AP Gov. Exam Review
Congress, the President and the Budget
Session 9
The Budget-making Process
Four Major Themes:
1. The national deficit is money the government does not have to pay its
bills. This can change from fiscal year to fiscal year. When the government
spends more than it takes in in federal revenues. The opposite being a
federal surplus
2. Entitlement spending takes up the largest portion of the
federal budget. These programs are also considered
“uncontrollable spending” and are required by federal law.
The national debt is all outstanding receipts the government owes.
3. The federal budget-making process is an extremely political process
with many actors and uncertain outcomes.
Main ActorsCongressPresidentInterest GroupsAgency headsCBOOMBGAO-
4. Since the end of World War II, the role of the federal
government in people’s lives has increased tremendously.
These programs like Social Security, Medicare and Medicaid
are extremely popular and the American public has shown a
reluctance to reduce benefits. Paradox= programs are popular
and need tax revenue to fund them. Program demands are
increasing and demand more tax revenue. Tax increases are
very unpopular with Americans. Rise of the welfare and
national security state.
AP Gov. Exam Review
Term, idea, concept etc.
National deficit vs. National
debt
Congress, the President and the Budget
Definition or examples
Here’s why it’s important:
An excess of federal expenditures
(spending) over federal revenues
(what we bring in in taxes)
Federal government has to
borrow money to pay its bills.
Debt is all the money borrowed
over the years that is yet to be paid
Tax expenditures
***Entitlement programs***
Session 9
Budget Deficit: a situation in which the
government spends more money than it
takes in from taxes and fees. (G>T). Typically
we use deficit financing by selling govt
securities to the public.
Revenue losses that result from
special exemptions, exclusions or
deductions on federal tax law
Exemptions and reductions
are very popular but cost the
federal government billions in
lost revenue
Policies for which Congress has
obligated itself to pay X level of
benefits to Y number of recipients.
Social Security, Medicare and
Medicaid
Very popular. Pay as you go.
KEY=baby boom generation is
a major strain on entitlement
programs. More people
benefiting from the current
system than those paying in.
AP Gov. Exam Review
Congress, the President and the Budget
Session 9
Term, idea, concept etc.
Definition or examples
Here’s why it’s important:
***Uncontrollable spending***
Expenditures that are determined
not by a fixed amount of
appropriated funds by Congress
but by how many eligible
beneficiaries there are for a
program or by previous
obligations
Entitlement spending makes
up the bulk of uncontrollable
spending. These programs are
not subject to annual
authorizations. Also nondiscretionary spending=
obligations we can’t do
anything about.
Federal funds that must be
reauthorized from year to year.
These can be changed.
Entitlements are taking more
and more away from
discretionary spending i.e.
education, environment &
transportation
Last year’s budget is the best
predictor of this year’s budget plus
a little more
Agencies are encouraged to
spend ALL of their allocated
budget. If they don’t, that
money will be taken away for
the next fiscal year. Congress
will see those funds as not
used and un-needed.
Discretionary spending
Incrementalism