Lecture Series #3
Budget Planning, Implementation and Monitoring
Step Three: Understanding Government’s Financial Statements & Fiscal Budget
Chris Droussiotis
September 2011
Table of Contents
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Corporate Vs Government Planning
An Overview of Government / Public / Federal Budgeting
Constitution Economics
Public Finance – Managing Debt
These slides could be obtain via the Instructor’s Web page at
www.celeritymoment.com
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Corporate Vs Government “Profit & Loss”
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Profit
Not for Profit
 Net Income/(Loss)
 Surplus / Deficit
 Exceeding Budget
 Meeting Budget
 Corporate Taxation
 Investment Taxation
What is the Federal Budget
 A plan for how the Government spends your money.
 A plan for how the Government pays for its activities.
 How much revenue does it raise through different kinds of taxes
 A plan for how the Government manages it’s Debt obligations
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What is the Federal Budget
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What is the Federal Budget
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What is the Federal Budget
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Government’s Goal: Balance Budget
REVENUE
Less
EXPENSES
Surplus
Pay Down Debt
Deficit
Borrow more Debt
Balance Budget Approach
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Government Revenues
Government Revenues
• Individual Income Taxes
• Corporate Income Taxes
• Social Insurance Payroll Taxes
• Social Security Taxes
• Medicare Taxes
• Unemployment Insurance Taxes
• Federal employee retirement payments
• Excise taxes – taxes on alcohol, tobacco, transportation fuels and telephone services
• Miscellaneous Revenues including Estate and Gift Taxes, Customs Duties, Fines, penalties
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Government Expenses
Government Spending
Mandatory Spending
Discretionary Spending
• Social Security
• National Defense
• Medicare (elderly and disabled)
• International Affairs
• Medicaid (poor)
• Technology, Space, Science
• Other Mandatory
• Energy
• Food Stamps
• Natural Resources & Environment
• Supplement Security Income
• Agriculture
• Child Nutrition
• Commerce and Housing
• Veterans’ Pensions
• Transportation
• Education, Training and Social Services
Interest Payment
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• General Government
Tracking Performance of the Budget Vs Economy
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Tracking Performance of the Budget Vs Economy
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Tracking Performance of the Budget Vs Economy
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EBITDA
Assessing Government’s performance
Coverage Ratio = The First performance measurement
 Projecting Expenses – Mandatory
 Adjusting Expenses – Discretionary
 View on the Economy and Outlook
 Achieving desired Growth
 To Increase Tax or not to
 Tax Incentives on Investments / businesses / lending
 Debt Management (Payment / Borrow)
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Assessing Government’s performance
The Relationship of Surplus and Debt = The Second performance measurement
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Assessing Government’s performance
The Relationship of Surplus and Debt = The Second performance measurement
Capital markets
• Coupon Vs Yield (secondary)
• Maturity (short Vs long)
Other Concepts:
• Quantitative Easing (QE1 & 2)
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