1. Section 2 Federal Government Expenditures Federal budget expenditures include –Social Security—considered mandatory spendingmandatory spending –National defense—considered discretionary spending discretionary spending –Income security –MedicareMedicare –Health - MedicaidMedicaid

2. Section 2 State government expenditures include –Intergovernmental expendituresIntergovernmental expenditures –Public welfare –Insurance trust and retirement –Higher education –Other expenditures Government Expenditures State and Local Expenditures Local government expenditures are –Elementary and secondary education –Utilities –Public safety and health –Other expenditures

3. VS 3 Surpluses, Deficits, and Debt When revenues exceed expenditures, governments enjoy a budget surplus. If revenues are less than expenditures, governments are faced with a budget deficit. They then have to borrow money to meet expenditures and incur debt.

4. Section 3 The national debt, although mostly owed to ourselves, still affects the economy by Impact of the National Debt (cont.) –Transferring purchasing power from private sector to public sector –Reducing economic incentives –Causing a crowding-out effectcrowding-out effect –Redistributing income Two Views of the National Debt

5. Section 3 Concern over deficit spending led to attempts to control it. Reducing Debts and the Debt (cont.) –Congress mandated a balanced budget. –“Pay-as-you-go” provision“Pay-as-you-go” provision –Line-item veto and spending capsLine-item vetospending caps –Raising revenues –Reduced spending—difficult because of entitlements entitlements

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

7. Vocab14 budget surplus a positive balance after expenditures are subtracted from revenues budget deficit a negative balance after expenditures are subtracted from revenues

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

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

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

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

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

13. 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

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