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AP Government
11.30.16
To Do Today
Announcements/News
•
Budget discussion or work day?
• RCQ 13.3-13.4
• ?
To Do Homework/ Tomorrow
• Chapter 13 test - Monday
RCQ 13.3-13.4
1.
2.
3.
4.
Congress drafts a budget resolution establishing a total expenditure level
before it embarks on making the actual budget. T/F (1)
Which statement accurately characterizes the politics of budgeting? (1)
a. Agencies within the gov’t work to protect their interest over the
budget.
b. Members of Congress act as policy entrepreneurs to support
constituent benefits.
c. Presidents try to use budgets to manage the economy.
d. State politicians request grants-in-aid to assist local economies.
e. All of the above are accurate, as every political actor has a stake in
the budget.
Incrementalism requires budget makers to build the budget anew for each
fiscal year. T/F
(1)
There are many different players in the national budgetary process.
Name three of these players, indicating their role in the process. (6)
RCQ 13.3-13.4
1.
2.
3.
Congress drafts a budget resolution establishing a total expenditure level
before it embarks on making the actual budget. T/F (1)
Which statement accurately characterizes the politics of budgeting? (1)
a. Agencies within the gov’t work to protect their interest over the
budget.
b. Members of Congress act as policy entrepreneurs to support
constituent benefits.
c. Presidents try to use budgets to manage the economy.
d. State politicians request grants-in-aid to assist local economies.
e. All of the above are accurate, as every political actor has a stake in
the budget.
Incrementalism requires budget makers to build the budget anew for
each
fiscal year. T/F
(1)
4.
There are many different players in the national budgetary process.
Name three of these players, indicating their role in the process. (3)
The Players---WHO WANT SOMETHING
3 Major Groups
Interest Groups!
The People
The Media
 CBO
 The House Ways and
Means Committee—
Senate Finance
Committee---WRITE TAX
OMB
CODES subject to the
The President
approval of
Government Agencies
Congress/President
GAO—Government
 Appropriations
Accountability Office—
Committees—Decides
Auditing/monitory and
who gets What
evaluating what agencies are
doing with the budgets…
Deficit: when expenditures exceed revenues
National Debt: the total amount of deficits we have had
since George Washington was president (Yearly Deficits
over time becomes the National Debt)
Definition of Budget
• A policy document allocating
BURDENS (taxes) and BENEFITS
(expenditures).
»Who bears the BURDENS of paying
for government?
»Who receives the BENEFITS?
16th Amendment
• The Constitutional Amendment adopted in
1913 that explicitly permitted Congress to levy
an income tax.
– Congress was already levying taxes before this.
– IRS was established to collect them at this point.
Jobs of the IRS
1. Scrutinize Individual tax returns every year
(receives more than 140 million every year).
2. Audit more than 750,000 of them.
3. Investigate suspected criminal violations of
tax laws.
4. Prosecute and secure convictions of nontaxpayers or criminal activity.
Expenditures: Where the Money Goes
2 PLACES
Mandatory
•Mandatory spending includes entitlement programs like Social
Security, Medicare, Medicaid and interest payments on the federal
debt. (usually ~60% of all expenditures)
Discretionary
•Discretionary expenditures are monies that Congress has the
power to cut if it chooses (national defense, education,
environmental protection, law enforcement, research,
international aid, and government operations)
Economic Policy Making
• Council of Economic Advisers:
professional economists sympathetic
to the president’s view of economics
• Office of Management and Budget:
prepares estimates of amounts to be
spent by federal government
agencies; negotiates department
budgets
• Secretary of the Treasury: reflects
the point of view of the financial
community
Copyright © Houghton Mifflin
Company. All rights reserved.
18 | 11
United States Secretary of
the Treasury
Official Seal
Jack Lew
since: February 27, 2013
First
Alexander
Hamilton
Formation
September 11,
1789
Presidential
succession
Fifth
Website
www.treasury.gov
The Federal Reserve
Board
• Regulates the supply
and price of money
• Sets monetary policy:
the effort to shape the
economy by controlling
the amount of money
and bank deposits and
the interest rates
charged for money
Copyright © Houghton Mifflin
Company. All rights reserved.
18 | 12
Federal Reserve System
Seal
Chair
Janet L. Yellen
Central Bank of
United States
Currency
US dollar
Base borrowing rate
0–0.25%
Base deposit rate
3.5%
Website
Federalreserve.gov
Where Does All The Money Go?
