Download Congress, the President, and the Budget

Congress, the President, and the
Budget
The Budget
• Who pays and who receives.
• The bigger the budget, the bigger the
government.
The Budget
• The President & Congress must appropriate
funds of the Gov would stop.
Budget: policy document allocating burdens
(taxes)and benefits (expenditures)
-translating financial resources into human
purpose. (goals with price tags)
Vocabulary
Expenditures: Government spending on things
such as social services and National security.
Revenues: The financial resources of
government. (money taken in by taxes)
Budget Deficits
Budget Deficit: when expenditures exceed
revenues in a fiscal year.
- Gov. spends more than it takes in.
• Total national debt rises
• Congress & the President struggle to control
spending and balance the budget.
Sources of Federal Revenue
Income Tax: Individuals are required to pay the
government a portion of the money they earn.
16th Amendment: permits congress to levy an
income tax.
Internal Revenue Service (IRS): government
agency that collects federal taxes.
Progressive tax rate: those who have a higher
income, pay a higher percentage.
Income Tax
• Top 10% pay 2/3 of the income tax in the
nation.
• Bottom 50% only pay about 10%
• Republicans want a “flat tax”
-everyone pays the same rate
Social Insurance Tax
• Social Security Tax
• Money deducted from workers pay, matched
by their employers.
• Money is “earmarked” into the Social Security
trust fund.
• Pays benefits to the elderly and disabled
Borrowing
• The Fed. Gov. can borrow money to make
ends meet
• Treasury department sells bonds (guaranteed
to pay interest to the buyer)
• People, financial institutions, foreign govs, and
companies can buy them.
• Most borrowing is to finance day to day
activities
The Federal Debt
Federal (national) Debt: All the Money
borrowed over the years that is still outstanding.
9% of our expenditures is to pay off the interest.
National Debt: The Bad
• The more we borrow now, the more future
generations will have to pay.
• Owing money to foreign countries can strain
foreign relations.
Tax Loopholes
• Tax breaks or tax benefits
• IRS codes are loaded with tax exempt
activities.
• Businesses have the resources to exploit these
issues to save money.
Tax Expenditures
• Revenue losses attributable to provisions of the
federal tax laws which allow a special exemption ,
exclusion, or deduction.
-Subsidies for different activities
-allow deductions for charitable giving, business
expansion.
Capital gains tax rates
Tends to favor the wealthy
Tax Reductions
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Americans push for tax reductions
Reagan passed a massive tax cut
Greatly benefited the wealthy
Clinton passed increase on the top 2%
-Created a surplus
W. Bush passed a tax cut on the rich
-Back into a deficit
Federal Expenditures
U.S. Budget
GDP: Gross Domestic product= a means to
measure the size of you economy.
• U.S. has a smaller government (compared to
our economy) than most industrializes
nations.
The National Security State
• Post WWII, the U.S. has had a permanent
military establishment.
• Greatly expanded our budget during the Cold
War.
• Defense spending has decreased compared to
spending on social services.
Next Week
• Multiple Choice Exam Next Tuesday
• FRQ Wed (Presidential powers and Budget
Process
Social Services
• Income security expenditures now the largest
part of the budget.
-direct/indirect aid to the poor, elderly, and
disabled
• Social Security
-Workers pay in, then receive checks after
retirement/or disability.
-average check 1,044
Social Services
Problems with Social Security:
-aging population
-longer life expectancy
Congressed raised S.S. tax
Medicare: Hospital and physician coverage to
the elderly
Incrementalism
• The best predictor of this years budget is last
years budget plus a little bit more.
Agency's usually get the base budget plus some
Expenditures are often mandated by law.
Many call for reform
-Prioritize
- cut wasteful spending
Uncontrollable Expenditures
• Policies that make some group automatically
eligible for some benefit or by previous
obligations of the government.
-Pensions
-Interest on the National Debt
Government cant decide on these expenditures
each year.
Entitlements: Number of people eligible and their
level of guaranteed benefits
-Agricultural subsidies
Social Security
The Budgetary Process
• Budgets go through a long and complex
process.
• Often the center of political battles
Stakes and Strategies
• All political actors have a stake
-Congressmen
-Governors
-Mayors
• Push for more money in their states, districts,
and cities.
The Players
• Interest Groups: Lobby congress and the
President for funds.
• Agencies: Head of agencies always push for
more funds.
• Office of Management and Budget (OMB):
Responsible to the president, but have
independence to allocate money to agencies.
• The President: Makes the final decision on
what to propose to Congress
The Players
• Tax Committees in Congress: The House Ways
and Means Committee and the Senate
Finance Committee write the tax codes.
• Budget Committees and the CBO: set the
parameters for the congressional budget
process and bind congress within certain
limits.
The Players
• Subject matter committee: Committees that
specialize in a subject (Ag. Vets…)
• Appropriations Committees: Decides who gets
what. From Subject matter com to APP. Comm
• Congress as a whole: Congress must approve taxes
and a appropriations.
-Congressmen want to bring home the bacon
• Gov. Accountability Committee (GAO): Monitors
what agencies with do with the funds after the
budget is passed.
The Presidents Budget
• Since 1921, Presidents must propose an executive
budget Congress.
• Office of Management and Budget aids the Pres.
Sends requests to agencies
sets guidelines for agencies
President sets policies and priorities
OMB narrows down agency requests
President must approve, send to Congress.
Current Events
• Obama proposes 4 trillion dollar budget.
• CDC urges measles vaccinations amid
nationwide outbreak; 100 cases confirmed so
far
Current Events
• 'Accountant of Auschwitz' to go on trial in
April on 300,000 counts of accessory to
murder
Congress and the Budget
• Congress must approve the budget.
• Power of the purse
Reforming the Process
Congressional Budget and Impoundment
Control Act of 1974:
-Fixed budget calendar: each step of the
budget has a completion date
- Budget Committee in Each House: Each must
agree on a target total budget size.
-Congressional Budget Office: advises Congress
on the probable consequences of its budget
decisions, and forecasts revenues.
Reforming the Process
Goal of reform: Push Congress to see the budget
as a whole, not in parts.
Budget Resolution: A resolution binding
Congress to a total expenditure level (the
bottom line)of all spending for all programs.
-each house is to agree on a Budget
resolution
2 Ways to Reach Budget Resolution
1. Budget Reconciliation: Process by which
program authorization are revised to achieve
required savings .
-requires tax/revenue adjustment
2. Authorization Bill: An act of Congress that
establishes, continues, a discretionary government
program or an entitlement.
-Establishes goals
-Sets spending limits
2 Ways of Budget Resolution
• Must pass an appropriations Bill to fund
programs established by authorization bills.
Appropriations Bill: An Act of Congress that
Actually funds programs within limits
established by authorization Bills.
Success of the 1974 Reforms
• Reforms a failure, Congress still overspends.
• Continues to miss budget deadlines.
• Resorts to passing Continuing Resolutions
- Law that allows agencies to spend at their
previous years level.