1. Economics Unit 4 Lesson 4 Understanding Government Budgets

2. Government Budgets A government budget is a plan for outlays (expenditures or spending) and revenue (collecting taxes) All governments - local, state, and federal - are required to revise budgets every fiscal year Only the federal government is not required to balance its budget annually The US Constitution does not require a balanced budget

3. Two Categories of Government Spending Mandatory – Required by law Discretionary – Voted on by Congress

4. What is Mandatory Spending? Social Security (1st largest #) 21% Medicare (3rd largest) 12% Interest on National Debt (sixth largest #) 10% Admin. of Justice 1%

5. What is Discretionary Funding Defense/Military (2nd largest #) 20% Health–Medicaid (5th largest) 11% Education 4% Agriculture 1% Welfare and Food Stamps (4th largest) 14% Transportation 2% Science, Energy, and Natural Resource Development 3% International Affairs and Aid 1%

6. From 2005

7. What is Government Debt? A deficit in the budget occurs when government expenditures are greater than revenues US Deficit for 2009 was over $1 trillion (highest ever) Increased by 50% since 2003 Biggest cause is $700 billion bank bailout The National Debt is the total accumulated deficits $13 Trillion in 2010 81% of GDP (National Wealth)

8. Newscast on National Debt Clock http://dailybail.com/home/national-debt- gets-too-big-for-debt-clock.html http://dailybail.com/home/national-debt- gets-too-big-for-debt-clock.html http://www.usdebtclock.org/

15. Government Surplus  Occurs when government revenues exceed government expenditures  1997-2001 were the only surplus in five decades

16. History of Deficit and Surplus

18. Creditors Those people or entities to whom the U.S. government owes money Owed $8 trillion in Treasury bonds and US notes 1/3 American people 1/3 Foreign governments China and Japan largest creditors Buy US bonds to strengthen their currency US Government borrows $4 trillion from itself Mostly to Social Security Interest is $450 million a year $1.5 Trillion due in 2011

21. Budget Battles: 2010-11 Issues 2010 National Budget Commission Bi-partisan Committee Recommend: Cuts in Social Security, Defense, and Domestic Programs Obama 2010 Budget $30 billion for Afghanistan war $30 billion for small business that hire new workers More money for education and Pell grants Money for high speed rail system Cuts in agriculture, oil, and corporate subsidies Fees on large banking firms 3 Year spending freeze after 2010

22. President Obma’s Proposed 2011 Budget http://www.nytimes.com/interactive/20 10/02/01/us/budget.html Budget Battles: 2010-11 Proposal New York Times Interactive Spending Budget–2010-11

23. Key Budget Issues 2010 Compromise Extend Bush Tax Cuts–2 years “Middle class”: focus on Social Security; cost $485 billion “upper class” (earning over $250,000/yr); cost $139 billion. Continue unemployment benefits–13 months Cost $33 billion But help 2.5 million unemployed pay bills