1. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2Federal, State, and Local Budgets  Identify the top spending category in the federal budget and the top source of revenue.  Identify the top spending category in state budgets and the top source of revenue.  Identify the top spending category in local budgets and the top source of income.  Compare the size of government here and abroad. Objectives

2. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2Federal, State, and Local Budgets  government budget  payroll taxes Key Terms

3. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 3 Federal Budgets A government budget is a plan for outlays and revenue for a specified period.

4. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 4 Federal Spending Redistribution Defense Interest payments Other outlays

5. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 5 Composition of Federal Spending Since 1960 Figure 14.3

6. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 6 Federal Revenue Sixteenth Amendment to the U.S. Constitution empowered Congress to levy a tax on personal income. Federal Insurance Contributions Act (FICA) Payroll taxes are taxes deducted from paychecks to support Social Security and Medicare

7. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 7 Composition of Federal Revenue Since 1960 Figure 14.4

8. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 8 State Budgets State spending State revenue

9. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 9 Composition of State Spending and State Revenue Figure 14.5

10. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 10 Local Budgets Local spending Local revenue

11. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 11 Composition of Local Spending and Local Revenue Figure 14.6

12. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 12 Relative Size and Growth of Government How has the size of government in America changed in recent years? How does that size compare with what’s been going on in other major economies around the world?

13. CONTEMPORARY ECONOMICS© Thomson South-Western 14.2 Federal, State, and Local Budgets SLIDE 13 Government Outlays as Percentage of GDP Figure 14.7