Download The Congress, the President, and the Budget: The Politics of Taxing

The Budget: The Politics of
Taxing and Spending
Chapter 14
Previewing the Budget

What is a BUDGET?
 What are our government’s SOURCES OF
REVENUE?
 What types of EXPENDITURES does the
government have?
 Why does the government operate at a DEFICIT?
Sources of Federal Revenue

What do we know about INCOME TAXES?
 What are SOCIAL INSURANCE TAXES?
 HOW and FROM WHOM does the government
Borrow?
Sources of Federal Revenue

Taxes and Public Policy
– Tax Loopholes: Break or benefit for a few
– Tax Expenditures: Widespread exemptions,
exclusions or deductions
– What is the impetus for TAX REDUCTION
and REFORM? How do these two terms differ?
Federal Expenditures

Big Government = Big Budget
 National Security State v. Social Service State?
Federal Expenditures

The Rise of the Social Service State
– The biggest part of federal spending is now for
ENTITLEMENT programs.
– Why have the cost of these programs gone up?
Federal Expenditures

Incrementalism
– The idea that last year’s budget is the best
predictor of this year’s budget, plus some.
 What kinds of programs result in
“Uncontrollable” Expenditures for the
government?
 What are the Discretionary Expenditures in the
budget?
The Budgetary Process
1.
2.
3.
4.
5.
6.
Agencies direct budget requests through the OMB &
president
OMB & president negotiate with agencies
President presents his budget to Congress; hearings are
held in committees
Congressional budget resolution sets the total budget
expenditure
Budget items reconciled
Budget authorized and appropriated
The Budgetary Process

Budgetary Politics
– The Players: The President and Congress
(among others)
– Stakes and Strategies: National Needs v.
Political Goals
The Budgetary Process

Congress and the Budget
– Congressional Budget and Impoundment Control Act
of 1974 did much to reform the process
– The Success of the 1974 Reforms?
 From 1974 to 2012, every budget EXCEPT 19982001 was a deficit budget.
 Congress misses most of its own deadlines and
passes continuing resolutions to keep the
government going until it passes a budget
Understanding Budgeting

Democracy and Budgeting
– How is the growth of the deficit a result of
political considerations? (AKA “We all want a
balanced budget – or do we?”)
– How does the budgeting process impact the size
of government?
Economic Policymaking
Chapter 17
Government and the Economy

Does the U.S. have a CAPITALIST economy?
 What level of GOVERNMENT INVOLVEMENT
do we have in the U.S.?
 How does the government MEASURE the health
of the economy?
– Unemployment
– Inflation
– CPI
Government and the Economy

What is the RELATIONSHIP between
politics and the economy?
 Through what MEANS does the
government manipulate the economy?
Instruments for Controlling the
Economy

Monetary Policy and “the Fed”
– Supply of money – too much cash and credit
produces inflation and affects the interest rate
– The Fed influences the supply of money in
circulation:



Sets discount rates
Sets reserve requirements
Buying / selling government bonds
Instruments for Controlling the
Economy

Fiscal Policy: The impact of the federal budget on
the economy
– Keynesian Economic Theory: Government spending
and deficits help the economy; assist in creating
demand
– Supply-Side policy: Too much taxation and not enough
money in circulation leads to hardship; reducing
taxation and regulation will create a greater supply of
goods
Obstacles to Controlling the
Economy

The budget is prepared in advance of when it goes
into effect, making quick action difficult
 Foreign problems and individual business actions
also impact economy
Arenas of Economic
Policymaking

Regulating Business
– Antitrust policy
– Consumer protection (FDA and FTC)
– Labor relations

Benefiting Business
– Government loans and subsidies to business
– Government collects data that business use
Arenas of Economic
Policymaking

The “New Economy”
– Conglomerates, transnationals – More power in
fewer corporate hands
– Information-centered – More men than women
have access, more whites than minorities have
access