1. Government Spending In 2001, total government expenditures amounted to nearly $2.9 trillion. On a per capita basis, this amounted to almost $10,300 for every man, woman, and child in the United States. Where are we now?now

2. Government Spending in Perspective Three reasons why government spending has increased since the 1940s: WW II GD = Favorable public opinion for government oversight (regulation) Success of large-scale public works projects

3. Goods and Services – Tanks, planes, ships to toilet paper and soap for gov’t employees Transfer Payments – Social Security, welfare, unemployment compensation, disability benefits Grant-in-aid: $$ provided from one level of government (fed) to another level (state) Subsidy: $$ to individuals or industries to encourage/protect a certain economic activity Two Kinds of Spending

5. Impact of Government Spending Remember, everything has a cost! – Can either stimulate economic activity or affect the FOP Affecting Resource Allocation Redistributing Income – May affect family incomes; provide/lose jobs Competes with the Private Sector

6. Establishing the Federal Budget Mandatory Spending (2/3 of federal budget) Spending authorized by law that continues w/out annual approval by Congress Interest on borrowed $$ Social Security Medicare Veteran’s benefits Discretionary Spending (1/3 of remaining budget) Programs that must receive annual authorization Defense spending Welfare Education Social services Transportation Natural resources Environment **The government’s fiscal year is from October 1 to September 30

7. How it’s Done Step One: Executive Formulation – Prez confers with advisors to draft a budget Step Two: Action by the House – Has the power to approve, modify, or disapprove of proposed budget  sent to various subcommittees  House Appropriations Committee Step Three: Action by the Senate – May approve House bill or draft its own version – If differences exist, a joint House-Senate conference committee works out a compromise bill Step Four: Final Approval – Sent to Prez for approval or veto. Once signed, it becomes the official budget for the new fiscal year. http://www.atpe.org/Advocacy/Po liticalInvolvement/basicSteps.pdf

8. See what our government is up to these days…government

9. State and Local Government Expenditures State Gov Expenditures- passed by state leege which requires annual spending not to exceed revenues Intergovernmental expenditures (80%)- state $$ aid to local communities – Public welfare (TxDOT) – Retirement/Insurance trust for state employees – Higher Education – Highways – Hospitals – Interest on public debt Local Gov Expenditures-approved by mayor, city council, or county judge Elementary/Secondary education Utilities Hospitals Police protection Public welfare Highways Housing and community development Fire protection Parks and recreation **(2/3 of total Spending)

10. Deficits, Surpluses, and The National Debt Deficit Spending: spending in excess of revenues collected Finance shortage of revenue by borrowing from others (sell treasury bonds to public) = federal debt Section 4

11. Impact of the National Debt First ConsequenceNational Debt Distribution of Income If gov’t borrows $$ from wealthy, AND the burden of taxes falls on the middle class and the poor, taxes would be transferred to the rich in the form of interest payments on the debt hmmm… sound familiar?

12. Impact of the National Debt Second C onsequence Purchasing Power The larger the public debt, the larger the interest payments  More taxes needed to pay off loans  Less $$ to spend on our own needs

13. Impact of the National Debt Third C onsequence Reduced Incentives Higher taxes = less incentive to work, save, or invest

14. Deficit Legislation Gramm-Rudman-Hollings (1991) – Set federal deficit targets for Congress and the president over a 6-year period Budget Enforcement Act of 1990 – “pay-as-you-go” provision Omnibus Budget Reconciliation Act of 1993 – Trim $500 billion from deficit over 5-year period Balanced Budget Agreement of 1997 – Spending caps to limit annual discretionary spending