Fiscal Policy

1. Fiscal Policy What the Government does with Our Money.

2. Solve the Riddle • In Middle English, the word is bowgette, in Middle French it's bougette, the nickname of bouge, meaning leather bag. These old words are both derived from a Latin word of Celtic origin, bulga, and this ancient word is akin to the Middle Irish, bolg, and the Old English, belg, which both means 'bag.' • What modern English word derives from these words?"

3. Budget • a budget is an itemized forecast of an individual's or a company's income and expenses expected for some period in the future

4. What is meant by a budget that runs in the black? • One's income is greater than his expenses • What does it mean for a budget to run in the red? • Expenses run higher than income

5. The Government, like an individual, or a company, must set a budget, and to do this it must "set priorities" about what programs the government should fund.

6. “Critics Say Money for Schools Falls Short of Promises” • How many states submitted plans to monitor student's performance, according to the article? • What federal law required these plans to be submitted? • Compared to this year's federal budget, how much more money does the 2004 education budget propose to raise for children through the 12th grade? • How does the education plan proposed in the 2004 federal budget proposal compare to the education budget proposed in the No Child Left Behind Act? • What does Eugene Hickok mean when he says "The color of money is not always green"? • According to the article, how many high poverty schools were found last June to be failing? • Why does Krista Kafer predict that many education programs would be restored? • According to the article, when is a school deemed "in need of improvement" under new federal education law? • How long do these failing school have to show improvement?

7. A program of public works could hire the unemployed to build new roads, parks and camps and public buildings, and even interview old people and write the local history of their communities. The Works Progress Administration did all of these things in the U. S. in the 1930's. (In its recession of the 1990's, Japan, too, turned to public works to increase income.) By hiring the unemployed, such a public works program would make the people it hired better off; but it would do more than that. It would have a multiplier effect.

8. The Multiplier Effect • The people hired for the public works would spend most of their income, and that would create income for still other people, who would in turn spend most of their income and create still more income for still other people. That's the way the multiplier works. And, so long as the new income is being produced by people and resources that would otherwise be unemployed, it's a no-lose situation -- no other goods and services need be sacrificed in order to increase the incomes of the formerly unemployed.

9. What about the Real World? • That's the way it would work in the Keynesian model economy. The real world is, as always, more complex and frustrating. • This is an example of fiscal policy.

10. Fiscal Policy • When a national government makes decisions on taxation and spending with a view to influencing the level of production and employment.

11. The Federal Budget • A plan for the federal government’s revenues and spending for the coming year • Revenues: income received by a government that can come from taxes or other non-tax sources • Fiscal Year – 12 month period that runs from Oct. 1 to Sept. 30