Download FE - Unit 6 Notes/Study Guide

Government Revenue & Spending
Free Enterprise Study Guide #6
1. In the United States, the largest employer and largest business is the ___________________, which can
be divided into three main levels _____________________, ___________________, and
______________________. All three levels exist to serve the needs of the ____________________, which
means that government is in the business of taking care of its ______________________. Its “business” has
grown larger and larger over the years.
2. In order to operate and provide citizens with the _________________________ they demand,
governments must have ______________________ or income. The single most important source of
government revenue is ____________________. Taxes come from a variety of sources including
________________, ______________________, and ______________________. The government also
collects revenue in the form of _____________________, _____________________________,
___________________________________, and ____________________________________. In 2004, all
three levels of government collected approximately $____________________ in revenue.
3. Four factors that have expanded the size of our government are:
a)
b)
c)
d)
4. The current population of the United States is approximately _____ million people, an increase of ______
million people since 1900. According to the U.S. Bureau of the Census there is one birth every ___ seconds,
one death every _____ seconds, and one immigrant entering the country every ____ seconds, for a net gain in
the total U.S. population of one person every _____ seconds. The growth rate of the U.S. from 1990 to 2000
was just over ______%. The population is expected to be _________ by the year 2015 and _________ by the
year 2050.
5. The 2009 population of Louisiana--________ million (up ____% from 1990). The population of Bossier
City is approximately ________________ and Shreveport is approximately
6. The worst economic time experienced by the U.S. occurred in the late 1920’s and into the 1930’s known
as ________________________________________. During this period, poverty and unemployment were at
an all time________, unemployment peaking at ______% in 1932. President
__________________________________ proposed a collective group of legislation known as
__________________________ to provide quick relief to the American people suffering during this economic
crisis. The New Deal included such acts as:
A)
B)
C)
D)
Bonus opportunity: Provide a short history (around 30-40 words) for each of these acts. (5 points)
7. Prior to the 1930’s most Americans supported the ______________________ doctrine which rejected
government intervention in the economy. Government success in ending the ___________ convinced many
people that government should play a big role in the economy. The modern-day economist who most
promoted this idea during the Great Depression was ____________________.
8. Taxes are ______________ payments that both individuals and firms make to the government to cover
the costs of ______________________________. The power to collect an income tax from
workers/entrepreneurs was given to the government in ______ with the passage of the ________ amendment
to the Constitution. In most cases, individual income taxes are paid through a
____________________________ system. The money is withheld from your payroll check by your
____________________ whose responsibility it is to send it to the government on your behalf. Each year, by
___________________, taxpayers file a ______________, the annual report to the IRS reconciling the
amount withheld and the amount actually owed. Employers are likewise required to file a
_________________ of your total _______________ and __________________. You receive a copy of the
form your employer sent to the Internal Revenue Service, a form known as _________. When you are hired,
you are required to complete a form _________ to list your withholding status.
9.
a)
b)
Two important roles of taxes are:
10. The three broad categories of taxes in the U.S. and examples of each are:
a)
--takes a larger percentage of income from high-income people than
from low-income people. EX:
b)
--takes a larger percentage of income from low-income people than
from high-income people. EX:
c)
--take the same percentage of income from all people (aka “Flat Tax”)
EX:
11. In the U.S. @_______% of every dollar earned is paid to the government in taxes. Three countries with
tax rates above 40% are: a)
b)
c)
12. In addition to income tax being withheld from your check, ____________--which stands for
________________________________ is also withheld. This tax is levied on both you and your
______________. ___________ includes both _________________ and ________________.
13. The Social Security Act of 1935 was created to provide ___________ benefits to workers and their
_____________. Due to changes made in the program, it also provides ________________ benefits to those
who cannot work and to their _________________. The act also provides benefits to
_____________________ of workers who have died.
14. Over _____ million workers and their employers pay taxes on wages. The tax rate for employees is
______% and employers pay in a matching amount. The current cap (2005) on Social Security is
$___________, but there has been discussion that the cap may be removed to save the program. In 2004,
the Social Security/Disability fund paid out about $______billion in benefits to _____ million beneficiaries.
