22.1 The Federal Budget: Revenues and Expenditures

22.1 The Federal Budget: Revenues and Expenditures
Just like you need to have a household budget to track your expenses, the federal government also has a budget. The budget covers October 1st of one year until September 30th of the next year. That 12 month period is known as a fiscal year (FY).

Public Policy

What is public policy? An attempt by a government to address a public issue or problem by instituting laws, regulations, decisions, or actions pertinent to the problem at hand A guide to legislative action that is more or less fixed for long periods of time, not just short-term fixes or single legislative acts. Policy also doesn’t happen by accident, and it is rarely formed simply as the result of the campaign promises of a single elected official, even the president. While elected officials are often important in shaping policy, most policy outcomes are the result of considerable debate, compromise, and refinement that happen over years and are finalized only after input from multiple institutions within government as well as from interest groups and the public

Stages of the policy process
Problem Recognition Agenda Setting Policy Implementation Policy Formulation Policy Adoption Policy Implementation Policy Implementation Policy Evaluation

Problem Recognition The process by which issues are identified
Agenda Setting Process of forming list of issues to address Policy Formulation Creating appropriate courses of action

Policy Adoption Approval of a policy proposal Policy Implementation
Carrying out policy Policy evaluation Process of determining whether implementation is working or not.

How do policy issues emerge?
Triggering mechanisms- “a critical event (or set of events) that converts a routine problem into a widely shared, negative public response” Dimensions of triggering mechanisms: Scope = # of people affected Intensity = perceived importance Time = length of time a critical event unfolds Policy issues are most likely to progress through the policy process when scope and intensity are high, and the critical event(s) happens quickly

Types of triggering mechanisms
Internal- natural catastrophes, economic calamities, technological breakthroughs, social evolution External- acts of war, indirect conflicts, economic confrontations, balance of power 1960s Civil Rights Movement  Civil Rights Act, Voting Rights Act 1930s Great Depression  New Deal Legislation 1980s/90s Crack cocaine epidemic  War on Drugs

Excerpt from The Jungle by Upton Sinclair (1904)
With one member trimming beef in a cannery, and another working in a sausage factory, the family had a first-hand knowledge of the great majority of Packingtown swindles. For it was the custom, as they found, whenever meat was so spoiled that it could not be used for anything else, either to can it or else to chop it up into sausage. With what had been told them by Jonas, who had worked in the pickle rooms, they could now study the whole of the spoiled-meat industry on the inside, and read a new and grim meaning into that old Packingtown jest—that they use everything of the pig except the squeal.

Jonas had told them how the meat that was taken out of pickle would often be found sour, and how they would rub it up with soda to take away the smell, and sell it to be eaten on free-lunch counters; also of all the miracles of chemistry which they performed, giving to any sort of meat, fresh or salted, whole or chopped, any color and any flavor and any odor they chose. In the pickling of hams they had an ingenious apparatus,1 by which they saved time and increased the capacity of the plant—a machine consisting of a hollow needle attached to a pump; by plunging this needle into the meat and working with his foot, a man could fill a ham with pickle in a few seconds.

And yet, in spite of this, there would be hams found spoiled, some of them with an odor so bad that a man could hardly bear to be in the room with them. To pump into these the packers had a second and much stronger pickle which destroyed the odor—a process known to the workers as “giving them thirty per cent.” Also, after the hams had been smoked, there would be found some that had gone to the bad. Formerly these had been sold as “Number Three Grade,” but later on some ingenious person had hit upon a new device, and now they would extract the bone, about which the bad part generally lay, and insert in the hole a white-hot iron. After this invention there was no longer Number One, Two, and Three Grade—there was only Number One Grade. The packers were always originating such schemes—they had what they called “boneless hams,” which were all the odds and ends of pork stuffed into casings; and “California hams,” which were the shoulders, with big knuckle joints, and nearly all the meat cut out; and fancy “skinned hams,” which were made of the oldest hogs, whose skins were so heavy and coarse that no one would buy them—that is, until they had been cooked and chopped fine and labeled “head cheese!”

It was only when the whole ham was spoiled that it came into the department of Elzbieta. Cut up by the two-thousand-revolutions- a- minute flyers, and mixed with half a ton of other meat, no odor that ever was in a ham could make any difference. There was never the least attention paid to what was cut up for sausage; there would come all the way back from Europe old sausage that had been rejected, and that was moldy and white – it would be dosed with borax and glycerin, and dumped into the hoppers, and made over again for home consumption

There would be meat that had tumbled out on the floor, in the dirt and sawdust, where the workers had tramped and spit uncounted billions of consumption germs. There would be meat stored in great piles in rooms; and the water from leaky roofs would drip over it, and thousands of rats would race about on it. It was too dark in these storage places to see well, but a man could run his hand over these piles of meat and sweep off handfuls of the dried dung of rats. These rats were nuisances, and the packers would put poisoned bread out for them; they would die, and then rats, bread, and meat would go into the hoppers together. This is no fairy story and no joke; the meat would be shoveled into carts, and the man who did the shoveling would not trouble to lift out a rat even when he saw one – there were things that went into the sausage in comparison with which a poisoned rat was a tidbit.

