Presentation on theme: "Warm-up 5/10/12 Yesterday we talked about welfare programs to help people in need. How does the government pay for these programs? What limits how."— Presentation transcript:
Warm-up 5/10/12 Yesterday we talked about welfare programs to help people in need. How does the government pay for these programs? What limits how much they can pay towards these programs?
Unit VI – Government Finances Fiscal Policy, Taxing, and Spending
Government spending Mandatory spending – federal spending required by law; does not need annual approval by Congress Social Security, interest payments on national debt Discretionary spending – federal spending that requires annual approval Defense spending, highway construction,
Appropriations Bill Approve spending for a particular activity
Where does the government get its money? Taxes, taxes, taxes. And some other stuff like selling bonds, but mostly taxes (approx 92%). Pg 679
Intergovernmental revenue Money that one level of the government receives from another level. EX – Federal gov’t gives the states money for welfare, highways, hospitals, etc.
Local government services Education Police & fire protection Water, sewer, sanitation services
Entitlement Programs Provide health, nutritional, or income supplements to individuals who meet certain requirements.
Government Budget When the government spends more than it collects in revenue, it has a deficit and when it collects more than it spends it has a surplus.
How does the Government borrow money? Selling bonds
National Debt All money that has been borrowed and not paid back by the federal gov’t. 1900 – $1.3 billion 1940 – $50.7 billion 2006 – $4.9 trillion 2012 – $??? http://www.brillig.com/debt_clock/
Impact of the national debt Interest – interest on debt must be paid every year Who pays this debt? Interest Rates – when the government borrows more money, there is less for citizens to borrow.
Balanced Budget Spending equals revenue Not required by Fed, but 48 states are required (NC can not spend more than it makes).
How to reduce the national debt Cut spending – get rid of unnecessary programs and costs (not that easy) Raise taxes – higher tax on wealthy class, higher (only option if spending can not be cut)
Deficit Spending To pay for necessary expenditures in times of recession I.e. – we still have to pay for some SS, welfare, highways, etc when in a recession. Funding may get reduced, but it does not go away.