15. The average person who earned about $__________ in 1997, will bet a benefit at age _____ equal to
about _____% of his/her earnings. The average monthly Social Security check today is $____________. The
worker at the current maximum wage base, $____________, will get a monthly check representing about
______% on his/her wages.
16. A worker can retire at age _____ and receive ______% of the benefit to which he/she is entitled, or wait
until age _____ and get 100%. The _______________________ to qualify for retirement benefits is on a
_________________________________, rising gradually over time. Those people born after 1942 will not
be eligible until age ______, and those born after 1959 will not be eligible until age _____. It is entirely
possible that those of you born in the 1980s will not be eligible until they are in their ___________.
17. At present Social Security revenues (income) exceed the outlays (what they pay out) by about $________
billion, leaving a ____________________of funds each year. However, the most recent projections of the
Social Security Administration state that by the year __________, revenues and expenditures will equalize
forcing the use of accumulated surplus funds to pay benefits. It is further projected that by the year
__________ all surplus funds will have been ________________ (used up) and the program will be operating
with a deficit--they will only be able to pay about ______% of the promised benefits.
Type of Tax
SPECIFIC TYPES OF TAXES
Taxing Level of
Tax Levied (Charged) On
Govt.
sale of some goods and services
Examples/Notes
only certain goods like tobacco,
alcohol, gasoline (aka “sin tax”)
assets of person who has died
transfer of certain gifts of value
like money or personal property
imported goods brought to U.S.
(aka customs duty)
earned salary or wages
profits of a corporation
personal income--tax is then
placed in retirement fund
personal income--tax is then
placed in insurance fund
land and/or other personal assets
18. Once the government has collected in taxes and other revenues, it must make a plan for the spending of
these revenues. This plan is known as the _____________________, and it is prepared by the
________________of _________________ and ______________, a part of the ___________________
branch of government. The budget is prepared for a _____________________, a 12 month planning period
which starts on ____________ each calendar year. Once the budget is written, it must be presented to the
______________________________for their ____________________. There it is turned over to House
_____________________committees for further study. If they do not agree with the ___________________
proposed spending plan, they may ask the President to _________________ the budget. Once the House
approves it, it must then go to the ____________________ for approval. The Senate may also ask for
revisions. Ultimately it goes to the President.
19. The President is generally forced to make __________________ when preparing the budget, due to
scarcities resources, especially _____________________. Some programs are ______________ so that
others may be __________________. Major debates on the federal budget tend to concentrate on spending
for ________________ programs over spending for _____________ programs, sometimes referred to as the
debate of “________________________________.” Ultimately the president either signs or ___________
the budget. He may not alter it after it passes both houses of Congress. He does not have the authority to do
a _________________________________.
20.
It is a function of the government to provide for the _____________________ by assisting specific
groups such as the ______________, ____________, and the _____________. Americans have chosen to
see that almost everyone in the nation is provided with a certain minimum level of _________________. This
task is primarily accomplished through __________________________, or the use of taxpayer dollars to help
those in need. Payments are made to these individuals through ______________________________
programs. Two examples of entitlement programs include:
a)
b)
21. Federal spending in 2004 totaled _________________, the greatest portion of this spent on
__________________ followed by spending on ___________________ . To put $2.319 trillion into
perspective, this amount laid end to end in one dollar bills would encircle the earth _________times. It is
enough to give every man, woman, and child in the U.S. $____________ each. A stack of $1000 bills __
inches high would make you a millionaire. A stack of $1000 bills equal to this amount would be ______ miles
high. If each one-dollar bill were counted 24 hours a day at the rate of one per second, it would take more
than ________________ years to count out this amount. At an average life expectancy of 70 years, it would
take more than ___________ lifetimes to count them all.
22. When government spending is greater than the revenues (income) it receives, a ___________________
occurs. When government revenues are greater than spending, a ________________________ occurs. In
1998, under the Clinton administration, the U.S. had a budget ______________ of $______________, the first
_______________ since ___________. That was followed in 1999 by a surplus of $_______, and a surplus in
2000 of $_______________. However, in 2003, the budget __________________ was
$____________________ and in 2004 it was $_______________. It is projected to exceed
$______________ in 2005.
23. The primary cause of the budget deficits is the government spending more and more ______________ on
more and more ___________________________, particularly __________________________ such as
Medicare and Social Security. While there has been an increase in ________________________ since 9/11
and the war in Iraq, the greatest increase has been in ________________________________, spending on
goods and services that are not related to defense or entitlement programs. This includes additional spending
for _____________________________. There is no way to accurately plan for these.
