1. Health Economics Unit 11

2. 2 Budget of the US Government Fiscal Year 2000 l October 1, 1999 to September 30, 2000 l Total Government Spending is 29% of Gross Domestic Product l Federal Spending Only is 20% l 71% from Private Sources

3. 3 Comparability to Other Countries l U.S. is comparable to Japan l Much less than United Kingdom, Canada, Germany, France, and Italy

4. 4 Federal Government Dollars l 10% corporate income taxes l 4% Other: fines, customs, Federal Reserve earnings l 4% Excise taxes: alcohol, tobacco, transportation fuels, and etc. l 48% Individual income taxes l 34% Social Insurance Payroll Taxes

5. 5 Composition of Revenues between 1960 to 1998 l Payroll taxes increased for social programs l Corporate taxes declined l Individual taxes remained constant

6. 6 Spending for Year 2000 l 1.8 trillion dollar budget l Surplus of 117 billion in 2000

7. 7 Budget for Year 2000 l 22% Social Security l 11% Medicare l 6% Medicaid l 6% Entitlements - Food Stamps, Veterans l 6%Federal Retirements, Insurance, Payments to Farmers l 15% Defense

8. 8 Budget Continued l 17% Discretionary: education, science, technology, housing, transportation, and foreign aid l 11% Interest Payments l 6% Will not be spent - save for Social Security

9. 9 On and Off Budget Items l Items such as Social Security and Postal Service are Off Budget Items l On items include such items as those found in the discretionary areas l Unified budget = On Budget + Off Budget Items

10. 10 Budget Process l 1st Monday in February, President submits proposed Federal budget to Congress for next fiscal year l White House Office of Management and Budget (OMB) prepares proposal with advise of Cabinets, Advisors, and President l Thousands of pages to document budget

11. 11 Process Continued l Congress must pass budget l President signs l Enacted

12. 12 Year 2000 Budget l Feb, 1998-December, 1998: Executive Branch develops requests to OMB l President reviews l Dec, 1998-February 1999: Transmitted to Congress l Mar-Sept 1999: Congress reviews and approves

13. 13 Year 2000 Process Continued l Oct 1, 1999 Fiscal Year Begins l Oct 1, 1999, to September 30, 2000 Agency Program Managers execute budget l Oct - Nov, 2000 Data analyzed on actual spending

14. 14 Congressional Process Used to Approve Budget l Budget Resolution must be passed l Serves as Framework to make decisions about spending and taxes l Targets are established for total spending, total revenues, and addressing the deficit

15. 15 Discretionary Spending l 1/3 of federal budget is discretionary l 13 annual appropriation bills l Covers such areas as FBI, Coast Guard, Housing, Education, Space Exploration, Highway Construction, Defense, and Foreign Aid l Must act on these each year

16. 16 Mandatory Items l 2/3 of Federal Budget l May or may not choose to act to change allocations on these l Includes such items as Social Security, Medicare, Veterans, Food Stamps, Interest paid on National Debt

17. 17 Current Budget Law l Imposes a cap on discretionary spending through the Year 2000

18. 18 Process in Congress Con’t l Hearings on proposals l Approval by Congress l Approval by President l Monitored by Agency Program Managers, OMB, Congress, General Accounting Office

19. 19 Budget Terms l Budget Authority: What law authorizes Federal Government to Spend l Budget Outlay: What actually is spent

20. 20 Budget Act 1993: Government Performance and Results Act; Improve government programs by better measurements of effectiveness

21. 21 History of Deficits l First deficit in 1792 l 70 deficits between 1900 and 1997 l Usually due to wars or recession l 1998: Federal budget surplus; first since 1969; reduced federal debt by 50 billion l 2000 Forecasts: surplus for decades to come

22. 22 Debt of Government l 5.5 Trillion at the end of 1998 l Includes deficits that have built up from past 200 years

23. 23 History of Budget Acts l 1985: Balanced Budget and Emergency Deficit Control Act; established annual deficit targets for 5 years; never achieved those targets l 1990: Budget Enforcement Act: Limit discretionary spending; accomplished, mandatory spending in areas such as healthcare, however made deficit increase

24. 24 Budget Acts Continued l 1993: 5 year reduction package which included spending cuts and higher revenues l 1997: Balanced Budget Act: Will result in 247 billion in savings over next 5 years; extends solvency of Medicare Trust Fund; benefits higher education, benefits children’s health, and gives tax credits to families with children

25. 25 Comparison of Deficit and Surplus Budgets l In 1992, deficit was 290 Billion l In 1998, 69 Billion surplus

26. 26 Year 2000 Budget l 3rd Balanced Budget with Surplus l Projected use of surplus in Year 2000: l 62% to strengthen Social Security over next 15 years l 15% to keep Medicare solvent for next 20 years l 10% to support Universal Savings Accounts

27. 27 Surplus Continued l 11% to provide for military readiness, education, and domestic needs

28. 28 Priorities for Budget l Education l Aid to Working Families l Care of Children l Healthcare coverage l Medicare and Medicaid enhancements l Avoidance of Fraud l Nature - Parks and etc.

29. 29 Priorities Continued l Urban green spaces l World Peace

30. 30 Government Priorities l Improving performance through better management l Smaller, more efficient government l Programs in 32 Federal Agencies to improve performance