THE BUDGET…
• Every year, the President and Congress must
appropriate funds
• Budget – a policy document allocating burdens
(taxes) and benefits (expenditures)
DEFICIT, EXPENDITURES, REVENUE
• Deficit – an excess of federal expenditures over
federal revenues in a fiscal year
• Expenditures – federal spending of revenues; major
areas of such spending are social services and the
military
• Revenues – the financial resources of the federal
government; the individual income tax and Social
Security tax are two major sources of revenue
SOURCES OF
FEDERAL REVENUE
• Income tax – shares of individual wages and
corporate revenues collected by the government
• Sixteenth Amendment – (1913) explicitly permits
Congress to levy an income tax
BORROWING
• When the federal government wants to borrow
money, the Treasury Department sells bonds,
guaranteeing to pay interest to the bondholder
• Federal debt – all the money borrowed by the
federal government over the years and still
outstanding
ENTITLEMENTS
• Policies for which
Congress has
obligated itself to
pay X level of
benefits to Y
number of
recipients
COSTS
• Social Service
• Social Security Act – (1935) passed during the Great
Depression; intended to provide a minimal level of
sustenance to older Americans and thus save them
from poverty
• Medicare – (1965) provides hospitalization insurance for
the elderly and permits older Americans to purchase
inexpensive coverage for doctor fees and other health
expenses
• National Security
SOCIAL
INSURANCE TAXES (1940)
• Social security taxes – go straight to the Social
Security Trust Fund
• Social Security covers
• Retirees
• Survivors
• Spouses who are over the age of 65
• Children who are under the age of 18 or are still in school
• Disabled
MEDICARE (1965)
• Medicare is a federal program that helps to pay for
older Americans’ health costs.
• Some people incorrectly consider Medicare to be
part of the Social Security system because taxes
that finance part of Medicare are lumped in with
those that pay for Social Security.
MEDICAID
• Medicaid is available only to certain low-income
individuals and families who fit into an eligibility
group that is recognized by federal and state law.
• Medicaid does not pay money to you; instead, it
sends payments directly to your health care
providers.
TAXES AND
PUBLIC POLICY
• Tax loopholes – a tax break or tax benefit
• Tax expenditures – revenue losses that result from
special exemptions, exclusions, or deductions on
federal tax law
HOUSE WAYS AND MEANS &
SENATE FINANCE COMMITTEES
• Write tax codes subject to the approval of the
Congress as a whole
CONGRESSIONAL BUDGET AND
IMPOUNDMENT CONTROL ACT OF
1974
• An act designed to reform the congressional
budgetary process
• Its supporters hoped that it would also make
Congress less dependent on the president’s budget
and better able to set and meet its own budgetary
goals
CONGRESSIONAL
BUDGET OFFICE
• Advises Congress on the probable consequences
of its decisions
• Forecasts revenues
AUTHORIZATION AND
APPROPRIATIONS
• Authorization Bill – an act of Congress that
establishes, continues, or changes a discretionary
government program or an entitlement
• Appropriations Bill – funds programs within limits
established by authorization bills