CHAPTER 9
AMERICAN
HOLT
GOVERNMENT
Economic Policy
Section 1: Raising Revenue
Section 2: Influencing the Economy
Section 3: The Federal Budget
Section 4: Deficit Spending and the Economy
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Objectives:
 What are the major types of federal taxes?
 How does the federal government collect taxes?
 What sources of revenue, other than taxes, does the
federal government have?
 What factors have affected the political debate over
tax policy in recent decades?
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Major types of federal taxes:
 individual income tax
 social insurance tax
 corporate income tax
 excise tax
 estate and gift taxes
 custom duties
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
The federal government collects taxes through the
Internal Revenue Service.
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Nontax revenue sources:
 earnings by Federal Reserve banks
 fees and fines collected by government agencies
 patent, trademark, and copyright fees
 federal court fines
 revenue from the sale or lease of federal lands
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 1:
Raising Revenue
GOVERNMENT
HOLT
Factors affecting the political debate over tax
policy in recent decades:
 growing public opposition to taxes
 the desire to fund government programs to help lessadvantaged citizens
 opposition to tax advantages for the wealthy
 distribution of wealth
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
Objectives:
 How is the U.S. economy organized?
 What are the goals of economic stabilization policy?
 What tools does the U.S. government use to stabilize
the economy?
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
The U.S. economy is organized under a freeenterprise system.
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
The goals of economic stabilization:
 full employment
 low inflation
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 2:
Influencing the Economy
GOVERNMENT
HOLT
Tools the U.S. government uses to stabilize the
economy:
 fiscal policy
 monetary policy
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Objectives:
 How has the federal budget-making process changed
over the years?
 What role does the president play in planning the
budget?
 Why are attempts at reducing the budget politically
controversial?
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Changes in the federal budget-making process:
 Budget and Accounting Act of 1921—gave the Bureau of the
Budget the power to raise or lower agencies’ spending requests
before they were sent to Congress
 Office of Management and Budget—increased the president’s
role in making economic policy when the office was moved to
the Executive Office of the President
 Congressional Budget and Impoundment Act of 1974—limited
presidential impoundments, set ceilings for budgets each year,
and allowed Congress to review the president’s budget
proposals more systematically
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Role of the president in planning the budget:
 shapes the OMB’s guidelines about the overall fiscal
situation
 influences each government agency’s spending
proposal through the OMB’s guidelines
 reviews and negotiates a budget proposal with each
federal agency and the OMB
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 3:
The Federal Budget
GOVERNMENT
HOLT
Reducing the budget can be politically
controversial because each party has different
choices about which programs should be affected
by a budget cut. Consequently, obtaining a
political majority for any one plan can be difficult.
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Objectives:
 What factors can cause the federal government to
operate at a deficit?
 How does the national debt influence the U.S.
economy?
 In what ways do the national debt and the federal
deficit influence each other?
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Factors that contribute to budget deficits:
 political disagreements
 uncontrollable spending
 a reluctant public
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Effects of a national debt on the U.S. economy:
 can deter foreign investors from investing in the U.S.
dollar and thereby cause the dollar to devalue
 can slow the economy when interest rates rise as a
result of the government’s large monetary borrowing
to finance deficit spending
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HOLT, RINEHART
AND
WINSTON
Economic Policy
AMERICAN
Section 4:
Deficit Spending and the Economy
GOVERNMENT
HOLT
Relationship between the national debt and the
federal deficit:
 If the federal budget is in deficit, then the government
must borrow money to reduce, which creates a
national debt. Without a deficit, the government can
reduce the national debt.
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HOLT, RINEHART
AND
WINSTON
AMERICAN
HOLT
GOVERNMENT
Chapter Wrap-Up
1. What are the federal government’s main
sources of revenue?
2. How can the federal government use tax
policy to influence the economy?
3. What were the short-term costs and long-term
benefits of the GI Bill?
4. How has government policy contributed to
scientific discoveries and improved consumer
products?
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HOLT, RINEHART
AND
WINSTON
AMERICAN
HOLT
GOVERNMENT
Chapter Wrap-Up
5. How did the Congressional Budget and
Impoundment Control Act change the way the
president’s budget proposal is considered?
6. Define uncontrollable spending and list three
examples.
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HOLT, RINEHART
AND
WINSTON