Chapter 13: The Budget

Question 1

What is a budget deficit?

Answer 1

When your expenditures are more than your revenue

Question 2

How does the US Government make money?

Answer 2

Income Tax
Corporate Tax
Social Insurance Tax
Borrowing

Question 3

Income Tax?

Answer 3

• 16th amendment

- progressive tax: the more money you make the more money in taxes you have to pay

Question 4

Corporate Tax?

Answer 4

Companies are outsourcing, which is why they don’t have to pay as high of taxes

Question 5

Social Insurance Taxes?

Answer 5

Money is taken out of your paycheck and put in specific programs: Medicare and Social Security trust fund

Question 6

What is medicare?

Answer 6

You can draw money out at 65 years old

Question 7

What is Social Security Trust Fund?

Answer 7

• retirement: you can get partial money at age 62.5, or get full amount at 65
• you get money from the social security trust fund if you are disabled, or if you are suddenly widowed or lose a parent
• 1/3 of all revenue goes to social security

Question 8

Borrowing?

Answer 8

US gov’t sells bonds through the Federal Treasury Department

Question 9

Why can’t we balance the budget?

Answer 9

Incrementalism and uncontrollable expenditures

Question 10

What is incrementalism?

Answer 10

last year’s budget plus 3%

Question 11

What are uncontrollable expenditures?

Answer 11

-ex/ natural disasters, things you can’t control, etc…
-“eligible beneficiaries”:
XY=? –> payrecipients=?
older people live longer, so they get more money than they actually put in to social security, and for longer

Question 12

Tax loopholes?

Answer 12

Any right offs people can get, ex/ charity, etc…

Question 13

Who do taxes mostly affect?

Answer 13

middle/upper class, and large corporations

Question 14

What is the Tax Reform of 1986?

Answer 14

Made taxes easier to do, with the E-Z form

Question 15

Defense?

Answer 15

• used to be biggest expenditure
• 50’s-60’s, 50% budget on defense
• 60’s-80’s, went down, and social welfare programs went up
• 90’s, spending goes down
• 2002, spending goes up

Question 16

Social Service State?

Answer 16

• biggest expenditure
• elderly, poor, and needy benefit from it
• social security began with FDR, and in the 50’s disability insurance is added to it; ‘65 medicare and medicaid are added
• you only get social security if you work, with the exception of medicaid

Question 17

What does the CEA do?

Answer 17

Council of Economic Advisors; they focus on trends

Question 18

What does the OMB do?

Answer 18

Office of Management and Budget; oversee last years budget for states, departments, etc, and put together the new budget, and then give it to the president

Question 19

What is the Congressional Budget and Impoundment Control Act and what does it do?

Answer 19

• sets up CBO
• oversees the budget (for Congress)
• sets limits on expenditures (budget resolution)

Question 20

What is a budget resolution and how is it obtained?

Answer 20

Resolution between each of the houses to have a total expenditure level

• Budget reconciliation
• Authorization Bill
• Continued resolutions

Question 21

What is a budget reconciliation?

Answer 21

Process of program authorizations that are revised to achieve a savings; tax or revenue adjustment

Question 22

What is an Authorization bill?

Answer 22

Act of congress that establishes a discretionary gov’t program or an entitlement that changes the program

Question 23

What is a continued resolution?

Answer 23

A law that allows agencies to spend at a previous years level

Question 24

What are the top three things we spend money on?

Answer 24

1) Social Security
2) Healthcare
3) Defense