1. Does the federal government budget and spend your tax dollars wisely?
The Federal Budget
Chapter 14
Essential Question:
Does the federal government budget and spend your tax dollars wisely?

2. History of the Budget
Budget – estimate of money in/out during fiscal year
1800s, Congress made the budget
It was balanced – income & expenses equal
Sometimes a surplus – more $ in than spent
Rarely a deficit – not enough $ to pay expenses
Debt – cumulative shortfall of $
Deficit is yearly, debt is cumulative

3. History (cont.) 1900s, president gets involved WWI ran up deficit/debt
1921, Budget and Account Act set up office in executive branch
Goal – balanced budget
President submits a budget to Congress yearly
1930s, Great Depression & FDR
“Deficit spending” was viewed as okay
The national debt also began to add up
1970s, Nixon did impoundment = refusing to spend $ Congress had allocated
Congress struck back

4. History (cont.) Today, Congress & President share budget power
Pres. still offers budget…
…House & Senate both have budget committees
CBO (Congressional Budget Office) estimates revenue/spending
We still struggle with the budget, bickering.

5. Budget process Phase 1 of 4 Feb., President submits budget to Congress
This reflects his goals, priorities
Phase 2 of 4
Congress committees take over (both House & Senate)
CBO helps match with president’s estimates
A conference committee settles House/Senate differences
Supposed to be approved by Congress by April 15

6. Budget process (cont.) Phase 3 of 4
Congress takes up 13 appropriations bills (spending categories)
They pass 1 by 1 through the summer, early fall
Sent to president to sign
Phase 4 of 4
By Oct. 1, budget is accepted. Or…
…they pass a continuing resolution – an extension, or…
…government shutdown.

7. Gov’t revenue, gov’t spending
Gov’t revenue (income)…
Individual income tax – paid by you/me on our income
Social insurance tax – Social Security or Medicare deductions
Corporate income tax – paid by businesses
Excise taxes – tax on things like alcohol, services
Progressive tax – burden falls more on wealthier taxpayers
Ex.: income tax
Regressive tax – burden falls more on poorer taxpayers
Ex.: excise tax

9. Gov’t revenue, gov’t spending (cont.)
2/3 of gov’t spending mandatory, it’s already set
Entitlements – programs that help people based on age, income, etc.
Ex.: food stamps, Social Security
1/3 of gov’t spending is discretionary (it’s a choice)
Congress/president change discretionary spending
Biggest chunk: defense
Earmarks – funds set aside for home projects (controversial!)