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Economics Unit 4 Lesson 4 Understanding Government Budgets

Economics Unit 4 Lesson 4 Understanding Government Budgets. Government Budgets. A government budget is a plan for outlays (expenditures or spending) and revenue (collecting taxes) All governments - local, state, and federal - are required to revise budgets every fiscal year

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Economics Unit 4 Lesson 4 Understanding Government Budgets

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  1. Economics Unit 4 Lesson 4 Understanding Government Budgets

  2. Government Budgets • A government budget is a plan for outlays (expenditures or spending) and revenue (collecting taxes) • All governments - local, state, and federal - are required to revise budgets every fiscal year • Only the federal government is not required to balance its budget annually • The US Constitution does not require a balanced budget

  3. Two Categories of Government Spending • Mandatory – Required by law • Discretionary – Voted on by Congress

  4. What is Mandatory Spending? • Social Security (1st largest #) 21% • Medicare (3rd largest) 12% • Interest on National Debt (sixth largest #) 10% • Admin. of Justice 1%

  5. What is Discretionary Funding Defense/Military (2nd largest #) 20% Health–Medicaid (5th largest) 11% Education 4% Agriculture 1% Welfare and Food Stamps (4th largest) 14% Transportation 2% Science, Energy, and Natural Resource Development 3% International Affairs and Aid 1%

  6. From 2005

  7. What is Government Debt? A deficit in the budget occurs when government expenditures are greater than revenues US Deficit for 2009 was over $1 trillion (highest ever) Increased by 50% since 2003 Biggest cause is $700 billion bank bailout The National Debt is the total accumulated deficits $13 Trillion in 2010 81% of GDP (National Wealth)

  8. Newscast on National Debt Clock • http://dailybail.com/home/national-debt-gets-too-big-for-debt-clock.html • http://www.usdebtclock.org/

  9. Government Surplus • Occurs when government revenues exceed government expenditures • 1997-2001 were the only surplus in five decades

  10. History of Deficit and Surplus

  11. Creditors Those people or entities to whom the U.S. government owes money Owed $8 trillion in Treasury bonds and US notes 1/3 American people 1/3 Foreign governments China and Japan largest creditors Buy US bonds to strengthen their currency US Government borrows $4 trillion from itself Mostly to Social Security Interest is $450 million a year $1.5 Trillion due in 2011

  12. Budget Battles: 2010-11 Issues • 2010 National Budget Commission • Bi-partisan Committee • Recommend: Cuts in Social Security, Defense, and Domestic Programs • Obama 2010 Budget • $30 billion for Afghanistan war • $30 billion for small business that hire new workers • More money for educationand Pell grants • Money for high speed rail system • Cuts in agriculture, oil, and corporate subsidies • Feeson large banking firms • 3 Year spending freeze after 2010

  13. Budget Battles: 2010-11 Proposal New York Times Interactive Spending Budget–2010-11 President Obma’s Proposed 2011 Budget http://www.nytimes.com/interactive/2010/02/01/us/budget.html

  14. Key Budget Issues 2010 Compromise Extend Bush Tax Cuts–2 years “Middle class”: focus on Social Security; cost $485 billion “upper class”(earning over $250,000/yr); cost $139 billion. Continue unemployment benefits–13 months Cost $33 billion But help 2.5 million unemployed pay bills

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