Chapter 16: Financing Government Opener

The constitutional purpose of a budget is to make government responsive to public opinion and responsible for its acts. -President William Howard Taft, message to Congress, 1909

Essential Question How should the federal budget reflect Americans’ priorities?

Guiding Questions Section 1: Taxes and Other Revenue How is the Federal Government financed? The Federal Government is financed by nontax revenues and by direct and indirect taxes, including income tax, corporation income tax, payroll tax, excise tax, estate and gift tax, and customs duty.

Guiding Questions Section 2: Borrowing and Public Debt What effect does borrowing have on the federal budget and the nation’s economy? Borrowing can be used to provide an economic stimulus for the nation and to pay off budget deficits in times of crisis or overspending. But such borrowing leads to future deficits and higher interest payments on the increasing public debt.

Guiding Questions Section 3: Spending and the Budget How is federal spending determined? The various federal agencies submit budget proposals to the Office of the President, which adjusts them before presenting a complete budget to Congress. Congress then makes further adjustments to the budget until appropriations bills are approved and sent to the President to be vetoed or signed into law.

Guiding Questions Section 4: Fiscal and Monetary Policy How does the Federal Government achieve its economic goals? The Federal Government tries to maintain a healthy, growing economy through a combination of fiscal policies. These involve taxation, government spending, and monetary policies based on controlling the money supply and the availability of credit.