1. The Budget: The Politics of Taxing and Spending Chapter 14

2. Previewing the Budget What is a BUDGET? What are our government’s SOURCES OF REVENUE? What types of EXPENDITURES does the government have? Why does the government operate at a DEFICIT?

3. Sources of Federal Revenue What do we know about INCOME TAXES? What are SOCIAL INSURANCE TAXES? HOW and FROM WHOM does the government Borrow?

4. Sources of Federal Revenue Taxes and Public Policy – Tax Loopholes: Break or benefit for a few – Tax Expenditures: Widespread exemptions, exclusions or deductions – What is the impetus for TAX REDUCTION and REFORM? How do these two terms differ?

5. Federal Expenditures Big Government = Big Budget National Security State v. Social Service State?

6. Federal Expenditures The Rise of the Social Service State – The biggest part of federal spending is now for ENTITLEMENT programs. – Why have the cost of these programs gone up?

7. Federal Expenditures Incrementalism – The idea that last year’s budget is the best predictor of this year’s budget, plus some. What kinds of programs result in “Uncontrollable” Expenditures for the government? What are the Discretionary Expenditures in the budget?

8. The Budgetary Process 1. Agencies direct budget requests through the OMB & president 2. OMB & president negotiate with agencies 3. President presents his budget to Congress; hearings are held in committees 4. Congressional budget resolution sets the total budget expenditure 5. Budget items reconciled 6. Budget authorized and appropriated

9. The Budgetary Process Budgetary Politics – The Players: The President and Congress (among others) – Stakes and Strategies: National Needs v. Political Goals

10. The Budgetary Process Congress and the Budget – Congressional Budget and Impoundment Control Act of 1974 did much to reform the process – The Success of the 1974 Reforms? From 1974 to 2012, every budget EXCEPT 1998- 2001 was a deficit budget. Congress misses most of its own deadlines and passes continuing resolutions to keep the government going until it passes a budget

11. Understanding Budgeting Democracy and Budgeting – How is the growth of the deficit a result of political considerations? (AKA “We all want a balanced budget – or do we?”) – How does the budgeting process impact the size of government?

12. Economic Policymaking Chapter 17

13. Government and the Economy Does the U.S. have a CAPITALIST economy? What level of GOVERNMENT INVOLVEMENT do we have in the U.S.? How does the government MEASURE the health of the economy? – Unemployment – Inflation – CPI

14. Government and the Economy What is the RELATIONSHIP between politics and the economy? Through what MEANS does the government manipulate the economy?

15. Instruments for Controlling the Economy Monetary Policy and “the Fed” – Supply of money – too much cash and credit produces inflation and affects the interest rate – The Fed influences the supply of money in circulation: Sets discount rates Sets reserve requirements Buying / selling government bonds

16. Instruments for Controlling the Economy Fiscal Policy: The impact of the federal budget on the economy – Keynesian Economic Theory: Government spending and deficits help the economy; assist in creating demand – Supply-Side policy: Too much taxation and not enough money in circulation leads to hardship; reducing taxation and regulation will create a greater supply of goods

17. Obstacles to Controlling the Economy The budget is prepared in advance of when it goes into effect, making quick action difficult Foreign problems and individual business actions also impact economy

18. Arenas of Economic Policymaking Regulating Business – Antitrust policy – Consumer protection (FDA and FTC) – Labor relations Benefiting Business – Government loans and subsidies to business – Government collects data that business use

19. Arenas of Economic Policymaking The “New Economy” – Conglomerates, transnationals – More power in fewer corporate hands – Information-centered – More men than women have access, more whites than minorities have access