1. Fiscal Policy What is unemployment and the types? What effects does unemployment have on the economy?

2. Fiscal policy Fiscal policy is carried out by the legislative and/or the executive branches of government. The two main instruments of fiscal policy are government expenditures and taxes. The government collects taxes in order to finance expenditures on a number of public goods and services—for example, highways and national defense.

4. Fiscal Policy/Federal Budget Federal Budget—the Federal Gov’t plan for the use of government revenues. 3 Reasons for development of Federal Budget: –Wartime Spending—Rises sharply during war –Increased Corruption—Believed to reduce –Progressive Reform—More accountable to the public.

5. How Does the Federal Government Create a Budget? There are five key steps in the federal budget process: –Step 1: The President submits a budget request to Congress –Step 2: The House and Senate pass budget resolutions –Step 3: House and Senate Appropriations subcommittees “markup” appropriations bills –Step 4: The House and Senate vote on appropriations bills and reconcile differences –Step 5: The President signs each appropriations bill and the budget becomes lawappropriations bill

7. Government Committees House Appropriations Committee –40% of total federal spending Armed Services Committee Foreign Relations Committee Committee, Committee, Committee, etc. –Why do our elected representatives want to be on these committees?

8. Federal Budget Deficits Fiscal Year—is a 12 month financial period that typically does not duplicate the dates of the calendar year. Federal Budget Deficits: –Deficit—when the government spends more money than it collects. –Surplus—when the government collects more money than it spends.

9. Federal Budget Deficits Deficit Spending—the policy of the government spending more money for programs than it is able to cover with it’s revenues. –1992 budget deficit was $300B –2003 budget deficit was around $600B –2009 budget deficit was $1.42 trillion

10. Why Budget Deficits ? 1. National Emergencies—ex. Wars 2. Social Programs 3. Stimulate economy during recessions The National Debt: is the total amount of money that the federal government has borrowed, and includes all deficits from previous years.The National Debt –1790 = $75 million –1917 = $ 1 billion –1996 = $5 trillion –2003 = $7 trillion –2012 = $16 trillion

11. The National Debt Debt Ceiling —Is the limit on the size of the national debt.Debt Ceiling –1918-- $12.5 Billion –1986 -- $2 Trillion –1996 -- $5.5 Trillion –2003--$8.0 Trillion –2012--$16.4 Trillion  Impact of National Debt:National Debt  1995—Government paid $232 Billion in interest  Could that money be used in other places?  What do we get for this $232 B ?

12. Balancing the Federal Budget Two Ways to Balance Budget: –1. Increasing Revenues– ex. Raise taxes –2. Decreasing Expenditures— 1990’s closed many military bases  Legislating a Balanced Budget—  Gramm-Rudman Act—1985, said that the federal budget must be balanced within 5 years.  Every program was cut  Did not achieve full budget balancing