Intro to Federal Budget and Debt

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Intro to Federal Budget and Debt
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Budget?

• Family Budget
• 1. Income determined
• 2. Expenses planned
• 3. Savings invested (or deficit borrowed)
• Federal Budget
• 1. Expenses planned
• 2. Borrowing planned
• 3. Income determined
• (tax revenue)

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Why done this way?

• Government contracts and entitlements obligate
  money
• Tax revenue is unknown
• The budget process takes more than a year to
  resolve
• Congress is trying to serve constituents in real
  time
• Projects come and go at irregular intervals

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Why done this way?

• Americans typically want
• Less overall spending
• More specific spending
• Lower taxes

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Where does the government spend their money?
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Process?

• VIEW Creating The Budget Powerpoint on
  teachercannon.com
• Quick Version (Pg. 457)

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Budget Resolution

• Begins just after submission of the Presidents
  Budget (which comes on the first Monday in
  February)
• The Budget Resolution is Congresss take on where
  (not how) to spend money
• Just as an individual has to allocate money among
  rent, food and insurance, the federal government
  allocates its money between items such as
  national security, environmental protection and
  education (divided up between 13 appropriations
  bills)
• Congress can provide more or less funds that the
  President has requested or make changes in tax
  laws

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Authorization vs. Appropriation

• Authorization is writing the law
• Authorization is policy guidance. It establishes
  a framework including what should a program do,
  where should it be located, etc.
• These bills authorize the federal government to
  do something, such as implement marine protected
  areas off the West Coast or amend the tax code,
  etc.
• The authorization bill merely says the government
  CAN spend the money on this purpose if it so
  chooses.
• Appropriation is cutting the check
• Any agency or program needs language in an
  appropriation bill to actually get the money
• Appropriations bills are key to making things
  happen because federal actions require money.
  Even though most policy guidance is contained in
  authorization bills, policy can also be modified
  through the appropriations process.

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Appropriations Process

• In the fall of each year, you often hear that
  Congress is trying to pass the federal budget. It
  is the appropriations bills that Congress is
  usually frantically trying to pass before their
  October 1st deadline (the beginning of the fiscal
  year)
• If Congress fails to pass the appropriations
  bills by October 1st, they must pass a CR or
  continuing resolution. This allows the government
  to continue operating with funding at the level
  of the previous fiscal year.

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Some Favorite Targets For Budget Cuts

• Science, Space And Technology
• Total savings 25.6 billion, less than 1 percent
  of the budget.
•  
• The Arts and Humanities
• Total savings NEA, 124 .4 million, NEH 141 .1
  million, less than .01 percent of the budget
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• Foreign Aid And International Relations
• Total savings 28.5 billion, 1 percent of the
  budget
•  
• The Program Formerly Known As Welfare
• Total savings Temporary Aid to Needy Families
  food and nutrition assistance, including food
  stamps 65.5 billion, 2.39 percent
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• And it all adds up to? A grand total of a little
  over 4 percent of the budget.

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How Does The Government Spend More than it makes?

• Simple answer IT BORROWS!!!
• How?
• They sell government bonds to people who are
  looking for a safe place to invest their money

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How Do You Balance a Budget?

• You spend less (or same) or tax more
• Spend less fewer government programs
• Tax More people have less money to spend