THE BUDGET

Monetary Policy v. Fiscal Policy

• Both terms have to do with money but have very different definitions.

Monetary Policy

• Is the economic philosophy of banking, interest rates, and the circulation of money

• It can be expansionary (put more $ in circulation at a MUCH faster pace) or it can be contractionary (put more $ in circulation at a slower pace)

• Activities such as printing more money and/or lowering interest rates can influence the economy.

The FED – Federal Reserve Bank

• America’s central banking system• 12 Federal Reserve banks nationwide• Controls the $ in circulation• Controls interest rates, which then impact

savings accounts, mortgages, credit cards and indirectly, the stock market

• We borrow $ from banks; banks borrow $ from the Fed; Fed also loans to foreign nations

• Therefore, the Fed can create or print, then loans money into existence.

Fiscal Policy• Fiscal Policy is the impact of the

federal budget on the economy--for example- taxes, spending and borrowing--so in talking about the budget process, we are talking about making

fiscal policy

MAJOR PLAYERS

•Executive Branch–The President–The Office of Management & Budget

–The Bureaucracy

MAJOR PLAYERS

• The Legislative BranchHouse & Senate Appropriations

CommitteesHouse & Senate Budget

CommitteesHouse Ways & Means

CommitteeSenate Finance CommitteeCongressional Budget Office

The Process

The President is supposed to prepare the budget and present it to Congress by the first Monday in February.

The Office of Management & Budget

• The OMB will also take requests from the different executive agencies and departments.

• The President will give the OMB his guidelines for the budget.

• The OMB uses all of this info to prepare the budget.

Congress• The Budget Committees in the House &

Senate receive the budget & study it.• Each committee makes a

recommendation to their chamber by early May and this recommendation becomes the – Budget Resolution

The Budget Resolution is a goal--NOT binding!! It can change!

• During the summer, each chamber passes 13 appropriations bills.

• Pass a law to authorize the creation of a program, then pass another to appropriate $ to fund the program>

•After the House and Senate agree on the appropriations bills and pass them, the President signs them (and we all faint!:)

•Once Congress passes a budget, each chamber usually has to pass a budget reconciliation resolution

• A budget reconciliation resolution resolves the differences between what the House or Senate meant to spend --budget resolution--and what they actually spent!!

The Fiscal Year

• The fiscal year for the national gov’t is from Oct. 1-Sept. 30. (KY – July 1 to June 30)

• IF Congress & the President can’t get the budget completed on time, Congress can pass a continuing resolution. This will continue to fund the gov’t at last year’s level.

• If Congress doesn’t pass a continuing resolution or the President doesn’t sign it, the national gov’t shuts down until a budget or a continuing resolution can be passed!

• We have not passed a new budget in over 1300 days. The government is being funded based upon 2009 figures.

ENTITLEMENTS

• Benefits provided by government programs to individuals or organizations based on eligibility criteria as defined by law—ex.-social security, Medicare

2009 Budget

THE END