• Forty-nine percent, or almost half of all spending, paid for
Social Security and health care entitlements (primarily
Medicare and Medicaid).
• In 2003, the entitlement share of the budget was 44 percent,
compared with 49 percent today. Without reform of these
massive and growing programs, Washington will have to
borrow increasing amounts of money, piling debt onto
younger generations and putting the nation on a dangerous
economic course.
• Social Security is the largest federal spending program and
has held this position since surpassing defense spending in
1993.
• Medicare is one of the largest and fastest-growing programs
in the entire federal budget.
Debt Is Too High, and Growing
• Federal gross national debt consists of the publicly held debt (borrowed
from credit markets) and intragovernmental debt, such as the Social
Security Trust Fund.
• Publicly held debt exceeded $13 trillion in 2014, and together with nearly
$5 trillion in intragovernmental debt, drove the national debt to nearly
$18 trillion.
• In 2014, the national debt exceeds $145,000 per American household.
• In 2014, publicly held debt reached 74.4 percent of GDP. The historical
average is about 38 percent.
• Baseline budget projections assume that Congress will allow a host of tax
provisions to expire, an unlikely proposition. If Congress also ignores
future sequestration cuts and continues the “doc fix” (reversing a
scheduled payment cut to physicians who serve Medicare patients),
publicly held debt would surge to 86 percent of GDP by 2024—the largest
share since 1948.
Budget Breakdown (Episode 1)
http://www.youtube.com/watch?v=fWu8o-ZzUNs
Who Creates and Institutes
the Budget
• The President and Congress
• Some SPECIFIC INFORMATION TO KNOW!
• *Before 1921, agencies of the executive
branch sent their budget requests to the
secretary of treasury who then forwarded it
on to Congress
Incrementalism!
REFORMS to CONTROL SPENDING in 1974 with the
Congressional Budget and Impoundment Control Act
CBO
Advises Congress on the Budget
•Forecast Revenues
•Forecast Consequences/Benefits of the Proposed Budget
•Work Horses!
Budget Resolution
Congress Agrees to Spending Levels
•Bottom Line
In order to
MAKE ANY
CHANGES
CONGRESS
MUST PASS-
Reconciliation
Take a look at the Presidents Budget and make
the necessary adjustments to meet the
demands of the Budget Resolution. This is
where tax or revenue adjustments are made.
Must be PASSED BY CONGRESS
Authorization Bill
Make any changes to discretionary government
programs or entitlement programs
Appropriations Bill
The ACTUAL funding of the new Budget
Continuing
Resolution
Allows departments to spend at the previous
years spending
IF THEY CAN”T
AGREE
Congress
How much should be spent
Bill that funds programs
Last Minute Changes
In an attempt to save money
within the budget, they
changed the way a budget
was thought of…
Reconciliation is a multiple-step process designed to
bring existing law in conformity with the most
recently adopted concurrent resolution on the
budget. ---In other words—They know what
they have to do, but how will they spend within
their means?
• Authorization Bill allows Congress to change
the language of distribution of entitlement
programs (Uncontrollable Expenditures) to
maximize the available funds
– 2/3 of the Federal Government
Gramm-Rudman Balanced Budget
Act (1985)
• Called for automatic cuts from 1986–1991, until the
federal deficit disappeared
• If there was a lack of agreement between the president
and Congress on the total spending level, there would
be automatic across-the board cut (a sequester)
• The president and Congress still found ways to increase
spending
–
–
–
–
–
War
Natural Disasters
9/11
New Cabinet Positions: Department of Homeland Security
Increase of Coverage for Medicaid Prescription Drug
Coverage
18 | 24
1990 Budget Strategy
• Congress voted a tax increase and the Budget
Enforcement Act capped non-entitlement
(discretionary) funding
• If entitlement spending increased, there had
to be cuts in discretionary spending or taxes
had to be raised
18 | 25
Levying Taxes
• Most revenue was derived from tariffs until
ratification of the Sixteenth Amendment
(1913)
• Taxes then varied with war (high) and peace
(low)
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Levying Taxes
• George H.W. Bush and Clinton increased tax
rates, keeping deductions low
• Balanced budget switched policy debates to
tax cuts, but Social Security and Medicare
policy problems remain
Copyright © Houghton Mifflin
Company. All rights reserved.
18 | 27
Gov’t Budget Cuts?
• http://www.businessinsider.com/50suggested-budget-cuts-for-the-usgovernment-2010-6#