Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Financing the Government { Federal Budget 1. 2. 3. 4. Economic growth Low unemployment Stable prices for goods & services Balanced budget 5. Federal Govt Economic Goals 1. Revenue Collection a. b. c. 2. Taxes & tariffs Loan interest Fees & Misc. Borrowing a. b. Bonds Credit from foreign countries Funding Sources 1. Tax Collection A. Income tax 1. Largest percentage of govt revenue (47%) 2. 16th Amendment a. Progressive tax – more income = more tax b. 10 % - 35% of a taxpayer’s income 3. All American citizens & resident aliens Revenue b. Payroll taxes 1. Social Security, Medicare & other social insurance forms a. used to pay for these programs 2. 34% of govt revenue 3. regressive tax – higher tax rate for low-income earners a. tax applicable on income to a certain amount 4. proportional tax – applied @ same rate for all Incomes a. Medicare Revenue C. Corporate income tax 1. tax on corporation’s incomes D. Excise tax 1. tax on certain goods a. gasoline E. Tariffs a. import tax F. Estate & gift tax a. tax on inherited money & property Revenue E. 2. Nontax sources A. Federal Reserve System 1. Interest from bank loans 2. Fed provides loans to commercial banks B. Fees 1. Entrance fees to National Parks Revenue Federal Reserve System 1. 2. Constitution a. Article 1, Section 8, Clause 2 b. Expressed power of Congress Bond Sales a. Buy bond for a certain amount – on loan to federal govt – bond is worth more @ a later date – interest on the bond b. Private people c. Foreign countries Borrowing Bonds 1. Mandatory Spending a. Required by law & not subject to budget process b. Used for entitlement programs 1. Social Security, Medicare & Medicaid a. also include unemployment compensation, SNAP , EIC & child tax credits 1. Can’t deny funding w/o changing the law 2. Rising funding needs a. 60% of mandatory spending budget Government Spending 2. Discretionary Spending A. Budget process B. Appropriation power of Congress 1. Allocate limited funds to nonmandatory spending agencies & programs a. National Defense b. Government c. Cabinet departments Government Spending President A. Proposes budget 1. assistance from the OMB B. Presents to Congress 2. Congress A. President’s budget = guidelines & makes changes 1. Assistance from Congressional Budget Office (CBO) a. non-partisan b. provides expert economic analysis 1. Budget Process B. Pass concurrent Resolution of total revenue & spending *House & Senate Appropriations Committees *individual funding & revenue resolutions Budget Process *Appropriation bills *Presidential approval Budget Process 3. Conflicts in the Budget Process A. Limited $ for discretionary spending B. Funding disputes between President & Congress C. Government Shutdown 1. no approved budget Budget Process Financial policies of the US a. federal budget creation b. tax laws 2. Provide adequate government spending w/o adversely affecting the economy 3. Boost economy *Increased target gov’t spending 1. *Stimulate economic sectors to produce more goods & hire more people Fiscal Policy *Cutting taxes *People have more personal money = Increased consumer spending & investment Fiscal Policy 4. Increased govt spending w/tax cuts can cause budget deficits & slow the economy *Increasing interest rates *Less borrowing & business expansion Fiscal Policy 5. Too much govt spending can trigger inflation & reduced standard of living *Rise in cost of goods & services = People must buy w/same amount of money Fiscal Policy 6. Govt measures to curtail inflation a. Reduce govt spending b. Raising taxes c. Raising interest rates Fiscal Policy 1. 2. 3. Control amount of money in circulation Controls interest rates Federal Reserve “The Fed” A. Implements monetary policy 1. adjust interest rates 2. buying & selling govt bonds Monetary Policy B. Interest rates *higher interest rates = lower borrowing *Less money in circulation *lower interest rates = more borrowing *More money in circulation Monetary Policy C. Buying & selling govt bonds *Buying bonds = removes money from circulation *Selling bonds = adds money to circulation Monetary Policy *More money in circulation *Economic Growth Monetary Policy *Inflation *Less money in circulation *Reduce inflation *Slow economic growth Monetary Policy 1. Limits to effectiveness of fiscal & monetary policy a. Takes time to see results b. Evolving economic problems 2. Federal Debt A. All money borrowed by the govt that hasn’t been repaid 1. National Debt 2. approximately $ 18 trillion Deficit Spending & Economic Problems B. Deficit 1. Govt must spend more than it earns 2. Govt only pays the interest of National Debt C. Deficit spending common in US budget 1. 2001 – Present 2. Increasing demands on Social Security & Medicare a. aging Baby Boomer generation Deficit Spending