Splash Screen. Chapter Intro 2 Section 1: The Federal Government Under our federal system, the...

Splash Screen

Chapter Intro 2

Section 1: The Federal Government

Under our federal system, the executive, legislative, and judicial branches share the responsibility of governing the nation. The president and Congress work together to create the budget—a blueprint for raising and spending the nation’s money.

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Chapter Intro 2

Section 2: State and Local Governments

Political and economic institutions evolve to help individuals and groups accomplish their goals. State and local governments have their own revenue sources and decide how to spend the money they take in.


Chapter Intro 2

Section 3: Managing the Economy

Political and economic institutions evolve to help individuals and groups accomplish their goals. Governments use various tools to manage the economy.


Chapter Preview-End


Section 1-Main Idea

Guide to Reading

Big Idea

Under our federal system, the executive, legislative, and judicial branches share the responsibility of governing the nation.


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Section 1

Preparing the Budget

The federal budget, created by the president and Congress, is the government’s blueprint for raising and spending money.


Section 1

Preparing the Budget (cont.)

• The president and Congress create the federal budget, which determines how the government raises and spends money.

• Government’s fiscal year (FY): October 1 to September 30


Section 1

• Budget process:

– President proposes budget to Congress by first Monday in February

– President sends proposed budget to Congress, with annual budget message



Section 1

– Congress passes budget resolution

• Mandatory spending does not need annual approval

• Discretionary spending (about one-third of the budget) is approved each year



Section 1

– Both houses must approve appropriations bills

– President signs into law or vetoes



Section 1

Revenues and Expenditures

The federal budget has two main parts—revenues and expenditures.


The Federal Budget, FY 2007

Section 1

Revenues and Expenditures (cont.)

• Revenues:

– Half from individual income tax returns

– Corporate income tax

– Payroll taxes fund Social Security and Medicare


Section 1

– Other taxes:

• Excise tax on gasoline, tobacco, telephone

• Estate tax on wealth to heirs

• Tax on gifts

• Miscellaneous income such as national park fees




Section 1

• Forms of taxation:

– Proportional tax—same percentage from everyone

– Progressive tax (such as the federal income tax)—proportion increases with income

– Regressive tax—proportion decreases with income




Section 1

• Expenditures:

– Social Security—largest category in 2007

– Income security

– Health costs

– Defense—second largest category—17.4 cents of every dollar spentin 2007




Section 1

– Interest on debt

– Programs such as education, highways, natural resources




Section 1

• Changes to budget:

– Early government had few expenditures

– Budget and Accounting Act of 1921

– Increased role of President




Section 1-End


Section 2-Main Idea

Guide to Reading

Big Idea

Political and economic institutions evolve to help individuals and groups accomplish their goals.



Section 2

Revenues

State and local governments have their own revenue sources.


Section 2

Revenues (cont.)

• State and local governments have their own budgets, revenues, and expenditures.

State and Local Governments:Revenues and Expenditures


Section 2

• State government revenues in order of importance:

– Intergovernmental revenues from federal government

Revenues (cont.)

• For welfare, highways, hospitals, etc.



Section 2

– State sales tax

Revenues (cont.)

– Contributions from state employees to retirement funds

• Five states have no sales tax

• Other states charge 2.9 to 7.25 percent



Section 2

– Income tax

Revenues (cont.)

• Seven states have none

• Some charge percentage of federal income tax

• Some charge single rate

• Some use progressive tax



Section 2

• Local government revenues:

– For many local governments, most comes from state

– Property taxes, usually only on real property

Revenues (cont.)

• Real property—land and buildings

• Personal property—portable objects



Section 2

– Local sales tax

– Fines and fees

– Revenue from water and utilities

Revenues (cont.)



Section 2

Expenditures

State and local governments use the revenues they receive to fund many different expenditures.


Section 2

Expenditures (cont.)

• State and local governments use revenues to fund many human services.



Section 2

• State governments

– Entitlement programs for the poor

– Subsidize college tuition

– Maintain highways

– Retirement, hospitals, corrections, education




Section 2

• Local governments

– Public schools

– Police and fire protection

– Water supply

– Sewage and sanitation




Section 2-End


Section 3-Main Idea

Guide to Reading

Big Idea

Political and economic institutions evolve to help individuals and groups accomplish their goals.



Section 3-Key Terms

Guide to Reading

Content Vocabulary

• surplus

• deficit

• bond

• debt

• balanced budget

• automatic stabilizer

Academic Vocabulary

• precise • ideological



Section 3

Surpluses and Deficits

Government budgeting can result in either a surplus, a deficit, or a balanced budget.


Section 3

Surpluses and Deficits (cont.)

• Surplus—the government budgets more than it spends

The Deficits and the Debt


Section 3

• Deficit—government spends more than planned

– Issue bonds to raise extra funds

– Outstanding bonds are government’s debt

– Federal debt about $4.9 trillion in October 2006




Section 3

• Balanced budget—spending equals revenues

– Not required of federal government

– Required of many state and local governments

– Must cut spending if revenues drop




Section 3

• Effects of national debt:

– Taxpayers must pay interest rather than funding services

– Higher consumer interest rates




Section 3

Fiscal Policy

The tool of fiscal policy can help governments control the economy.


Section 3

Fiscal Policy (cont.)

• Fiscal policy is the government using taxes and spending to help the economy grow.

– Theory: to increase spending, cut taxes in recession; to reduce spending, increase taxes in boom.

– Practice: hard to raise taxes or cut services


Section 3

• Many oppose spending increases, while others oppose tax cuts on ideological grounds, or on principle

• Politics hamper quick action



Section 3

• Automatic stabilizers always in place

– Unemployment and welfare

– Progressive income tax



Section 3-End


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Vocab1

budget

a plan for making and spending money

Vocab2

mandatory spending

federal spending required by law that continues without the need for annual approvals by Congress

Vocab3

discretionary spending

spending for federal programs that must receive annual approval

Vocab4

appropriations bill

legislation earmarking funds for certain purposes

Vocab5

Social Security

federal program that provides monthly payments to people who are retired or unable to work

Vocab6

Medicare

government program that provides some health care to the elderly

Vocab7

enormous

very large

Vocab8

intergovernmental revenue

funds one level of government receives from another level of government

Vocab9

sales tax

tax levied on a product at the time of sale

Vocab10

property tax

tax on land and property

Vocab11

entitlement program

a program using eligibility requirements to provide health, nutrition, or income supplements to individuals

Vocab12

subsidize

to aid or promote with money

Vocab13

revenue

the income that a government collects for public use

Vocab14

utilize

to make use of

Vocab15

resource

the money, people, and materials available to accomplish a community’s goals; wealth

Vocab16

surplus

situation in which quantity supplied is greater than quantity demanded; situation in which government spends less than it collects in revenues

Vocab17

deficit

situation in which government spends more than it collects in revenues

Vocab18

bond

contract to repay borrowed money with interest at a specific time in the future

Vocab19

debt

money borrowed and not yet paid back

Vocab20

balanced budget

annual budget in which expenditures equal revenues

Vocab21

automatic stabilizer

program that automatically provides benefits to offset a change in people’s incomes

Vocab22

precise

to be exact

Vocab23

ideological

a body of opinions

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