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CHAPTER 9
AMERICAN
HOLT
GOVERNMENT
Economic Policy
Section 1: Raising Revenue
Section 2: Influencing the Economy
Section 3: The Federal Budget
Section 4: Deficit Spending and the Economy
1
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Objectives:
 What are the major types of federal taxes?
 How does the federal government collect taxes?
 What sources of revenue, other than taxes, does the
federal government have?
 What factors have affected the political debate over
tax policy in recent decades?
2
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Major types of federal taxes:
 individual income tax
 social insurance tax
 corporate income tax
 excise tax
 estate and gift taxes
 custom duties
3
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
The federal government collects taxes through the
Internal Revenue Service.
4
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Nontax revenue sources:
 earnings by Federal Reserve banks
 fees and fines collected by government agencies
 patent, trademark, and copyright fees
 federal court fines
 revenue from the sale or lease of federal lands
5
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Factors affecting the political debate over tax
policy in recent decades:
 growing public opposition to taxes
 the desire to fund government programs to help lessadvantaged citizens
 opposition to tax advantages for the wealthy
 distribution of wealth
6
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
Objectives:
 How is the U.S. economy organized?
 What are the goals of economic stabilization policy?
 What tools does the U.S. government use to stabilize
the economy?
7
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
The U.S. economy is organized under a freeenterprise system.
8
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
The goals of economic stabilization:
 full employment
 low inflation
9
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
Tools the U.S. government uses to stabilize the
economy:
 fiscal policy
 monetary policy
10
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Objectives:
 How has the federal budget-making process changed
over the years?
 What role does the president play in planning the
budget?
 Why are attempts at reducing the budget politically
controversial?
11
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Changes in the federal budget-making process:
 Budget and Accounting Act of 1921—gave the Bureau of the
Budget the power to raise or lower agencies’ spending requests
before they were sent to Congress
 Office of Management and Budget—increased the president’s
role in making economic policy when the office was moved to
the Executive Office of the President
 Congressional Budget and Impoundment Act of 1974—limited
presidential impoundments, set ceilings for budgets each year,
and allowed Congress to review the president’s budget
proposals more systematically
12
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Role of the president in planning the budget:
 shapes the OMB’s guidelines about the overall fiscal
situation
 influences each government agency’s spending
proposal through the OMB’s guidelines
 reviews and negotiates a budget proposal with each
federal agency and the OMB
13
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Reducing the budget can be politically
controversial because each party has different
choices about which programs should be affected
by a budget cut. Consequently, obtaining a
political majority for any one plan can be difficult.
14
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Objectives:
 What factors can cause the federal government to
operate at a deficit?
 How does the national debt influence the U.S.
economy?
 In what ways do the national debt and the federal
deficit influence each other?
15
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Factors that contribute to budget deficits:
 political disagreements
 uncontrollable spending
 a reluctant public
16
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Effects of a national debt on the U.S. economy:
 can deter foreign investors from investing in the U.S.
dollar and thereby cause the dollar to devalue
 can slow the economy when interest rates rise as a
result of the government’s large monetary borrowing
to finance deficit spending
17
HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Relationship between the national debt and the
federal deficit:
 If the federal budget is in deficit, then the government
must borrow money to reduce, which creates a
national debt. Without a deficit, the government can
reduce the national debt.
18
HOLT, RINEHART
AND
WINSTON
AMERICAN
HOLT
GOVERNMENT
Chapter Wrap-Up
1. What are the federal government’s main
sources of revenue?
2. How can the federal government use tax
policy to influence the economy?
3. What were the short-term costs and long-term
benefits of the GI Bill?
4. How has government policy contributed to
scientific discoveries and improved consumer
products?
19
HOLT, RINEHART
AND
WINSTON
AMERICAN
HOLT
GOVERNMENT
Chapter Wrap-Up
5. How did the Congressional Budget and
Impoundment Control Act change the way the
president’s budget proposal is considered?
6. Define uncontrollable spending and list three
examples.
20
HOLT, RINEHART
AND
WINSTON
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