Rajat Goyal 12th Grade

Due: 13 November 2011

Advanced Placement U.S. Government & Politics

Budget
A policy document
allocating burdens
(taxes) and benefits
(expenditures).
The United States
federal budget in 2012
is expected to run a
$1.101 trillion deficit;
since the total
expenditures ($3.729
trillion) are greater than
the total revenues,
which are mainly from
taxes (2.627 trillion).

Deficit
An excess of federal
expenditures over federal
revenues.
The United States federal
deficit in the past year was
caused mainly due to
excessive defense
spending and government
programs.
State governments are
usually not allowed to run
a deficit in their budgets;
however, the federal
government is allowed to
run deficits and it does,
thus, the U.S. debt
constantly increases.

Expenditures
Federal spending of
revenues. Major areas
such as spending are
social services and the
military.
In 2010, the federal
expenditures of Medicare
& Medicaid was $793
Billion, exceeding the $689
billion in defense spending.
Federal expenditure in
defense is often criticized
by tax payers and
republicans, since it is
considered wasteful and
contributes greatly to the
federal deficit.

Revenues

The financial resources of

the federal government.
The individual income tax
and Social Security tax are
two major sources of these.
Continually there is an
ongoing debate between
Republicans and
Democrats on weather the
national government should
raise income taxes (and the
effect it would have on the
economy) to increase
revenue and thus reduce
the national deficit without
making spending cuts.

Income Tax
Shares of individual
wages and corporate
revenues collected by
the government. The
Sixteenth Amendment
explicitly authorized
Congress to levy this.
Currently the U.S.
government collects
35% income tax from
the top income bracket
(which is families or
individuals earning over
$350,000) and there is a
debate whether or not to
raise this to 39.5%.

Sixteenth Amendment

The constitutional
amendment adopted in
1913 that explicitly
permitted Congress to levy
an income tax.
The sixteenth Amendment
does not state how much
income tax the U.S.
government can impose,
but instead says Congress
has the right to collect
taxes without
apportionment.
The Sixteenth Amendment
is necessary since from it
most of the countries
revenue is generated
which will fund the many
aspects of government
that are necessary to run
the country.

Congress

Federal Debt
All the money borrowed by the
federal government over the
years and still outstanding.
Today it is more than $8 trillion
(Correction: over $14 trillion).
The federal government borrows
money when people, investors,
or countries (today it is primarily
China) purchase government
bonds, which have proven to be
good stable investments.
During the two terms (eight
years) President George W.
Bushs was in office, the federal
debt doubled, because of
immense spending and tax cuts.
Because there is a large federal
debt, a part of the yearly federal
expenditures go to paying
interest on this debt (nearly 9%).

Tax Expenditures

Revenue losses that result

from special exemptions,
exclusions, or deductions on
the federal tax law.
Recently, there have been
many tax expenditures since
there have been cuts and
deductions from taxes to help
stimulate the economy.
Often, people and businesses
are motivated to donate to a
non-profit because of the tax
expenditure they receive.
Despite such positive things
tax expenditures bring, they
contributes to a majority of
the deficit ($925 billion in
2009), and as a result
Republicans want to cut them
to help solve the deficit and
debt problem.

Rank

Tax Expenditures

Billions($)

Social Security Act

A 1935 law passed during the
Great Depression that was
intended to provide a minimal
level of sustenance to older
Americans and thus save
them from poverty.
The Social Security Tax rate
has steadily increased from
when it was introduced to
sustain similar benefits for the
elderly Americans who
contributed to the fund even
though there is an
increasingly aging population
of the United States.
All working Americans (who
must pay social security tax)
expect to receive benefits
when they are older; however,
some Americans are
questioning whether or not
they will.

Medicare
A program added to the Social
Security system in 1965 that
provides hospitalization
insurance for the elderly and
permits older Americans to
purchase inexpensive coverage
for doctor fees and other health
expenses.
Medicare is a large contributing
factor to todays deficit and when
a presidential candidate who
talks about cutting it is likely to
loose the election (due to the
many elderly voting members).
The American Association of
Retired Persons (AARP) wants
Medicare benefits to continue for
all, since they believe those who
receive it have earned the
benefits it provides.

Year-Year Budget

Incrementalism

The belief that the best predictor of this

year's budget is the last year's budget,
plus a little bit more.
Incrementalism budget decision making
would makes it easier for Congress to
decide on the following years budget
for each existing government agency,
as they only would have to look at last
years budget and add a small
percentage to determine the agencies
budget for the next year. It would be an
easier but more devastating alternative
to today's complex budgeting process
in which Congress determines how
much to cut or add (typically 5-10%) to
the budget of each agency and whether
to cut the agency entirely (and then
determine how best they could
appropriate the budget by analyzing the
effects of their decision to the
economy).

