10 trillion and counting https://www.youtube.com/watch?v=pfZyffw7U6E

www.whitehouse.gov/omb

Solve the deficit

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?_r=0

THE FEDERAL BUDGETUnit 7.2

I. BUDGET AND SPENDING

A. Executive Branch -President submits a new budget every year1.Office of

Management and Budget (OMB)

2. Huge political statement about priorities of gov’t

B. LEGISLATIVE BRANCH

1. Congress receives a proposed budget from the executive branch

a. B/w March – October b. Each branch of Congress must pass bills for

discretionary spendingc. Appropriations –bills that assign spending money

on a specific program, project or government department

d. 12 subject areasi. EX: Defense, Agriculture, Transportation & Housing

and Urban Development

C. FISCAL POLICY

1. Fiscal Policy –use of gov’t revenue collection and expenditures to influence the economy

2. Discretionary -spending optional spending that is approved thru an appropriations bill

a. 12 departments/committees are subject to this funding

3. Mandatory spending -spending required by existing law

4. Currently 60% of US budget Social Security Medicare/Medicaid Other entitlements

D. Budget breakdown

1.entitlement programs (social security, Medicare, welfare): ~50% of budget

2. defense- 21%, interest on debt 9%

3.deficit (spending more than the revenue collected)

4. total debt: $10.8 trillion, >$200 billion in interest

II. GOV’T INTERVENTIONS

Entitlement programs Medicaid, Food Stamps, WIC, FDC

payments, federal jobs programs & training

Gov’t subsidized loans for college education

Federal Reserve lowering interest rates so that

companies can expand businesses & hire more workers

Taxation Progressive tax rate & Income tax credit

UNEMPLOYMENT AND POVERTY

A. Cyclical Employment- unemployment rises during economic downturns and falls when economy improves

B. Full Employment- unemployment rate 4-5%

C. Underemployment- people working at a job in which they are overqualified or part-time

CLOSE

Give a situation in which someone is underemployed.

What is fiscal policy? Why do you think both the executive and legislative branches participate in shaping it?

TAXES; FEDERAL , STATE AND LOCAL

Federal Taxes Personal Income Tax: Paid by individuals –progressive Payroll Tax: employers deduct tax from employees paychecks for Entitlements

Capital Gains tax: tax on profits made from sell of assets Excise Tax: tax on goods ( sin tax) cigarettes, gas, alcohol: regressive

Tariff: Tax on imported goods Corporate Income Tax: Income tax on profits Estate Tax: Tax on inheritance

STATE AND LOCAL TAXES

State: State individual income tax: progressive- largest source of revenue for the

state Corporate income tax: Estate Tax Sales Tax: Tax on goods and services – regressive Excise Tax: Licenses/ Permits: Fees/ fines:

Local : Property Tax: Largest source of revenue for a local cities Sales tax: Licenses, fees, permits, fines

WHAT ARE AUTOMATIC STABILIZERS?

Automatics stabilizers are expenditures by the Federal Budget to offset the negative affects of a slowdown in the economy.

Examples are Unemployment benefits, foods stamps and other public assistance programs.

These programs help people supplement their incomes.