1. Federal Budget Process Each year, the president sends a federal budget to Congress. The budget undergoes a lengthy approval process until it is signed into law. VS 1

2. Section 2 Federal Government Expenditures (cont.) Federal budget leads to a budget deficit or a budget surplus.budget deficitbudget surplus The Federal Budget for Fiscal Year 2007

3. Section 2 Federal Government Expenditures (cont.) Federal budget expenditures include –Social Security—considered mandatory spendingmandatory spending –National defense—considered discretionary spending discretionary spending –Income security –MedicareMedicare

4. Section 2 Federal Government Expenditures (cont.) Federal budget expenditures include –Health—MedicaidMedicaid –Net interest on debt –Other expenditure categories Profiles in Economics: Alice Rivlin

5. Section 2 Unlike the federal government, some states have a balanced budget amendment.balanced budget amendment States must cut spending when revenues drop. State Government Expenditures (cont.)

6. Section 2 State government expenditures include –Intergovernmental expendituresIntergovernmental expenditures –Public welfare –Insurance trust and retirement –Higher education –Other expenditures State Government Expenditures (cont.) State and Local Expenditures

7. Section 2 Local governments’ expenditures are Local Expenditures (cont.) –Elementary and secondary education –Utilities –Public safety and health –Other expenditures The Global Economy & YOU: International Education Spending

8. VS 2 Major Budget Categories The major budget categories vary for federal, state, and local governments. The focus of the federal government is on nationwide programs and expenditures. States pass on much of their budget to local governments and spend the rest on state-level programs. Local governments focus their expenditures on local needs.

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16. Vocab10 federal budget annual plan outlining proposed expenditures and anticipated revenues

17. Vocab11 fiscal year 12-month financial planning period that may not coincide with the calendar year

18. Vocab12 appropriations bill legislation authorizing spending for certain purposes

19. Vocab13 budget deficit a negative balance after expenditures are subtracted from revenues

20. Vocab14 budget surplus a positive balance after expenditures are subtracted from revenues

21. Vocab15 mandatory spending federal spending authorized by law that continues without the need for annual approvals by Congress

22. Vocab16 discretionary spending spending for federal programs that must receive annual authorization

23. Vocab17 Medicare federal health-care program for senior citizens, regardless of income

24. Vocab18 Medicaid joint federal-state medical insurance program for low-income people

25. Vocab19 balanced budget amendment constitutional amendment requiring government to spend no more than it collects in taxes and other revenues, excluding borrowing

26. Vocab20 intergovernmental expenditures funds that one level of government transfers to another level for spending

27. Vocab21 ambiguity uncertainty about meaning or value

28. Vocab22 coincide to happen or exist at the same time or in the same position

29. Vocab23 deficit spending annual government spending in excess of taxes and other revenues

30. Vocab24 national debt total amount borrowed from investors to finance the government’s deficit spending

31. Vocab25 balanced budget annual budget in which expenditures equal revenues

32. Vocab26 trust fund special account used to hold revenues designated for a specific expenditure such as Social Security, Medicare, or highways

33. Vocab27 per capita per person basis; total divided by population

34. Vocab28 crowding-out effect higher than normal interest rates and diminished access to financial capital faced by private borrowers when they compete with government borrowing in financial markets

35. Vocab29 “pay-as-you-go” provision requirement that new spending proposals or tax cuts must be offset by reductions elsewhere

36. Vocab30 line-item veto power to cancel specific budget items without rejecting the entire budget

37. Vocab31 spending cap limits on annual discretionary spending

38. Vocab32 entitlement program or benefit using established eligibility requirements to provide health, nutritional, or income supplements to individuals

39. Vocab33 mandate to order or require

40. Vocab34 instituted put into action

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