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
The Federal Budget Two Key Terms needed for understanding the Budget: Contrast Deficit versus Debt (how related?) Budget Deficits The amount by which government spending exceeds government revenues in a single year. National Debt The total amount of money the federal government owes to pay for accumulated deficits. Over $9,500,000,000,000 (Almost 70% of GDP) 1 The Ideal Budget? Receipts ($$$ in) = $pent (Outlays) Balanced Budget Budget Surplus OR A federal budget in which spending and revenues are equal. A federal budget in which revenues exceed spending. How has Federal Government faired in meeting this “ideal” criteria?* 2 Budget Deficits & Surplus Over Time 2005 2006 2007 2008 2009 2010 2011 2012 e d p r o j e c t e d P r o j e c t e d P r o j e c t e d P r o j e c t e d P r o j e c t e d P r o j e c t e d 239B 248B $427B 410B 377B 407B 415B 457B 3 Key Terms Review: Two Key Terms needed for understanding the Budget: Contrast Deficit versus Debt ?________________ ?_________________ The amount by which government spending exceeds government revenues in a single year. The total amount of money the federal government owes to pay for accumulated deficits. 4 Growth in National Debt (in $$ Billions) $9.5 Trillion Your share: $31,000 DEBT Accumulation of Deficits/year = 5 Consequences of a Large National Debt • Is debt always bad? (investment vs. consumption) – Depends: Tuition for College versus Spring Break Vacation • When Government barrows $$$ => from whom? – Pays Interest on $$=> US & Foreign investors, Fed. Pensions • The trade offs: – – – – – – Lost opportunities (discretionary spending) Impact on interest rates? ($$ too expensive) Impact on private sector growth? Impact on jobs? => consumer spending? Impact on economic growth=> Impact on the National Economy (GDP)? 6 Government Revenue Sources- 2000 10% 5% 50% 32% Income Taxes Excise Taxes Payroll Taxes Estate, Customs Corporate Taxes 3% 7 Government Revenue Sources- 2005 What tax source has increased the most in a relatively short time? 8 Federal Spending (Priorities for 2007) What has triggered this increase in Federal spending on individuals? 9 Entitlement Expenditures Discretionary vs. Non-discretionary _______________________ $1.481 Trillion $857 Billion* 19% 9% *How has Discretionary spending changed over time? 10 The Growth of Entitlement Programs • Entitlement programs – Who qualifies? • Social Security => – Pay as you go system? – Generational Pyramid scheme – Trend & impact? • 1950: (15 workers to 1 retiree) • 1990: (3.5 to 1) • Post Baby Boom retires: (3:1) • COLA & the CPI (Box 16-1) – Impact? • Proposed adjustments? – Increase taxes – Cut benefits – Tighten eligibility • Making hard choices=> – The 3rd Rail & who votes? 11 Other Entitlement Programs • Medicare (40M elders)=> – $221Billion & growing • Medicaid (35M poor) – Food Stamps (17M poor) • Federal retirement & VA disability benefits • All Entitlement programs are “non-discretionary” * 12 The Debt Ceiling Deal Agreement to Increase the Debt Limit • $900 Billion Initial Increase in the Debt Limit – Increased in two tranches: $400 billion and $500 billion – $500 billion occurs if Congress doesn’t block it • $917 Billion in Spending Cuts tied to Initial Increase • Bill created a “Congressional Joint Select Committee on Deficit Reduction” (a.k.a. “Super Committee”) to locate up to $1.5 trillion in additional deficit reduction Some Perspective on the Debt Limit Deal • The Debt Agreement Must Reduce the Deficit by at least $2.1 trillion over the next ten years • The Federal Government is Slated to Spend more than $46 trillion over the next ten years • Bottom Line: The Debt Agreement cuts 4% from Federal Spending over the next ten years • Put Another Way: Cuts in Debt Agreement do not cover half of Federal Interest payments of