1. BUDGET
STUDENT NOTES

2. BUDGET VOCAB Budget deficit Congressional Budget Office
Discretionary spending
Entitlement programs
Fiscal policy
Keynesian economics
Mandatory spending
Means-test programs
Monetary policy
Non-means tested programs
Supply side economics

3. SOME BASIC INFORMATION
Policy document allocating burdens and benefits
FEDERAL gov. funds a substantial and diverse range of programs and activities from Pell Grants to scientific research to military operations
2 categories of spending
MANDATORY spending: gov. allocates funds to all who are eligible based on legislation regardless of cost to the treasury
Entitlement programs
Means-tested or defined by legislation (non-means tested)
Interest on national debt
DISCRETIONARY spending: everything else
Deficit occurs when expenditures exceed revenues
Nat’l gov. spends more money than it receives = DEFICIT each yr. added to federal DEBT

5. THE PLAYERS Interest groups POTUS COTUS Agencies
OMB – Office of Management and Budget
COTUS
CBO – Congressional Budget Office
Budget Committees
Standing Committees
Appropriations Committees
GAO – General Accounting Office

6. FEDERAL BUDGET BOTH POTUS and COTUS write the budget
CONGRESS CONSTITUTIONALLY
Funding levels for fiscal yr. based on incrementalism
U.S. Constitution (Article I, section 9, clause 7)
“no money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of Receipts and Expenditures of all public Money shall be published from time to time."
Budget Accounting Act 1921 – required the President to submit to Congress an annual budget for the federal government
Congressional Budget and Impoundment Control Act of 1974 – calendar, budget committee, CBO, president cannot impound funds w/o approval

7. Fiscal Year Executive level Legislative level
Funding for fiscal year – Oct. 1st – Sept. 30th
Office of Management and Budget (OMB): responsible for drafting budget
estimates spending, revenue and borrowing levels
Executive level
Congressional Budget Office (CBO): responsible for giving Congress budget projections, priorities, and balancing the OMB’s priorities with Congress’s policy interest
Legislative level

8. BUDGET PROCESS - POTUS
POTUS submits his budget request to Congress by first Monday in Feb.
Proposal is a request – no binding authority
Statement of administrations fiscal goals and policy preferences
Economic projections and analysis
Detailed program by program funding levels
Introduces new policies, programs or changes they would like to enact (mandate)
Prepared by the OMB

11. BUDGET PROCESS - COTUS
Concurrent Congressional Budget Resolution – sets the TOTAL level of discretionary funding
Budget committee (caps TOTAL amount for EACH piece of the pie)
Filed by April 15th
Send message about fiscal priorities of each chamber
Sent to Appropriations committee
Determine program by program funding (very specific program allocation)
Separate appropriations bills
Divide funding into specific programs: hold hearings, accept requests
Differences often occur w/I each chamber
ALL appropriations bills MUST pass BOTH chambers
If not passed: 2 options
1) CR – continuing resolutions: operate government under temporary funds and last years budget
2) SHUTDOWN!

13. SOURCES OF REVENUE INCOME TAX (individual) Varies 0-35%
SOCIAL SECURITY (FICA)
Elderly, disabled, widowed, unemployed
CORPORATE INCOME TAX
EXCISE DUTIES
Tax on liquor, tobacco, gas
10% excise tax on tanning
Less than 5%
CUSTOMS, DUTIES, TARIFFS
BORROWING

15. Why a recession is bad…
People are out of work, so they don’t get paid, so they don’t pay taxes, so the government doesn’t collect as much revenue
People are out of work, so they don’t buy anything, small business can’t profit, they fire more people, go under and can’t pay as much taxes, so the government doesn’t collect as much revenue
You see where I’m going here???

16. Nation In Debt Deficit Spending = Expenditures exceed revenue
FY2011 deficit = $1.27 trillion
FY2013 deficit = $901 billion
Federal gov only level of gov able to borrow more money than it receives
1930: $16 Billion
1950: $260 Billion
1980: $909 Billion
FY2010: $1.56 Trillion

17. MANDATORY V. DISCRETIONARY
Budget allocation divided
MANDATORY: MUST be spent aka “entitlements”
ENTITLEMENT PROGRAM: Social security, Medicare, Medicaid (all paid for through payroll taxes)
SS: 44 million in 2010 to 73 million in 2030 (it’s gonna run out!!! More people being paid than paying in!!! Even I can do that math)
May absorb all federal revenues sometime around 2050 :-0
Solutions: raise the age/requirements (work longer)
DISCRETIONARY: OPTIONAL
EVERYTHING ELSE: defense, education, transportation, agriculture (think about Cabinet departments)

18. How did we get into this mess?!?!
POLITICIANS USE THE BUDGET TO GET ELECTED! DUH!
Republicans want to lower taxes
SUPPLY SIDE ECONOMICS
Democrats want to increase social programming and raise taxes on the wealthiest percentages to benefit and lower and middle class
KEYNESIAN ECONOMICS