Does the federal government budget and spend your tax dollars wisely? The Federal Budget Chapter 14 Essential Question: Does the federal government budget and spend your tax dollars wisely?

History of the Budget Budget – estimate of money in/out during fiscal year 1800s, Congress made the budget It was balanced – income & expenses equal Sometimes a surplus – more $ in than spent Rarely a deficit – not enough $ to pay expenses Debt – cumulative shortfall of $ Deficit is yearly, debt is cumulative

History (cont.) 1900s, president gets involved WWI ran up deficit/debt 1921, Budget and Account Act set up office in executive branch Goal – balanced budget President submits a budget to Congress yearly 1930s, Great Depression & FDR “Deficit spending” was viewed as okay The national debt also began to add up 1970s, Nixon did impoundment = refusing to spend $ Congress had allocated Congress struck back

History (cont.) Today, Congress & President share budget power Pres. still offers budget… …House & Senate both have budget committees CBO (Congressional Budget Office) estimates revenue/spending We still struggle with the budget, bickering.

Budget process Phase 1 of 4 Feb., President submits budget to Congress This reflects his goals, priorities Phase 2 of 4 Congress committees take over (both House & Senate) CBO helps match with president’s estimates A conference committee settles House/Senate differences Supposed to be approved by Congress by April 15

Budget process (cont.) Phase 3 of 4 Congress takes up 13 appropriations bills (spending categories) They pass 1 by 1 through the summer, early fall Sent to president to sign Phase 4 of 4 By Oct. 1, budget is accepted. Or… …they pass a continuing resolution – an extension, or… …government shutdown.

Gov’t revenue, gov’t spending Gov’t revenue (income)… Individual income tax – paid by you/me on our income Social insurance tax – Social Security or Medicare deductions Corporate income tax – paid by businesses Excise taxes – tax on things like alcohol, services Progressive tax – burden falls more on wealthier taxpayers Ex.: income tax Regressive tax – burden falls more on poorer taxpayers Ex.: excise tax

Gov’t revenue, gov’t spending (cont.) 2/3 of gov’t spending mandatory, it’s already set Entitlements – programs that help people based on age, income, etc. Ex.: food stamps, Social Security 1/3 of gov’t spending is discretionary (it’s a choice) Congress/president change discretionary spending Biggest chunk: defense Earmarks – funds set aside for home projects (controversial!)