1. The Federal Government is the only government that can spend more than it receives. Current Debt: $16.4 Trillion Current Deficit: 1.1 Trillion (for 2012); so far in 2013, about $290.4 billion What is your opinion on this statement? Should the federal government be able to do this or have a balanced budget?

2. The Budget Read the provided handout on the budget process. Answer the worksheet questions either as you read or after you read. Your answers should be specific and detailed.

3. The Basics

4. What is the Constitutional basis for the Federal Government’s Budgetary power? Article I Section 8: “Lay and collect taxes”, pay debts, provide for common defense, general welfare Article I: House initiates appropriations Article I: Congress given power to “borrow money on the credit of the US” Amendment XVI: income taxes NOTE: Congress can only appropriate money that is budgeted

5. What is the President’s role? The OMB? The CBO? Federal agencies submit expenses and requests to OMB OMB reviews and revises and helps to create President’s budget Budget is for a Fiscal Year (FY) that runs from October 1- Sept 30 President submits budget to Congress in February CBO reviews proposals to submit to House and Senate Budget Committees

6. What is Congress’ role in the budget process? Appropriations committees review budget and submit budget resolutions (max amounts for spending) to each of their respective chambers Resolutions contain estimates of spending and recommendations for revenue April 15: budget must be passed by Congress and signed by President If NOT, emergency spending legislation must be passed to avoid shutdown

7. The Congressional Budget and Impoundment Control Act of 1974 Eliminates subcommittee control of spending President can’t cut programs unilaterally by impounding funds Created a calendar for the process with procedures for each branch Created Budget committees in Congress Created CBO as a check on OMB

8. Where does the government’s money come from? Revenues Social Security Taxes 40% Corporate Income Tax 9% Individual Income Tax 42% Other 9%

10. Where does the money go? Spending Social Security 21% Medicare/Medicai d 20% Other Mandatory 13% Interest on Debt 8% Defense 20% Non-Defense Discretionary 18% 2/3 of the Federal Budget is mandatory spending. Entitlements are the fastest growing area of spending.

11. Gramm-Rudman Hollings Balanced Budget and Emergency Debt Control Act of 1985 (GRHBBEDC) “A bad idea who’s time has come.” -Sen. Warren Rudman

12. Failed Attempts: What did Graham- Rudman do? Why didn’t it work? Targets set for budget to cut deficit. Cuts each year from ‘86- ’91 If targets weren’t met, automatic cuts were made President and Congress found loopholes Does this remind you of a certain, economic/government related current event???

13. GRH was replaced by the Budget Enforcement Act (BEA) of 1990 Congress increased taxesSet limits on discretionary spending If limits were exceeded in one program, Congress must cut spending in another

14. Budget Control Act of 2011 Raises debt ceiling to $16.4 Trillion (wait…haven’t we reached this already???) Congressional Joint Select Committee on Deficit Reduction ( the “Super committee”) Automatic Budget SequestrationOption for Balanced Budget Amendment