Bell Work: 1. How much money does the US spend per year? 2. Why is the budget important? What is it? Federal Budget

What is the Federal Budget? In the last fiscal year of 2011, the Federal government spent over 3.6 trillion dollars. This money was used for military spending, social security, Medicare, energy, national parks, farm subsidies and a variety of other areas.

Budget for 2010

Boiling it down Thus the Federal Budget is the allocation of monetary resources redistributed to help government funded projects.

Who finances the budget? The Federal Budget is financed from a variety of sources: Taxpayers- main stay of the budget. income taxes excise taxes (goods) estate taxes custom taxes (imports)

Chart of Income

Other financing options Aside from taxes the government will fund the budget via borrowing money. This causes deficit spending. Overall trade deficit is huge 12 trillion dollars Some years there will be individual surpluses but overall debt is not paid off. As of 2002, 1 out every 5 dollars the government spends goes to debt interest.

Breakdown

Main Loaners of $ China Japan The implications of deficit spending have national security concerns and debt burdens for future generations.

How is the budget created? Article I, Section 9, Clause 7 of the US Constitution… Only Congress can provide money for a budget- they have the power of the purse. Overtime, the budget burdens lies in the hands of the Executive Branch. President creates a plan. Congress modifies and approves or disapproves the plan.

Importance of the Budget This is extremely important for whatever legislation or programs the President may implement, they will need funding. This the budget is formulated public policy- without funds, no Federal program could exist. Therefore the President must work with Congress in order to have a successful administration… judgment of the administration

Simple Breakdown 1. President prepares the budget. 2.The budget is submitted to Congress. 3.Congress reacts to the President’s proposal. 4.Congress will then enact most of the proposals in appropriations measures (spending bills). Note: not all of the budget will pass and when something passes its usually modified from the original item.

Budget Preparation Note again… the process for preparing the budget is lengthy, controversial and extremely complicated… we will simplify the process for our class.

Presidential Preparation 1.Each federal agency will create a detailed estimate of their spending needs for the fiscal year. Example: Department of Energy may need 17.2 billion dollars because they are creating a new nuclear energy program.

Presidential Preparation 2)Each proposal is then sent to the Office of Management and Budget (OMB). This group is the president’s budget making agency. The OMB then conducts several meetings with these agencies in which the agencies must defend their estimates.

Presidential Preparations 3) The OMB, after reviewing the plans will then modify and submit them to the president for approval. 4)Upon approval the budget is then submitted to Congress.

Summary Presidential Prep. 1) Agencies submit budget estimates to the OMB. 2)OMB reviews and debates proposal. 3)Proposal submitted to the President. 4)If approved, proposal then submitted to Congress.

Congressional Budget Talks Generally, Congress operates in committees (rarely have full sessions). Each house will have their own budget committees. Regarding the budget, the most important budget committees are the House and Senate Appropriations Committees. These groups will subpoena agency officials to determine the merits of the budget.

Congressional Budget Each budget committee will then study the budget with the help of the Congressional Budget Office. The CBO was created in the 70’s to help with the complicated process… it has not ties to the OMB and is nonpartisan.

Budget Hearings As Congress subpoena’s the various agencies and experts they determine the merits based on their political agendas. Example: Appropriations Committee may ask members of the Department of Energy to explain why a new nuclear program is needed.

Congress and the Budget After conducting the hearings, the two houses appropriation committees will report back to their respective houses regarding the budget. The two houses will then propose a concurrent resolution which sets the targets for that specific budget. A vote is then taken…

Voting and the Budget A budget for a specific agency can be approved or disapproved. If Congress does not pass a budget, emergency funding could be passed (continuing resolution). Or the Congress may risk a government shutdown if the program is not deemed an entitlement program.

Simplified Overview 1) Agencies submit budget estimates to the OMB. 2)OMB reviews and debates proposal. 3)Proposal submitted to the President. 4)If approved, proposal then submitted to Congress. 5)Congress then examines the budget in appropriation committees (with the help of the CBO) 6)A concurrent resolution is submitted to both houses. 7)Budget is approved by the Congress (individually or in an omnibus bill). 8)President approves the budget or vetoes.

NGO’s? Or Lobbyists Aside from government officials, non-government officials influence the budget (lobbyists). They are lobbying groups that may want certain items cut or added to the budget. Examples: teacher’s union may want money increased for the Department of Education or a Tea Party group may want cuts to medicare.

What Gets Funded the Most? 1) Security… Defense, Energy (Nukes), Homeland Security, Veterans Affairs, State and International Programs. 2) Social Security… retirement 3) Health and Human Services… Medicare and Medicad 4) Debt Payments… treasury

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