1990 1991

1996

2012

Uncontrollable Expenditures

Expenditures that are determined

not by a fixed amount of money
appropriated by Congress but by
how many eligible beneficiaries
there are for a program or by
previous obligations of the
government.
Today, about two-thirds of the
federal budget is uncontrollable
expenditures such as Social
Security Benefits, Medicare, and
Medicaid.

Entitlements
Policies for which Congress has
obligated itself to pay X level of
benefits to Y number of recipients
that must be eligible for the
benefits.
Social Security, Medicare, Veteran
Benefits, Unemployment insurance,
Welfare, Student Loans, and Food
stamps are just some of the
government entitlement programs
(that lead to uncontrolled
expenditures) in which Congress is
obligated to pay a certain amount
of benefits for its recipients.

House Ways and Means

Committee
The House of Representatives committee
that, along with the Senate Finance
Committee, writes the tax codes, subject to
the approval of Congress as a whole.
The House Committee on Ways and Means
restricts its members from serving on any
other House Committee unless they apply
for a waiver
The House Committee on Ways and Means
is where all revenue raising policy (including
but not limited to taxation and tariffs)
originate as the U.S. Constitution requires
all bills regarding taxation have to originate
in the House of Representatives and it is an
influential committee on deciding the details
on all matters regarding taxation.

We
Approve!

Senate Finance Committee

The Senate committee that, along

with the House Ways and Means
Committee, writes the tax codes,
subject to the approval of
Congress as a whole.
The Senate Finance Committee,
like the House Ways and Means
Committee is extremely influential
in the tax code writing process
and its approved tax codes
generate almost all of the
revenues for the United States.

Link to diagram of budgetary process

timeline

Congressional Budget and

Impoundment Control Act of 1974We want

An act designed to
reform the
congressional
budgetary process.
Its supporters hoped
that it would also
make Congress less
dependent on the
president's budget
and better able to set
and meet its own
budgetary goals

to Control
Budget!

Less Dependent On

Budg

Congressional Budget Office

Advises Congress on the probable consequences

of its decisions, forecasts revenues, and is a
counterweight to the president's OMB (Office of
Management and Budget).
The Congressional Budget Office plays an
important part in the budgetary process and
Congress takes its input on future forecast it
provides to make informed decisions on taxation
and expenditure limits when establishing a budget.

Budget Resolution
A resolution binding
Congress to a total
expenditure level,
supposedly the bottom
line of all federal
spending for all
programs.
Every year by the month
of April, Congress is
supposed to have the
budget resolution, the
amount of total
expenditures for all
government programs,
and only then do they
appropriate the budget
into sections.

Total
Expenditures
=
$ ????.??
Billion

Budget
Item 3

Budget
Item 1

Budget
Item 2

Reconciliation
A congressional process
though which program
authorizations are
revised to achieve
required savings. It also
usually also includes tax
or other revenue
adjustments.
Reconciliation helps
allow spending totals to
meet the strict budget
resolution laid out by
Congress before
apportionment.

Authorization Bill

An act of Congress that

establishes, continues, or
changes a discretionary
government program or an
entitlement. It specifies
program goals and
maximum expenditures for
discretionary programs.
Talk about an authorization
bill being issued to set the
maximum amount that can
be spent by an entitlement
program by changing
benefits and eligibility
standards often leads to
many American people
who are benefiting from
such programs unhappy.

Government Program

Appropriations Bill
An act of Congress that actually
funds programs within limits
established by authorization bills. It
usually covers one year.
The appropriations bill appropriated
less money than what was
authorized for the construction of
roads and highways, thus the
workers were not able to complete
rebuilding the highway.

Continuing Resolutions

We cannot reach
an agreement and
pass an
Appropriations bill.
Lets resort to a
Continuing
Resolution.

That
was
easy

When Congress cannot reach

agreement and pass appropriations
bills, these resolutions allow
agencies to spend at the level of the
previous year.
The heated debate over the funding
for infrastructure led to Congress
passing a continuing resolution
instead of appropriating a certain
amount of money for that year.
Government Agency Spending

-------------------------------------------------End of Visual Dictionary

Word

Definition:
_________________
_______________
Sentence 1:
_________________
_______________
(Sentence 2): (For
some slides)
_________________
_______________
(Sentence 3): (For
some slides)
_________________
_______________

Picture/Pictures

Budgetary Process Timeline