Congress, the President and The Federal Budget

1. The White House Tax receipt Budget Hero Congress, the President and The Federal Budget Chapter 14 Chapter 17

2. A. Key Terms • 1. Budget –a financial plan for the use of money, personnel, and property • E.g. the federal budget for 2010 is 3.6 trillion dollars 2. Balanced Budget- When expenditures equal revenues in a fiscal year. 3. Budget Deficit Whenexpenditures exceed revenues in a fiscal year. 4. Budget Surplus- When expenditures are less than revenues –the money left over is called a surplus.

3. B. Policy tools for influencing the Economy 1. Monetary policy- • A. Monetary policy is controlled by the Federal Reserve Board • B. Regulating the money supply, controlling inflation, and adjusting interest rates are all monetary policy issues

4. What is fiscal policy? 2. Fiscal Policy a. Fiscal policy is controlled by the Executive and legislative branches. (The president proposes the federal budget and Congress passes it.) b. Fiscal policy includes: 1. raising and lowering taxes 2. government spending programs

5. Possible Questions 1000. Fiscal policy refers to the manipulation of government income and expenditure to • control the volume and price of money • limit the rate of increase in incomes • affect the value of the dollar on world financial markets • affect the level of total expenditure, output and employment 1001. A government budget surplus is where • the value of inflows of goods and services into the economy exceeds the value of outflows • public sector borrowings are less than in the previous year • government expenditure exceeds revenue in a year • government revenue exceeds expenditure in a year

6. In your own words • What is the difference between fiscal policy and monetary policy?

7. The history of the role of Government in managing the economy • 1. Creation of Federal Reserve Board (1913) • 2. President’s Budget (1921) • 3. Turning point of the Great Depression • 4. Congressional Budget and Impoundment Control Act (1974)

8. Test questions on Fiscal and Monetary policy • #100. The main role of the Federal Reserve is to • administer the government’s budget and fiscal policy • provide advice to the government on the state of the economy • oversee the operations of the financial system and monetary management • establish the value of the dollar and official interest rates 101 The functions of the Federal Reserve include • minting all official medals and medallions • acting as the banker for the US government • determining national economic policy direction • providing finance to industry in the short-term

9. Practice Questions • Monetary policy is concerned with influencing • the general level of money wages • the level of government expenditure • the price and availability of money • the level of shares on the stock market

10. How do we come up with a Budget? • About a year-and-a-half out, agencies prepare requests that over time are aggregated up the chain and ultimately go to the Office of Management and Budget (OMB). • The President’s budget is presented in January or February. • The Congressional budget is presented in the late summer.

11. Link to Budget Timeline • The appropriations process starts after the Congressional budget and continues until the start of the fiscal year, more-or-less. The federal fiscal budget year begins October 1 for the next year. • The end game: • reconciliation • continuing resolutions (CRs), and • omnibus legislation

12. Budget Flow Chart Rubric CHART   YOUR SCORE Title 5 Points   Steps #1-10 maximum 70 Points   Each additional step #_____x 2 points   Following directions includes neatness, use of appropriate symbols 10 Points   TOTAL POINTS     You and a partner are to create a flow chart of the federal budgeting process.  Include as many of the individual steps as you can justify.  The illustrations must be symbols of what is happening at that stage.  It is to be neatly drawn and colored.  Assignment: Budget Flow Chart