The Federal Money TreeUnit V/VI

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Managing the federal coffersPresident advises, Congress delegates somewhat harmoniously

Who bears the burden of paying?

Who receives the benefits?

How does one maintain prosperity?Liberal vs. Conservative Ideology

Will government continue to fund all those GREAT programs?

Budget

Government collects $$$ by taxes and spends it via expenditures. If tax allocations are higher, it is a …..surplus.

Always debate who was the key…

Economic surge really helped / Should we give it all back?

If expenses are higher, it is a ……deficit which is then added to the national debt.

Interest on the debt

National Debt Clock

Old Photo?

Federal Income Sources

Income Tax –16th Amendment power to tax people via the IRS—50%

Direct taxes---one who is taxed pays the tax. Must be equally apportioned. [House]

Progressive taxes---higher incomes pay more supposedly. Impact?

Flat tax?

Loopholes?

Federal Tax SourcesRegressive Taxes---levied at a flat rate [Sales tax]

Excise Taxes---Sale or consumption of a productSIN tax

Corporate Tax—10%

Social Security- FICA---33% (Regressive)

BorrowingDebt load shifts burden to future taxpayers. Balanced budget amendments with certain provisions?

Lost IncomeLoopholes, deductions, tax breaks, off shore, cash money

Expenditures

Social SecurityElderly, needy, poor

Social Security Act of 1935, Medicare 1965, Medicaid 1965

1/3 of federal budget

Will it be available to you? 2042

How it works?

Issue---too much going out, and not enough going in

The Fix?

Expenditures

National Defense

Interest on Debt

Discretionary SpendingBridge to nowhere, Pell Grants, the Fence

Some programs are funded annually while some have sunsets

Budget Process

Controlled expendituresIncrease last years budget by an “increment” to satisfy this years budget. Discretionary allocations

Uncontrolled expenditures2/3 of budget

EntitlementsYou qualify, you get them no matter what the cost to the government even if we have no money

Level of benefit X number of recipients

The Budget Battle

$ 3.2 Trillion + draws a lot of participants. Discretionary decisions

SIGS

Bureaucratic agencies

Office of Management and Budget—President

President

Congressional Budget Office

Subject matter committees—Ag, Science, Energy

Appropriations committees

Government Accounting Office

Partisan politics---Party Issues

Budget Reform

Fixed Budget Calendar (October 1 to September 31)

Budget Committees

Congressional Budget Office

1974 Reforms-budget resolution established in April sets the bottom line

Spending limits

1993 Gramm-Rudman Act- Balanced Budget

Economic TheoriesMonetarism- Fed monitors interest rates

Goal-steady money supply growth with equal growth of economy. Free market principles

KeynesianismInspire demand with expenditures or cut it with higher taxes

Goal-government is central figure

Price & Wage Government monitors with fiscal and monetary policies

Goal-bailouts or subsidies impact market

Supple SideCut taxes, less government

Goal-little government, less taxes will inspire private sector to move on its own

So…

The Federal Money TreeUnit V/VI