There was no place for the men to wash their hands before they ate their dinner, and so they made a practice of washing them in the water that was to be ladled into the sausage. There were the butt-ends of smoked meat, and the scraps of corned beef, and all the odds and ends of the waste of the plants, that would be dumped into old barrels in the cellar and left there. Under the system of rigid economy which the packers enforced, there were some jobs that it only paid to do once in a long time, and among these was the cleaning out of the waste barrels. Every spring they did it; and in the barrels would be dirt and rust and old nails and stale water – and cartload after cartload of it would be taken up and dumped into the hoppers with fresh meat, and sent out to the public's breakfast. Some of it they would make into "smoked" sausage – but as the smoking took time, and was therefore expensive, they would call upon their chemistry department, and preserve it with borax and color it with gelatin to make it brown. All of their sausage came out of the same bowl, but when they came to wrap it they would stamp some of it "special," and for this they would charge two cents more a pound.

"I aimed at the public's heart, and by accident I hit it in the stomach."
Sinclair meant to highlight the poor working conditions, but the American public was far more outraged with his exposure of health violations and unsanitary practices in the American meatpacking industry during the early 20th century, greatly contributing to a public outcry which led to reforms including the Meat Inspection Act. Federal Meat Inspection Act of 1906 makes it a crime to adulterate or misbrand meat and meat products being sold as food ensures that meat and meat products are slaughtered and processed under sanitary conditions.

Prioritizing Values Freedom Diversity Equality Cooperation Security
Justice Self-reliance Community Stability Democracy

Prioritizing Values Freedom Diversity
Equality Cooperation Security Justice Self-reliance Community Stability Democracy In the margin of your notes, prioritize your values.

Prioritizing Values Freedom Diversity
Equality Cooperation Security Justice Self-reliance Community Stability Democracy In the margin of your notes, prioritize your values. Now briefly discuss your rankings and why you ranked them as such within your group.

Goods: describe the range of commodities, services, and systems that help us satisfy our wants or needs. toys, furniture, food, transportation, etc…

Public Good vs Private Good
Non-excludable means that it is costly or impossible for one user to exclude others from using a good. Non-rivalrous means that when one person uses a good, it does not prevent others from using it.

Public Goods: can be consumed by more than one person; typically paid for by the government via taxes. May not necessarily be a physical good that you can hold in your hands Ex: Sidewalks, lampposts, public roads, national security, etc… Non-excludable: Even if you strongly disagree with America’s defense policies or with the level of defense spending, the national defense still protects you. You cannot choose to be unprotected, and national defense cannot protect everyone else and exclude you. Non-Rivalrous: Multiple people using it does not necessarily keep others from using it.

Private Goods: products that people must buy in order to use or own them. Ex: Newly purchased car Excludable: If you do not pay for the car, the dealer would not just allow you to use it. Rivalrous: If you are driving the car, no one else can be also driving that exact same car. You are rivals in consumption.

Externalities: positive or negative side effect of economic activities Positive
Public goods like roads allow cars and trucks to travel easier and for good to be transported efficiently, resulting in lower prices of goods. Negative Results when an action has a harmful effect. Ex: Cars enable travel but create pollution The government encourages positive externalities by promoting positive actions and discourages negative externalities by regulating actions that result in negative externalities.

NEGATIVE The government regulates the car industry to reduce the amount of emissions that may contribute to pollution and climate change. The negative externality of pollution is easy to ignore from inside a vehicle. From the outside, it is hard to miss.

POSITIVE The government subsidizes public schooling because a well educated workforce is a positive externality. Optional video: An Open Letter to Students by John Green

A P P L I C A T I O N  The Measles Epidemic of 1989–1991
After the measles vaccine was introduced in 1963, measles cases had become relatively rare in the U.S. by the 1980s. Over the period from 1989 to 1991, however, there was a huge resurgence in measles. It is clear that this outbreak resulted from very low immunization rates among disadvantaged inner-city youths. These unimmunized children were imposing a negative externality on other children who had received their immunizations but for whom immunization may have worn off. The federal government responded to this health crisis in the early 1990s: The government publicly encouraged parents to get their children immunized. The government also paid for the vaccines for low-income families. The result was impressive. Immunization rates, which had never been above 70% before the epidemic, rose to 90% by Government intervention clearly reduced this negative externality.

