1. The Federal Budget
Rixie

2. Budget - what is it?
Policy document allocating burdens (taxes) and benefits (expenditures)
REVENUES:
Where the government
gets the money
EXPENDITURES:
What gov’t spends
it on

3. Deficit When expenditures
exceed revenues in a given fiscal year. (the opposite of a surplus)
Federal Fiscal Year: October 1st through September 30th
National Debt: the sum of our deficits over the years

4. Sources of Federal Revenue
Individual income tax, social insurance taxes (SS & Medicare – also known as payroll taxes), corporate income tax, tariffs and excise taxes, other sources (such as estate taxes)
What the government doesn’t collect in taxes, it borrows
Treasury Dept. sells government bonds with guaranteed interest
Citizens, corporations, foreign governments buy them

6. Income Tax What is it? 16th Amendment Progressive vs. Flat
The federal government takes it out of your paycheck.
16th Amendment
Gave the federal gov’t power to collect this
Progressive vs. Flat
Progressive: tax wealthier people higher rates
Flat: tax everybody the same rate

8. Social Security Taxes (a payroll tax)
Who pays them?
Working citizens & their employers!
This revenue goes into the Social Security Trust Fund.
Who benefits?
The elderly, disabled, & unemployed

11. Tax Policies – What do you think?
Should we reduce taxes?
Increase them?
Can we reform tax law? (politically risky!)

12. Federal Expenditures 2 Main Ideas:
What the government spends money on changes over time.
Regardless, expenditures rise continuously.

13. National Security State
Permanent military establishment
Expensive military technology

14. Social Service State Social Security Act of 1935 Medicare – 1965
“Intergenerational Contract”
Medicare – 1965
Is it sustainable?

16. Incrementalism Best predictor of this year’s budget =
Last year’s budget, plus a little more
Usually true, but not for every agency
NASA, for instance

17. “Uncontrollable” Expenditures (a.k.a. mandatory spending)
Interest on national debt
MUST be paid!
Entitlements – a certain # of people qualify for a certain # of benefits
In other words, formulas written into law for these programs must be followed (so the spending is mandatory)

19. Military Defense Physical Resources Other Functions
Discretionary Spending (includes all categories other than interest on the debt and mandatory spending)
Military Defense
Physical Resources
Energy, Natural Resources & Environment, Commerce & Housing Credit, Transportation, Community & Regional Development
Other Functions
International Affairs; Science, Space, and Technology; Agriculture; Administration of Justice; General Government.

21. Politics of the Budget Process
The “players”
Interest groups
Bureaucratic agencies
Office of Management & Budget (OMB)
POTUS
Congressional Budget Office (CBO)
Congressional committees
Government Accountability Office (GAO)

22. The President’s Budget
POTUS appoints director of OMB (approved by Senate)
OMB prepares the budget; advises Prez
First Monday in February
Deadline to submit budget to Congress for the next fiscal year

23. Congress’s Role
Power of the PURSE!!!
Congressional Budget Office (CBO) advises Congress on the probable consequences of its budget decisions (counterweight to OMB)

24. Must first pass a budget resolution:
Congress’s Role
Must first pass a budget resolution:
Bottom line of federal spending on all programs

25. 2 major steps in funding the gov’t Authorization bill:
Congress’s Role
2 major steps in funding the gov’t
Authorization bill:
Establishes or continues gov’t programs
Appropriations bill:
Funds the programs

26. budget decisions can lead to: Continuing resolutions
Congress’s Role
Gridlock on
budget decisions can lead to:
Continuing resolutions
Continues an agency’s spending at last year’s level
Sequesters
Across the board spending cuts