XIII - The Budget Flashcards
Federal budget
Where the gov’t gets the money and what it decides to spend the money on
Implied & enumerated powers
Allows Congress to pass a federal budget
Revenuse
Source of money
Expenditures
How money will be spent
Surplus
More revenues than expenditures
Deficit
More expenditures than revenues
Most revenue raised by fed gov’t is through
Taxes
Sixteenth Amendment
Allowed Congress to establish an income tax
Federal income tax is
progressive- higher incomes are taxed at higher rate
Flat tax
Everyone pays the same tax rate
Cooporate taxes
While the % corporations are suppose to pay may be high, oftentimes many find ways to avoid paying
Social Insurance taxes
Social Security and Medicare taxes are withheld from an employee’s paycheck
The gov’t borrows money when
Tax revenue does not reach the amount needed to cover federal expenditures
The gov’t borrows money by
Selling bonds
Borrowing money from itself
National debt
Money borrowed by the fed. gov’t and interest owed
Debt ceiling
Established by Congress
Limit on how much money the gov’t can borrow
Tax revenue decreases
During an economic downturn
Spending will often increase when
revenue declines
Tax expenditures
Tax revenue that is lost as a result of exemptions
Tax cuts
popular with voters
Causes increases in deficit
Tax exemptions includes
Charitable contributions
Interest on mortgage
Business deductions
Fed. gov’t spending
Steadily increased since the 1930’s
Size of fed. gov’t
Increased as voters look to gov’t to do more things
Defense spending
Substantially increased throughout 20th century
Entitlements
Dramatic increase in social programs during New Deal & Great Society
Problems with entitlement
More beneficiaries than workers
Costs of these programs can’t be easily cut
Incremental increases
Appears in most federal budgets each year
Federal spending is
uncontrollable
Automatic federal spending includes
Interest on debt
Federal entitlements
Discretionary spending
Spending
Mandatory spending
Spending
As entitlement costs grow, discretionary spending opportunitites will
Decrease unless tax revenues increase or budget deficit increases
President submits a
Budget to Congress for approval
Office of Management & Budget h
Helps the President prepare the budget
Budget committees
In the House & Senate helps to develop their own budget proposals
Budget resolution
Compromise budget agreed upon by both chambers
Budget reconcilliation
Involves changing any laws to make the numbers work
Authorization bills
Establish or change gov’t programs
Appropriations bills
Fund programs
During the budgeting process, variouys groups
tries to influence it
Gov’t shutdowns
Results when deadline of budget approaches but the budget has not been decided upon
Continuing resolutions
Laws passed by Congress that allow agencies to spend at last year’s levels
Politics of scarcity
There are not enough funds to meet all the demands placed on the gov’t
Public policy is pulled in two directions
Want low taxes
Want various services
Increase in size & scope of federal gov’t led to
increases in federal spending