24. When the government has a deficit, it must _____________ money to pay its obligations. The total
amount of money the federal government owes to its creditors is known as the ________________. At the
beginning of 2011, the national debt was over $_______________ (which represents over $
_______________per citizen) & $_________________per tax payer, compared to the $________million debt
during George Washington’s administration. Public concern about the size of the __________________ led
Congress to approve a ___________________ law, which limited (put a maximum $ on) the size the debt
could be. However, since that law was passed, Congress has regularly raised the ______________ each time
it has felt the need.
Extra info: When Reagan took office in 1980 national debt was 930 billion; at end of his first term it had reached 1.7 trillion; at end
of his second term it had reached 2.8 trillion. That’s 1.9 trillion increase—a tripling of the debt in 8 years. During the administrations
of George H.W. Bush and Clinton combined, the debt since tripled in size.
25. Some members of Congress favored using the surplus to reduce the nation’s ______________, meaning
to reduce the national debt. (“Red ink” or “in the red” means being _____________. “In the black” or “black
ink” signifies a _______________.) Other members of Congress wanted to use it to bolster important
programs like ________________. There is no doubt that a significant portion of our surplus has been used
to ____________________ caused during the terrorist attacks and will continue to be used to fund
___________________ operations and for _____________________ security. During the Clinton
administration, the national debt was __________________ by several hundred billion dollars, but most agree
that a greater effort on the part of Congress and the President to get spending under control is a must.
26. Budget deficits and the national debt have been around for decades, but it was not until ______ that the
American public began to pay attention to the problem. In 1980, the national debt was just $____________;
by 1990 it had ________________ to over $ ___________. An increase in __________ spending and the
continued growth of __________ programs outpaced the expansion of the economy.
Deficits can undermine the economy in several ways. When the government borrows money to pay its debt, it
_________________ the amount money which is ___________________________________ by individuals or
businesses to spend or invest. Likewise, the increased demand for borrowing money can
___________________________________________. And finally, a massive debt requires massive
___________________________, money that could have been spent on other goods or services to benefit
the public. Economists point out that by dampening investment, deficits harm ______________________ the
most. As the debt undermines the country’s economy, Americans in the 21st century may not enjoy the same
____________________________ as previous generations. (The will be required to pay in more tax dollars to
support the debt.) Thus, many argue that lawmakers must keep the deficit under control and contain the
national debt to preserve the ________________________ for their children and grandchildren.
When the government runs short of money, it must borrow to finance its spending. It generally does this by
having the Treasury Department sell ______________________________ and ______________________ to
the public. These are a form of ________ that promises to repay the borrowed money after a stated period of
time. Most bonds have a _____________________ ranging from ____ to _____ years. Treasury bills mature
in _________________________________.
27. There are only two ways to balance the budget and avoid federal deficits:
__________________________ or _______________________. Both are difficult since the choices about
raising _____________ and cutting _______________ are not popular with voters. Additionally, politicians
regularly include frivolous items in budgets. This is known as __________________________.
Government spending is divided into four main categories:
--financing military operations, atomic energy, nuclear weapons, and
disposal of nuclear waste.
--funding entitlement programs like Social Security, Medicare, Medicaid,
retirement for civil service workers, military, railroad workers, and disabled
coal miners.
--@353 billion for 2005. Amount varies based on interest rate and size of
debt.
--adjusted by Congress and the President each year
Federal Revenue Sources 2004
Federal Spending 2004
28. Some responsibilities for providing public goods are shared by the federal, state, and local governments.
Three examples of these concurrent (shared) responsibilities are:
a)
b)
c)
29. State spending Louisiana in 2004 totaled $ _______________, the greatest portions of this spent on
___________________________ ($
) and _______________ ($
). The three greatest
sources of income for the state of Louisiana are __________
________ (31%) and ________
_______ (41%). The three largest tax sources are _
,_
___, and
.
State Revenue Sources 2004
State Spending 2004
30. At the parish level, Bossier Parish spending and revenues were each $
income sources are
,
Expenses include administrative costs to operate the
,
. as well as expenses for maintenance of
recreation and
.
million in 2005. Major
, and
.
and
, culture and
31. At the city level, Bossier City spending and revenues were each $_______________.
Expenses include
__________________________________. Revenues include ____________________________.
32. Taxing decisions, regardless of which level of government collect them, are based on one of two
principles:
A)
--those who benefit from government services should be the ones to
pay for them, and should be paid in proportion to the services and
benefits received.
B)
--people should be taxed on their income available to pay, not
according to the benefits they receive.