Download AP Gov. Exam Review Congress, the President and the Budget Se

AP Gov. Exam Review
Congress, the President and the Budget
Session 9
The Budget-making Process
Themes:
AP Gov. Exam Review
Term, idea, concept etc.
Congress, the President and the Budget
Definition or examples
Session 9
Here’s why it’s important:
I. Policymaking and the Budget Process
a.
Fiscal Policy: the manipulation of the public debt through taxes and government spending in order to achieve the 3 goals of Full Employment,
Economic Growth (Full Production) and Price Stability. Ex: In response to the Great Depression, the Full Employment Act of 1946 established the
role of fiscal policy in the U.S. Legislature and economy.
b.
Subsidies: government payment to business in order to encourage the production of a specific good or service. Can be per unit or in a block Ex:
$10 per 100,000 gallons of milk produced to American Dairy Farmers or $1000 block grant for worker retraining
c. Deregulation: the act of removing controls from some sector of the economy. In nearly all cases, deregulation of a given industry has both
positive and negative implications for investors. Typically, firms in a strong financial position benefit from deregulation, while firms in a weak
financial position suffer. Ex: California and the electricity industry
d.
Discretionary Fiscal Policy: Specific legislative changes in government spending and taxes passed by the Congress. Ex: Decreasing the Estate Tax
by 15% or Decreasing spending for Homeland Security
e.
Reaganomics/ Supply Side Fiscal Policy: The idea that it is possible to cause a rightward shift in the aggregate supply through fiscal policy. Ex:
Decreasing capital gains tax rates would allow businesses and entrepreneurs to take more productive risks and therefore increase the overall
output of the economy.
f.
Budget Deficit: a situation in which the government spends more money than it takes in from taxes and fees. (G>T). Typically we use deficit
financing by selling govt securities to the public. Ex: occurs in a recession. Ex: The United States is currently experiencing a significant budget
AP Gov. Exam Review
Congress, the President and the Budget
Session 9
deficit; the government is spending tremendous amounts of money on the military and homeland security, while many citizens of the country are
enjoying a reduction in income taxes.
g.
Budget Surplus: a situation in which the government takes in more money than it spends (T>G) Typically we can pay down the national debt or
leave the funds idle. Ex: Occurs during inflationary periods. Ex: During the relatively peaceful mid-1990s, the United States experienced a budget
surplus; taxes were higher than they are now, and there were not any major military conflicts.
h.
National Debt: the accumulation of all yearly budget deficits minus budget surpluses by the Federal Government. Since the deficits are financed
by government borrowing, national debt is equal to all government debt outstanding. Ex: The Outstanding Public Debt as of 19 Nov 2008 at
03:19:45 PM GMT is: $ 10,625,134,117,639.58. The estimated population of the United States is 305,123,027 so each citizen's share of this debt
is $34,822.46. The National Debt has continued to increase an average of $3.87 billion per day since September 28, 2007!
i.
Political agenda: a set of issues thought by the public or those in power to merit action by the government Ex: The AARP’s political agenda is
to make sure that legislation is passed that meets the needs and interests of its members.
j.
Interest group politics: the politics of policy-making in which one small group bears the costs of the policy and another small group receives
the benefits. Each group has an incentive to organize and press its interest. Ex: The National Endowment of the Arts lost funding due to interest
group politics.
k.
Pork barrel projects: legislation that gives tangible benefits (highways, dams, post offices, etc) to constituents in several districts or states in
the hope of winning their votes in return. Ex: Senator Ted Stevens fights for many pork barrel projects for his home state of Alaska, which helps
him to get reelected every six years.
l.
Logrolling: mutual aid among politicians, whereby one legislator supports another’s pet project in return for the latter’s support of his. The
expression dates from the days when American pioneers needed help from neighbors in moving logs off of land to be farmed.
Ex: If Illinois Senator Barack Obama engages in logrolling with New York Senator Hillary Clinton on a bill in their Environment and Public Works
Committee, she will most likely support a bill that Obama supports in the future.
m. Process regulation: rules regulating manufacturing or industrial processes, usually aimed at improving consumer or worker safety and reducing
environmental damage
n. Ex: The governmental agency OSHA instates process regulations for manufacturing facilities such as factories.
AP Gov. Exam Review
Congress, the President and the Budget
Session 9
o.
Client politics: the politics of policy-making in which some small group receives the benefits of the policy and the public at large bears the
costs. Only those who benefit have an incentive to organize and press their case. Ex: The widespread use of pesticides in farming is because of
client politics; the effects of pesticides may be dangerous to the public, yet farmer’s benefit greatly from increased crop yields and reduced
numbers of insects that pesticides provide.
p.
Majoritarian politics: the politics of policy-making in which almost everybody benefits from a policy and almost everybody pays for it. Ex: Clean
air legislation is an example of majoritarian politics; everyone has to breathe air – so everyone benefits – while everyone will have to pay the
monetary costs of such efforts.
q.
Entrepreneurial politics: policies benefiting society as a whole or some large part that impose a substantial cost on some small identifiable
segment of society. Ex: Much environmental legislation is an example of entrepreneurial politics; trees may be saved in a particular forest for all
to enjoy, yet those employed by a local logging company may lose their jobs as a result.
II.
H: Fiscal Policy
III.
I: Monetary Policy
IV.
J: Entitlements
V.
K: Supply-Side Economics- cutting taxes