillion

11. Managing the Economy
Economic Policy

12. Types of Economic Policies
Fiscal
Monetary
Taxing and spending considerations
Budgeting
Conducted by Congress and the President
Regulation of money supply
Adjusting interest rates to increase/decrease inflation
Conducted by “the Fed”

13. History of Economic Policy
Constitution gives Congress power to regulate commerce
Industrial Revolution led to congress making greater use of economic regulatory powers
Great Depression led to even greater regulation

14. Economic theories Keynesian
Gov’t spending can help weather the ups and downs
Gov’t can spend its way out of the Depression
Provide jobs, get $ back in people’s pockets
Increase demand
Generally favored by Democrats

15. Economic theories Supply-Side
Stimulate supply of goods, not their demand
When gov’t spends too much/taxes too much/regulates too tightly it curtails economic growth
Low taxes motivate individuals
Generally favored by Republicans
“Starve the beast”

16. Turn and talk
Do you think either of these approaches is reasonable? If not, what would you envision as another option?

17. Economic Policy Making
Council of Economic Advisers: professional economists sympathetic to the president’s view of economics
Office of Management and Budget: prepares estimates of amounts to be spent by federal government agencies; negotiates department budgets
Secretary of the Treasury: reflects the point of view of the financial community

18. The Federal Reserve Board
Created in 1913
Members appointed by the president, confirmed by the Senate; serve a nonrenewable fourteen-year term
Somewhat independent of both the president and Congress

19. Federal Reserve Board Regulates the supply and price of money
Sets monetary policy: the effort to shape the economy by controlling the amount of money and bank deposits and the interest rates charged for money
Too little money in circulation slows the economy
Too much cash/credit in circulation inflates the economy

20. History of the National Debt