1.  10 trillion and counting https://www.youtube.com/watch?v=pfZyffw7U6E  www.whitehouse.gov/omb www.whitehouse.gov/omb  Solve the deficit  http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits- graphic.html?_r=0

3. THE FEDERAL BUDGET Unit 7.2

4. I. BUDGET AND SPENDING A.Executive Branch - President submits a new budget every year 1.Office of Management and Budget (OMB) 2.Huge political statement about priorities of gov’t

5. B. LEGISLATIVE BRANCH 1.Congress receives a proposed budget from the executive branch a.B/w March – October b.Each branch of Congress must pass bills for discretionary spending c.Appropriations –bills that assign spending money on a specific program, project or government department d.12 subject areas i.EX: Defense, Agriculture, Transportation & Housing and Urban Development

6. C. FISCAL POLICY 1.Fiscal Policy –use of gov’t revenue collection and expenditures to influence the economy 2.Discretionary -spending optional spending that is approved thru an appropriations bill a.12 departments/committees are subject to this funding 3.Mandatory spending -spending required by existing law 4.Currently 60% of US budget  Social Security  Medicare/Medicaid  Other entitlements

7. D. Budget breakdown 1.entitlement programs (social security, Medicare, welfare): ~50% of budget 2.defense- 21%, interest on debt 9% 3.deficit (spending more than the revenue collected) 4.total debt: $10.8 trillion, >$200 billion in interest

8. II. GOV’T INTERVENTIONS  Entitlement programs  Medicaid, Food Stamps, WIC, FDC payments, federal jobs programs & training  Gov’t subsidized loans for college education  Federal Reserve  lowering interest rates so that companies can expand businesses & hire more workers  Taxation  Progressive tax rate & Income tax credit

9. UNEMPLOYMENT AND POVERTY A.Cyclical Employment- unemployment rises during economic downturns and falls when economy improves B.Full Employment- unemployment rate 4-5% C.Underemployment- people working at a job in which they are overqualified or part-time

10. CLOSE  Give a situation in which someone is underemployed.  What is fiscal policy? Why do you think both the executive and legislative branches participate in shaping it?

11. TAXES; FEDERAL, STATE AND LOCAL  Federal Taxes  Personal Income Tax: Paid by individuals –progressive  Payroll Tax: employers deduct tax from employees paychecks for Entitlements  Capital Gains tax: tax on profits made from sell of assets  Excise Tax: tax on goods ( sin tax) cigarettes, gas, alcohol: regressive  Tariff: Tax on imported goods  Corporate Income Tax: Income tax on profits  Estate Tax: Tax on inheritance

12. STATE AND LOCAL TAXES  State:  State individual income tax: progressive- largest source of revenue for the state  Corporate income tax:  Estate Tax  Sales Tax: Tax on goods and services – regressive  Excise Tax:  Licenses/ Permits:  Fees/ fines:  Local :  Property Tax: Largest source of revenue for a local cities  Sales tax:  Licenses, fees, permits, fines

13. WHAT ARE AUTOMATIC STABILIZERS?  Automatics stabilizers are expenditures by the Federal Budget to offset the negative affects of a slowdown in the economy.  Examples are Unemployment benefits, foods stamps and other public assistance programs.  These programs help people supplement their incomes.