Congress, the President, and the Budget

The debt and the deficit Budget deficit – spending > revenues in a year Budget deficit – spending > revenues in a year Budget surplus – spending < revenues in a year Budget surplus – spending < revenues in a year When we run a deficit, we have to borrow $; we borrow $ by selling bonds When we run a deficit, we have to borrow $; we borrow $ by selling bonds National debt – the sum of all the $ the U.S. owes National debt – the sum of all the $ the U.S. owes

Revenues 16 th amendment created the income tax 16 th amendment created the income tax Progressive taxes – tax rate increases with income (income tax) Progressive taxes – tax rate increases with income (income tax) Social Security taxes – used for Soc. Sec.; paid by both employees and employers Social Security taxes – used for Soc. Sec.; paid by both employees and employers Most tax revenue comes from individual income taxes Most tax revenue comes from individual income taxes Tax expenditures – tax deductions, credits, etc. that reduce individuals’ taxes Tax expenditures – tax deductions, credits, etc. that reduce individuals’ taxes Taxes in U.S. are among the lowest in the world Taxes in U.S. are among the lowest in the world

Expenditures Social Security, Medicare & Medicaid, defense, interest on the debt, other discretionary spending Social Security, Medicare & Medicaid, defense, interest on the debt, other discretionary spending Uncontrollable (mandatory) spending – dependent on # of people who qualify; $ is not controllable by Congress (Soc. Sec., other entitlements, interest on the debt) Uncontrollable (mandatory) spending – dependent on # of people who qualify; $ is not controllable by Congress (Soc. Sec., other entitlements, interest on the debt) Discretionary spending -- $ Congress can control (defense, education) Discretionary spending -- $ Congress can control (defense, education)

The Budget Process Depts. and bureaucratic agencies submit requests to OMB (Office of Management & Budget – in the EOP) Depts. and bureaucratic agencies submit requests to OMB (Office of Management & Budget – in the EOP) OMB puts together budget OMB puts together budget President makes changes & submits to Congress President makes changes & submits to Congress Congress has the final say Congress has the final say Taxes – House sees it first; Ways and Means and then Senate Finance Taxes – House sees it first; Ways and Means and then Senate Finance

Terms to know Entitlements Entitlements Authorization bill Authorization bill Appropriations bill Appropriations bill Budget resolution Budget resolution Continuing resolution Continuing resolution