POLS 1301-165 POLS 1301-165 2/25/04 2/25/04

The Federal Budget and ProcessThe Federal Budget and Process

NotesNotes

Take Chapter 16 QuizTake Chapter 16 Quiz

What is a Budget?What is a Budget?

A sum of money allocated for a particular A sum of money allocated for a particular purpose.purpose.

Set of decisions concerning the allocation Set of decisions concerning the allocation of resources to meet goals of the public.of resources to meet goals of the public.

Schedule of projected revenues, Schedule of projected revenues, expenditures, and capital outlays.expenditures, and capital outlays.

Revenues by Source 2002Revenues by Source 2002

38%

31%

19%

6% 4% 1%1%Individual income taxes

Social Insurance Taxes

User fees, earmarked taxes andreceiptsCorporation taxes

Excise taxes and customs duties

Miscellaneous receipts

Death taxes

Comparing National Tax Comparing National Tax BurdensBurdens

2002 Expenditures by Type2002 Expenditures by Type

Budget ConceptsBudget Concepts

Balanced Budget – Revenues and Expenditures Balanced Budget – Revenues and Expenditures are equal.are equal.

Budget Deficit – Expenses exceed revenues Budget Deficit – Expenses exceed revenues forcing the government to issue debt. forcing the government to issue debt.

Budget Surplus – Revenues exceed expenditures, Budget Surplus – Revenues exceed expenditures, allowing government to pay-down debt.allowing government to pay-down debt.

Pork Barrel Spending - Legislation that Pork Barrel Spending - Legislation that appropriates gov’t money for local projects of appropriates gov’t money for local projects of questionable value that may ingratiate a legislator questionable value that may ingratiate a legislator with his or her constituents.with his or her constituents.

Budget Surplus and DeficitBudget Surplus and Deficit

Growth in National DebtGrowth in National Debt

Social Security DeficitsSocial Security Deficits

Budget AgenciesBudget Agencies

OMB - Office of Management and BudgetOMB - Office of Management and Budget– Created by Nixon, was previously the treasury Created by Nixon, was previously the treasury

departmentdepartment CBO – Congresssional Budget OfficeCBO – Congresssional Budget Office

– Was created in 1974 by the Congressional Was created in 1974 by the Congressional Budget and Impoundment Control Act to give Budget and Impoundment Control Act to give congress same level of detail as Presidentcongress same level of detail as President

Budget ProcessBudget Process

OMB and President create initial budget to OMB and President create initial budget to be submitted to the Congressbe submitted to the Congress

House of Representatives considers budget House of Representatives considers budget and makes adjustmentsand makes adjustments

Senate then considers budgetSenate then considers budget Final details are worked out in joint Final details are worked out in joint

committeecommittee

Budget CalendarBudget Calendar

Monetary PolicyMonetary Policy

Monetary Policy LinkMonetary Policy Link InflationInflation - - An increase in the general price level of An increase in the general price level of

goods and services; alternatively, a decrease in goods and services; alternatively, a decrease in purchasing power of the dollar.purchasing power of the dollar.

Recession - Recession - A downturn in economic activity, A downturn in economic activity, broadly defined by many economists as at least broadly defined by many economists as at least two consecutive quarters of decline in a nation's two consecutive quarters of decline in a nation's gross domestic product (GDP)gross domestic product (GDP)

CPI – Consumer Price Index - CPI – Consumer Price Index - a measure of the a measure of the average change in prices over time in a market average change in prices over time in a market basket of goods and services.basket of goods and services.