1. Government Spending
Essential Question:  Who and what should be taxed, and how should governments spend tax money?
Learning Target:  
Compare and contrast government revenue and spending at the federal state and local levels.
Distinguish between mandatory and discretionary spending.
Explain the budget process and evaluate the effects of the national debt.

2. Criteria for Success
Can identify the major components of revenue and spending at the federal, state and local levels.
Can explain the concept of fiscal federalism.
Can distinguish between the two types of government spending.
Can give examples of discretionary and mandatory spending, and explain how they affect the federal budget.
Can describe the federal budget process.
Can trace the growth of the national debt over time.
Can critically evaluate the possible effects of national debt growth on future generations.

3. Government Revenue Government Spending Federal
Individual Income Tax…..47%
FICA Taxes…………………..33%
Corporate Income Tax…..11%
Other…………………………… 9%
Fiscal Federalism
Social Programs …………..60%
Social Security
Income Security
Medicare
National Defense………… 16%
Interest on the Debt………6%

4. State Local Intergov. Revenue……..…35% Sales Tax……………………..28%
Other Taxes/Fees………….27%
State Income Tax (not in TX)
Fiscal Federalism
Public Welfare……………….41%
Education…………………..…40%
Economic Development….14%
Highways………………..……. 6%
(Much of this spending is transferred to the local level.)
Local
Intergov. Revenue………..34%
Property Tax…………………26%
(MUDs, ISDs, etc.)
Education……………………35%
(Primary and Secondary)
Fire, Police, EMS, Hospitals, Parks and Utilities

5. 2 Types of Spending Goods and Services Transfer Payments
Discretionary spending
Exhaustive government outlays
Transfer Payments
Mandatory spending
Created by legislation

7. Transfer Payments (Mandatory Spending)
Entitlements (can not have spending caps)
Social Security
Medicare
Medicaid
Welfare
Unemployment
Non-discretionary spending
Interest on the debt

8. Budget Process Fiscal Year October 1st – September 30th
1. Executive Formulation – President and OMB
(due in early February)
2. Action by the House
debate discretionary spending, set budget targets, subcommittees – appropriations bills
(deadline September 15th)
3. Action by Senate – compromise with the House
4. Final Approval – Congress sends to President for
approval.

9. Deficit and Debt Debt Level: 1900 - $ 1.3 billion 1929 - $16.9 billion
$ 6.2 trillion
$ 7.9 trillion
$ 10.5 trillion
Dec $ 12.0 trillion
Mar $12.5 trillion
Oct – $14.9 trillion
Mar – $15.6 trillion
Mar $16.8 trillion
Oct $18,156,009,168,208.26
Apr $19,227,505,274,471.36
Oct $19,806,410, 739,
Your Share = $61,
Increases by an average of $2.53 billion / day

10. Financing Deficits: Government bonds Face Value (amount bond is worth)
Interest Rate (how much the bond earns)
Term (the number of years the bond must be held)

11. Impact:
Higher taxes
Interest payments

12. 2015 Federal Budget

13. 2025 Projected Federal Budget

14. Criteria for Success
Can identify the major components of revenue and spending at the federal, state and local levels.
Can explain the concept of fiscal federalism.
Can distinguish between the two types of government spending.
Can give examples of discretionary and mandatory spending, and explain how they affect the federal budget.
Can describe the federal budget process.
Can trace the growth of the national debt over time.
Can critically evaluate the possible effects of national debt growth on future generations.

15. Essay Question
Explain the difference between the deficit and the national debt. What is the current level of the national debt, and how are deficits financed? Discuss the possible impact of the rising national debt on future generations, and suggest steps that can be taken now to mitigate those effects.

16. Essays:
Imagine that you are an elected official who wants to increase tax revenues. Which tax would you raise? (Individual Income Tax, Corporate Income Tax, Sales Taxes, Property Taxes, Other (explain)) Why did you choose the tax you did? You wish to be re-elected! Who did you harm the most with your choice, and how will you convince them that it was the best choice?
Explain the difference between the deficit and the national debt. What is the current level of the national debt, and how are deficits financed? Discuss the possible impact of the rising national debt on future generations, and suggest steps that can be taken now to lessen the effect of the debt.