1. Warm-up 5/10/12  Yesterday we talked about welfare programs to help people in need. How does the government pay for these programs?  What limits how much they can pay towards these programs?

2. Unit VI – Government Finances Fiscal Policy, Taxing, and Spending

3. Government spending  Mandatory spending – federal spending required by law; does not need annual approval by Congress  Social Security, interest payments on national debt  Discretionary spending – federal spending that requires annual approval  Defense spending, highway construction,

4. Appropriations Bill  Approve spending for a particular activity

5. Where does the government get its money?  Taxes, taxes, taxes.  And some other stuff like selling bonds, but mostly taxes (approx 92%).  Pg 679

6. Intergovernmental revenue  Money that one level of the government receives from another level.  EX – Federal gov’t gives the states money for welfare, highways, hospitals, etc.

7. Local government services  Education  Police & fire protection  Water, sewer, sanitation services

8. Entitlement Programs  Provide health, nutritional, or income supplements to individuals who meet certain requirements.

9. Government Budget  When the government spends more than it collects in revenue, it has a deficit and when it collects more than it spends it has a surplus.

10. How does the Government borrow money?  Selling bonds

11. National Debt  All money that has been borrowed and not paid back by the federal gov’t. 1900 – $1.3 billion 1940 – $50.7 billion 2006 – $4.9 trillion 2012 – $??? http://www.brillig.com/debt_clock/

12. Impact of the national debt  Interest – interest on debt must be paid every year  Who pays this debt?  Interest Rates – when the government borrows more money, there is less for citizens to borrow.

13. Balanced Budget  Spending equals revenue  Not required by Fed, but 48 states are required (NC can not spend more than it makes).

14. How to reduce the national debt  Cut spending – get rid of unnecessary programs and costs (not that easy)  Raise taxes – higher tax on wealthy class, higher (only option if spending can not be cut)

15. Deficit Spending  To pay for necessary expenditures in times of recession  I.e. – we still have to pay for some SS, welfare, highways, etc when in a recession. Funding may get reduced, but it does not go away.