The Budget:

The Politics of Taxing

and Spending
AP U.S. Government

2/23 - Taxing
O "I like paying taxes. With them I buy

civilization."
O Justice Oliver Wendell Holmes

Taxing & Spending

Taxing &
Spending

Mandatory &
Discretionary
Spending

Revenue
Sources

Balance (Surplus
& Deficit)

2/23 - Taxing
O Americans are

among the most

lightly taxed in the
western world.
O And the loudest
complainers.
O We come by it
honestly.
O Its in our DNA:
O No taxation

without
representation.

What kinds of taxing?

2/23 - Spending
O Annual Federal Budget:

$4,000,000,000,000 four million million

O Mandatory
O Discretionary
O Sometimes broken into Defense & Non-

Defense subcategories

Total Spending

Mandatory Spending
O AKA Entitlements generally used

negatively
O Federal programs that guarantee a specific
level of benefits to persons who meet
requirements set by law
O Person is entitled to benefits if they meet
the criteria set by the federal government
O Spending on entitlements is mandated by
the Federal law

Mandatory Spending

Entitlements
Positives

Negatives

O Provides needed

O No Congressional

benefits to American
citizens
O Government cannot
delay or avoid
payment in the
budget

discretion on money
allotted
O 2/3 of budget
O Less money for
discretionary
spending

Discretionary Spending
O
O
O
O
O
O
O
O
O
O
O
O

Defense/Military
Agriculture
Science
Transportation
International Affairs
Energy
Environment
Overhead costs for mandatory
spending
Housing
Government overhead
Education
Veterans benefits

O A means of enacting

policy
O A reflection of
political philosophy
O A reflection of beliefs
about the role and
scope of government
O Influenced by
incrementalism

Discretionary Spending

2/23 The Balance (Deficit)

Historic Budget Deficits

Historic Revenue &

Expenses

Spending without Taxing

Defense Spending
1990s
96

97

98

2000s
99

00

01

02

03

04

05

2010s
06

07

08

09

10

11

12

13

Defense
Budget 266 270 271 292 304 335 362 456 491 506 556 625 696 698 721 717 681 610
(Billions)

14

15

614 637

Total
Budget 1.58 1.64 1.69 1.78 1.82 1.96 2.09 2.27 2.41 2.58 2.78 2.86 3.32 4.08 3.48 3.51 3.58 3.48 3.64 3.97
(Trillions)
Defense
16.8 16.5 16.0 16.4 16.7 17.1 17.3 20.1 20.4 19.6 20.0 21.9 20.9 17.1 20.7 20.4 19.1 17.5 16.8 16.0
Budget %
Defense
Spending -0.1 1.6
Change

0.2

7.8

4.0

10.1 8.2

26.0 7.6

3.1

10.0 12.5 11.3 0.2

3.4

-0.6 -5.0 -10.5 0.6

3.8

Spending without Taxing

2010 Revenue & Expenses

Another Measure

GDP: Gross Domestic Product

(I.Am.Not.An.Economist.)

O GDP is

generally
defined as
the
measure of
the USAs
output of
goods and
services.

C + I + G + (X-M) = GDP

GDP: Gross Domestic Product

(I.Am.Not.An.Economist.)

O GDP is

generally
defined as
the
measure of
the USAs
output of
goods and
services.

2/23 The Debt

O So what?
O 6% of federal spending

is on interest on the
debt.
O Last year 9% of my
spending was interest
on loans
O However, Im also

paying down the

principal.

O Americans owe $13.4

billion on mortgages

O 43 percent of all American

families spend more than

they earn each year.
O Median household income is
less than $50,000
O Median household debt in
America is $75,600.
O 34% of households carry
credit card debt from month
to month.
O

The lower the household

income, the higher the credit
card debt

O The average interest rate on a

credit card that is carrying a

balance is now up to 14.89%

We live in a credit culture

O Science fiction novels of the mid-20th

century referred to currency as credits

O Individual/Household credit and debt and
budgeting is different from government .
O Federal government credit and debt and
budgeting is different from state and local
governments.
O The economy only works if money keeps
moving.

Nobody Understands Debt

O Analyze Krugmans idea that government

budgeting and spending is different from

individual/family budgeting and spending.

Homework Reminder
O John Ellwood & Eric Patashnik, In Praise of

Pork. (1993)