Fiscal Policy and Federal Budget

Vocab  Federal Budget-The federal governments plan for the use of the government revenues  Fiscal Year-a 12-month financial period that typically does not duplicate the dates of the calendar year.  Budget Deficit-When the government spends more money than it collects.  Budget Surplus-When the government collects more than it spends.  Deficit Spending-The term for the government policy of spending more money for its programs than it is able to cover with its revenues.

Vocab Continued.  National Debt-The total amount of money that the federal government has borrowed, and it includes deficits from the previous years.  Debt Ceiling-Legislates a limit on the size of the national debt.  Proportional Taxes- also called “flat rate taxes” It takes the same percentage of tax from all individuals  Progressive Taxes-Takes a larger percentage of tax from a high-income person than a low-income person  Regressive Taxes- Tax takes a larger percentage of tax from people with low incomes than from people with high incomes (sales tax is an example)

Creating the Federal Budget  Before the civil war the U.S. had no process for planning future expenditures. There were three large developments that pushed for an orderly budgeting process. Wartime spending, increased corruption, and progressive reform.

The National Debt  What happens when you spend more money than you earn? In order to try to get back into the green you will probably have to borrow money. This is what has happened to the U.S. and has lead us into a national debt.

Growth of The National Debt  It all started when the U.S. constitution was signed and they agreed to assume all outstanding debts of the Confederation Congress. The debt started off and about $75 million. Ever since then, the debt has gone up and down. The debt finally passed the $1 billion mark during the civil war. Since then with WW1 and WW2 the debt has continued to rise and by 2000 was more than $5.6 trillion.

Balancing the Federal Budget  High federal deficits and the rise of the national debt have caused policy makers to look for good ways to balance the federal budget. The two, simple, ways to balance it is to increase revenues and to decrease expenditures.

Questions  How was the national debt started?  How much was the original national debt?  What are the two simple ways to balance the federal budget?  What were the 3 main developments that helped create the federal budget?  Do you have any idea what the national debt is today?