Intro to Federal Budget and Debt

Budget?  Family Budget 1. Income determined 2. Expenses planned 3. Savings invested (or deficit borrowed)  Federal Budget 1. Expenses planned 2. Borrowing planned 3. Income determined (tax revenue)

Why done this way?  Government contracts and entitlements obligate money  Tax revenue is unknown  The budget process takes more than a year to resolve  Congress is trying to serve constituents in “real time” Projects come and go at irregular intervals

Why done this way?  Americans typically want… Less overall spending More specific spending Lower taxes

Where does the government spend their money?

Process?  VIEW Creating The Budget Powerpoint on teachercannon.com  Quick Version: (Pg. 457)

Budget Resolution  Begins just after submission of the President’s Budget (which comes on the first Monday in February)  The Budget Resolution is Congress’s take on where (not how) to spend money Just as an individual has to allocate money among rent, food and insurance, the federal government allocates its money between items such as national security, environmental protection and education (divided up between 13 appropriations bills)  Congress can provide more or less funds that the President has requested or make changes in tax laws

Authorization vs. Appropriation  Authorization is writing the law Authorization is policy guidance. It establishes a framework including what should a program do, where should it be located, etc. These bills authorize the federal government to do something, such as implement marine protected areas off the West Coast or amend the tax code, etc. The authorization bill merely says the government CAN spend the money on this purpose if it so chooses.  Appropriation is cutting the check Any agency or program needs language in an appropriation bill to actually get the money Appropriations bills are key to making things happen because federal actions require money. Even though most policy guidance is contained in authorization bills, policy can also be modified through the appropriations process.

Appropriations Process  In the fall of each year, you often hear that Congress is trying to pass the federal budget. It is the appropriations bills that Congress is usually frantically trying to pass before their October 1st deadline (the beginning of the fiscal year)  If Congress fails to pass the appropriations bills by October 1st, they must pass a “CR” or continuing resolution. This allows the government to continue operating with funding at the level of the previous fiscal year.

Some Favorite Targets For Budget Cuts Science, Space And Technology  Total savings: $25.6 billion, less than 1 percent of the budget. The Arts and Humanities:  Total savings: NEA, $124.4 million, NEH $141.1 million, less than.01 percent of the budget Foreign Aid And International Relations  Total savings: $28.5 billion, 1 percent of the budget The Program Formerly Known As Welfare  Total savings: Temporary Aid to Needy Families; food and nutrition assistance, including food stamps: $65.5 billion, 2.39 percent And it all adds up to? A grand total of a little over 4 percent of the budget.

How Does The Government Spend More than it makes?  Simple answer: IT BORROWS!!!  How?  They sell government bonds to people who are looking for a safe place to invest their money

How Do You Balance a Budget?  You spend less (or same) or tax more  Spend less = fewer government programs  Tax More = people have less money to spend