Excludable or Non-Excludable?

Streaming music from satellite transmission programs
Police protection Police protection is nonexcludable because once citizens are protected from crime, it is difficult to exclude someone from this protection. Streaming music from satellite transmission programs Some satellite radio services, such as SiriusXM, are sold by subscription fee, so they are excludable. Roads Once a road is built, it is difficult to exclude people, although toll roads can exclude nonpayers. Primary education Primary education can be provided by private companies, so it is excludable. Cell phone service Companies sell cell phone service and exclude those who do not pay.

Free rider: Someone who wants others to pay for a public good but plans to use the good themselves Free-rider Problem: Markets often have a difficult time producing public goods because free riders attempt to use the public good without paying for it. Collecting taxes is one of the big ways to alleviate the problem.

Market Failure: Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market.

COMMON RESOURCES Common resources, like public goods, are not excludable. They are available free of charge to anyone who wishes to use them. Common resources are rival goods because one person’s use of the common resource reduces other people’s use.

Tragedy of the Commons The Tragedy of the Commons is a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole. Common resources tend to be used excessively when individuals are not charged for their usage. This is similar to a negative externality. The government tries to regulate overharvesting by issuing fishing licenses, quotas, etc…

The queen conch is a large marine mollusk found in shallow waters of sea grass in the Caribbean. These waters are so shallow, and so clear, that a single diver may harvest many conch in a single day. Not only is conch meat a local delicacy and an important part of the local diet, but the large ornate shells are used in art and can be crafted into musical instruments. Because almost anyone with a small boat, snorkel, and mask can participate in the conch harvest, it is essentially nonexcludable. At the same time, fishing for conch is rivalrous; once a diver catches one conch it cannot be caught by another diver.

Goods that are nonexcludable and rivalrous are called common resources
Goods that are nonexcludable and rivalrous are called common resources. Because the waters of the Caribbean are open to all conch fishermen, and because any conch that you catch is conch that I cannot catch, common resources like the conch tend to be overharvested. Since nobody owns the ocean or the conch that crawl on the sand beneath it, no one individual has an incentive to protect that resource and responsibly harvest it.

Tasks Classic Types of Policies Different Types of Goods

The Federal Budget: Revenues and Expenditures
THE PROCESS Step 1: The President sends a message to Congress no later than the first Monday in February stating how much the President wants to spend on each federal program. We’ll talk about it. More money to military. Cut Department of Interior…

Step 2: Key members of Congress agree on a budget resolution, which is Congress’s plan for revenue and for spending on broad categories such as health. Two kinds of government spending: 1. Mandatory Spending: set by laws outside the budget process Fixed from year-to-year Ex: Social Security 2. Discretionary Spending: spending choices made and approved each year. Includes items such as national defense and highways and can differ from year to year.

Step 3: Congress sets spending on each program for the upcoming fiscal year. First, committees in the House write appropriation bills, which gives official approval for the government to spend money. The House writes the bills, but they must be approved by both chambers of Congress. After each is passed, they are sent to the President, who signs them into law or vetoes them. If they are vetoed, Congress can rewrite the bill or override the veto (must have 2/3 Congress to override veto). Sign this pls

Revenue: Most US revenue comes from taxes. The two largest are personal income tax, which is taxes individuals pay on their income, and payroll taxes. Payroll taxes are deducted from your paycheck for social insurance programs like Social Security and Medicaid. While employers and employees both pay payroll taxes, the burden is still typically passed to the employee by employers lowering wages to compensate.

Social Security is the government’s largest expenditure and will likely increase as the Baby Boomers age. The “Other” category includes programs in education, veteran benefits, and highway costs and is discretionary spending (not necessarily set by laws and can change year to year).

Budgeting for State and Local Governments

Intergovernmental revenue The largest source of state income. Funds that one level of government receives from another level of government. States receive this money from the federal government.

Sales Tax States’ second-most-important source of revenue Paid when someone buys a good or service Ex: If your sales tax is 5%, and you buy a $100 TV, you will pay an additional $5 in taxes.

State Income Tax All but 5 states have a personal income tax In some states it is proportional, where all taxpayers pay a flat rate. In other states it is progressive, with high incomes taxed at higher rates.

Entitlement Programs Single biggest area of state spending is public welfare, which help people with little money maintain basic health and living conditions. Entitlement programs have benefit requirements set by law Ex: Medicaid (health services for the poor)

Education Another large category of state spending. Some is used to subsidize students’ state college education to make college more affordable Some goes to local governments to help fund public schools

Local governments rely heavily on property taxes and sales taxes to raise funds. Property Taxes: based on the value of land and property that people own (higher the value; higher the tax).

Task iCivics Taxes Worksheet

22.1 The Federal Budget: Revenues and Expenditures

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