Budget, Deficit, Debt
By PresenterMedia.com
The Budget Process
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Some vocab…
The Budget:
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A plan for how the government spends your money
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A plan for how the government pays for its activities
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Something that impacts the national economy
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Something that is impacted by the national economy
Budget Resolution
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The annual framework within which Congress makes its
decisions about spending and taxes.
Includes: targets for…
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Total spending,
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Total revenues,
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Allocations for discretionary and mandatory spending
The Budget Process
More Vocab…
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Discretionary Spending:
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What the President and Congress must decide to spend for
the next fiscal year.
12 appropriations bills (Acts of Congress that enable Federal
Agencies to spend money for specific purposes).
FBI, education, space exploration, highway construction
Mandatory Spending
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Authorized by permanent law
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Social Security
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Can be changed, but if no changes are made it
automatically continues at current levels
The Budget Process
More vocab…
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Balanced Budget
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Total revenues = total outlays
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Outlay – actual spending in a given year
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Budget authority – what the law allows the Federal government to
spend for programs or activities. May be spread over several years.
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Budget deficit
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Total revenues < total outlays
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NOT the same thing as Debt
National Debt
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The sum of all cumulative budget deficits, minus all cumulative budget
surpluses.
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Budget Surplus
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Total revenues > total outlays
The National Debt
How does the Treasury borrow money?
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It issues “securities”
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Savings bonds
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Treasury bills, bonds, notes
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Treasury inflation-protected securities (TIPS)
Securities pay the investor interest
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Interest = the cost of borrowing money
Subject to a debt limit (more later)
The Budget Process
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First Monday in February – President submits proposed
Federal budget to Congress (for next fiscal year,
which begins October 1)
Congress reviews the President’s budget, then
develops and passes the budget resolution.
Congress then passes 12 appropriations bills, plus any
“authorizing” bills to change mandatory
spending/revenue.
Fiscal year starts October 1.
The Budget Process 2013
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Congress fails to pass a budget resolution!
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Senate and House each pass different budget resolutions
As of August – House has passed only 4
appropriations bills, Senate has passed none.
Homework Pass:
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Congress can pass a “Continuing Resolution” – allowing
Federal spending to continue, temporarily, until a budget is
passed.
August/September 2013 – Congress fails to pass a
Continuing Resolution.
October 1…….Government Shutdown
Debt Ceiling
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As if government shutdown isn’t enough
Treasury – issues securities to borrow money to cover
annual budget deficits
WWI/WWII – Congress creates a “debt limit” to allow
Treasury freedom to issue debt to cover any
expenses.
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Replaced old system requiring Congress to authorize all
debt for specific purposes
Made borrowing money easier. Limit made sure Treasury
didn’t go nuts with the national credit card.
Does NOT authorize spending, only borrowing to pay the bills
for spending authorized by Congress.
Routinely raised to cover authorized spending
14th Amendment
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Section 4: “…The validity of the public debt of the
United States, authorized by law, including debts
incurred for payment of pensions and bounties for
services in suppressing insurrection or rebellion, shall
not be questioned. ”
Second Debt Ceiling Crisis This
Year!
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August 2, 2013: Debt Ceiling for 2013 nearly reached.
Congress reaches temporary deal to increase debt
ceiling…will run out on October 17, 2013.
What happens if US doesn’t raise
debt ceiling?
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Treasury doesn’t
have enough cash
on hand to pay
the bills…
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Interest rates rise...
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Confidence is lost
THE DEAL!!!
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Government is funded
through January 15
President given unilateral
authority to raise debt to
cover spending – through
February 7
Furloughed workers will get
back pay
Individuals requesting
healthcare subsidies under
Obamacare must have
their income confirmed.