Budget and the Economy Flashcards
Budget:
a policy document allocating burdens (taxes) and benefits (expenditures).
Deficit:
an excess of federal expenditures over federal revenues
Expenditures:
government spending of revenues; major areas of federal spending are social services and national defense
Revenues:
the financial resources of the government. The individual income tax and social security tax are two major sources of the federal government’s revenue
Three major sources of federal revenues are
personal and corporate income tax
social insurance taxes
borrowing
Income tax:
shares of individual wages and corporate revenues collected by the government; 16th amendment
Federal debt:
all the money borrowed by the federal government over the years and still outstanding; more than 9 trillion today
Most of the government’s income comes from
taxes
Tax expenditures:
Tax expenditures: revenue losses that result from special exemptions, exclusions, or deductions on federal tax law
ex of tax deductions
charitable donations, mortgage deductions
Two conditions associated with government growth in America are the rise of the
national security state and the rise of the social service state.
Social Security Act:
a 1935 law passed during the Great DEpression that was intended to provide a minimal level of sustenance to older Americans and thus save them from poverty
Medicare:
a program added to the Social Security system in 1965 that provides hospitalization insurance for the elderly and permits older Americans to purchase inexpensive coverage for doctor fees and other health expenses
Incrementalism:
a description of the budget process where the best predictor of this year’s budget is last year’s budget plus a little bit more
Uncontrollable expenditures:
expenditures that are determined by how many eligible beneficiaries there are for a program or by previous obligations of the government
Entitlements:
policies for which Congress has obligated itself to pay X level of benefits to Y number of recipients
House Ways and Means Committee + Senate Judiciary Committee:
write the tax codes; subject to approval of Congress as a whole
CBO
Advises congress on the probable consequences of its decisions, forecasts revenues, and is a counterweight to the President’s OMB
Congressional Budget and Impoundment Control Act of 1974:
an act designed to reform the congressional budgetary process. Its supporters hoped that it would also make Congress less dependent on the president’s budget and better able to set and meet its own budgetary goals.
Budget resolution:
a resolution binding Congress to a total expenditure level, supposedly the bottom line of all federal spending for all programs
Budget reconciliation:
a congressional process through which program authorizations are revised to achieve required savings
Authorization bill:
an act of Congress that establishes, continues, or changes a discretionary government program or an entitlement. It specifies program goals and maximum expenditures for discretionary programs.
Appropriation bill:
an act of Congress that actually funds programs within limits established by authorization bills. Usually cover one year
Continuing resolutions:
when congress cannot reach agreement and pass appropriation bills, these resolutions allow agencies to spend at the level of the previous year
Capitalism:
an economic system in which individuals and corporations, not the government, own the means of production and seek profits
Mixed economy:
an economic system in which the government is deeply involved in economic decisions through its role as regulator, consumer, subsidizer, taxer, employer, and borrower
Multinational corporation:
business with vast holdings in many countries, some of which have annual budgets exceeding that of many foreign governments
Securities and Exchange Commission:
a federal agency created during the New deal that regulates the stock market
Minimum wage:
The legal minimum hourly wage for large employers
Labor union:
an organization of workers intended to engage in collective bargaining
Collective bargaining:
negotiations between representatives of labor unions and management to determine pay and acceptable working conditions
Unemployment rate:
proportion of labor force actively seeking work but unable to find jobs
Inflation:
the rise in prices for consumer goods
Consumer price index
: the key measure of inflation that relates the rise in prices over time
Laissez-faire
: the principle that the government should not meddle in the economy
Monetary policy:
manipulation of the supply of money in private hands by which the government can control the economy
Monetarism:
an economic theory holding that the supply of money is the key to a nation’s economic health; too much cash and credit in circulation causes inflation
Federal Reserve System:
the main instrument for making monetary policy in the US; regulates the lending practices of banks and thus the money supply
Fiscal policy:
the policy that describes the impact of the federal budget - taxes, spending, and borrowing - on the economy; almost entirely determined by Congress and the President, who are the budget makers
Keynesian economic theory:
theory emphasizing that government spending and deficits can help the economy weather its normal ups and downs; proponents of this theory advocate using the power of government to stimulate the economy when it is lagging
Supply side economics:
an economic theory holding that too much income goes to taxes so too little money is available for purchasing and that the solution is to cut taxes and return purchasing power to the consumers
Protectionism:
economic policy of shielding an economy from imports; usually involves tariffs
World Trade Organization:
International organization that regulates international trade
Antitrust policy:
a policy designed to ensure competition and prevent monopoly, which is the control of a market by one company
Food and Drug Administration:
the federal agency formed in 1913 and assigned the task of approving all food products and drugs sold in the US
National Labor Relations Act (Wagner Act):
guarantees workers the right of collective bargaining, sets down rules to product unions and organizers and created the National Labor Relations Board
