Financing GovernmentUncle Sam takes all your money and what does he do with it?

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How does the budget get written!?

1. President/OBM/Executive Depts draft Budget 2. Send proposal to Congress3. Congress reviews, edits, passes/doesn’t pass

…sooo what if Congress doesn’t pass it?

Where does the government get money?

TAXES (Article 1 Section 8) Income—Personal and Corporate Social Insurance (Social Security

or Payroll Taxes) Excise—tax on manufacture, sale

or consumption of goods and/or performance of services

Estate and Gift Custom Duties (Import taxes)

What is the breakdown of tax revenue (this is how gov gets $$$ to run!)?

2014 Federal Tax Rates

Tax Brackets10% - 35% (USA)Higher is most

other developed countries

Besides taxes, where do we get money?

Borrowing—Congress has power to borrow money (Art. 1, Sect. 8)

(Kinda like them having student loans…)

Public Debt http://www.brillig.com/debt_clock/ All money borrowed plus accrued interest

How does the gov’t borrow? Issue T-bills (Treasury notes/bills) for short-

term borrowing Issue Bonds for long-term borrowing Investors (individuals, banks, foreign

countries, etc.) buy the bonds

Government Spending

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How do we spend the money?

What do you think we spend the most money on?

If you had to balance the budget, what would you spend money on?

http://www.econedlink.org/lessons/em306/flash/popupActivity.html

http://deathandtaxesposter.com/

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What are deficits and surpluses? Deficit: When we spend more than we take in

Surplus: When we take in more than we spend

How do we get a deficit? The bulk of the deterioration in the budget

since the start of 2001 - some 75 percent of it - has come from policy changes (i.e. tax cuts and spending increases), rather than from economic and technical factors outside policymakers’ control.

How can we balance the budget?

What are you willing to sacrifice?