Chapter 13

Question 1

The Politics of Budgeting

Answer 1

• Budget - policy document allocating burdens and benefits (Taxes and expenditures)
• Revenues - Financial resources (Taxes)
• Expenditures - spendings

Question 2

The Deficit

Answer 2

• Budget Deficit - expenditures exceed revenues

Question 3

Policy Making : Congress

Congress is the legislative branch

Answer 3

• Fiscal Policy – government decisions on taxing and spending
• Monetary Policy – government decisions on control over money supply and interest rates
• Budget is divided between Congress and the President

Question 4

Fiscal Policy : The President

fiscal policy (government decisions on taxing and spending)

Answer 4

• President is unable to accomplish much without the cooperation of Congress
• While the President can suggest their own budget, their only real power is to either sign the budget into law or to veto it.

Question 5

Personal and Corporate Income Tax

Answer 5

• income tax - shares of individual wages and corporate revenues collected by the government
• incomes taxes; first enacted briefly during the Civil War

Question 6

Social Insurance Taxes

Answer 6

• Due to the aging of the large baby boomer generation, social insurance taxes have grown faster
• Medicare is the most expensive social program
• deducted from employees’ paychecks and matched by employers.

Question 7

Borrowing

Answer 7

• federal government borrows money, then Treasury Department sells bonds
• Citizens, corporations, and foreign governments purchase such bonds

Question 8

Borrowing, cont.

Answer 8

• national debt - all the money
  borrowed over the years that is still
  outstanding
• Foreign investors hold most of the federal government’s public debt
• The largest foreign holder of debt is Japan then China, the United Kingdom, Ireland, Luxembourg, and Brazil

Question 9

Spending

Answer 9

• Mandatory spending - categories that the government is obligated to fund
• Discretionary spending - not seen as an obligation for the government