1. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 1 Economic Policy Section 1: Raising Revenue Section 2: Influencing the Economy Section 3: The Federal Budget Section 4: Deficit Spending and the Economy CHAPTER 9

2. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 2 Section 1: Raising Revenue Objectives: What are the major types of federal taxes? How does the federal government collect taxes? What sources of revenue, other than taxes, does the federal government have? What factors have affected the political debate over tax policy in recent decades?

3. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 3 Section 1: Raising Revenue Major types of federal taxes: individual income tax social insurance tax corporate income tax excise tax estate and gift taxes custom duties

4. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 4 Section 1: Raising Revenue The federal government collects taxes through the Internal Revenue Service.

5. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 5 Section 1: Raising Revenue Nontax revenue sources: earnings by Federal Reserve banks fees and fines collected by government agencies patent, trademark, and copyright fees federal court fines revenue from the sale or lease of federal lands

6. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 6 Section 1: Raising Revenue Factors affecting the political debate over tax policy in recent decades: growing public opposition to taxes the desire to fund government programs to help less- advantaged citizens opposition to tax advantages for the wealthy distribution of wealth

7. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 7 Section 2: Influencing the Economy Objectives: How is the U.S. economy organized? What are the goals of economic stabilization policy? What tools does the U.S. government use to stabilize the economy?

8. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 8 Section 2: Influencing the Economy The U.S. economy is organized under a free- enterprise system.

9. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 9 Section 2: Influencing the Economy The goals of economic stabilization: full employment low inflation

10. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 10 Section 2: Influencing the Economy Tools the U.S. government uses to stabilize the economy: fiscal policy monetary policy

11. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 11 Section 3: The Federal Budget Objectives: How has the federal budget-making process changed over the years? What role does the president play in planning the budget? Why are attempts at reducing the budget politically controversial?

12. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 12 Section 3: The Federal Budget Changes in the federal budget-making process: Budget and Accounting Act of 1921—gave the Bureau of the Budget the power to raise or lower agencies’ spending requests before they were sent to Congress Office of Management and Budget—increased the president’s role in making economic policy when the office was moved to the Executive Office of the President Congressional Budget and Impoundment Act of 1974—limited presidential impoundments, set ceilings for budgets each year, and allowed Congress to review the president’s budget proposals more systematically

13. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 13 Section 3: The Federal Budget Role of the president in planning the budget: shapes the OMB’s guidelines about the overall fiscal situation influences each government agency’s spending proposal through the OMB’s guidelines reviews and negotiates a budget proposal with each federal agency and the OMB

14. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 14 Section 3: The Federal Budget Reducing the budget can be politically controversial because each party has different choices about which programs should be affected by a budget cut. Consequently, obtaining a political majority for any one plan can be difficult.

15. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 15 Section 4: Deficit Spending and the Economy Objectives: What factors can cause the federal government to operate at a deficit? How does the national debt influence the U.S. economy? In what ways do the national debt and the federal deficit influence each other?

16. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 16 Section 4: Deficit Spending and the Economy Factors that contribute to budget deficits: political disagreements uncontrollable spending a reluctant public

17. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 17 Section 4: Deficit Spending and the Economy Effects of a national debt on the U.S. economy: can deter foreign investors from investing in the U.S. dollar and thereby cause the dollar to devalue can slow the economy when interest rates rise as a result of the government’s large monetary borrowing to finance deficit spending

18. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Economic Policy 18 Section 4: Deficit Spending and the Economy Relationship between the national debt and the federal deficit: If the federal budget is in deficit, then the government must borrow money to reduce, which creates a national debt. Without a deficit, the government can reduce the national debt.

19. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 19 Chapter Wrap-Up 1.What are the federal government’s main sources of revenue? 2.How can the federal government use tax policy to influence the economy? 3.What were the short-term costs and long-term benefits of the GI Bill? 4.How has government policy contributed to scientific discoveries and improved consumer products?

20. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 20 Chapter Wrap-Up 5.How did the Congressional Budget and Impoundment Control Act change the way the president’s budget proposal is considered? 6.Define uncontrollable spending and list three examples.