The Federal Budget

Big Federal Spending

• Came with the Great Depression• World War II• Then Social Programs of the 60’s• Subsequent Wars

Entitlements

• Assistance benefits for the people who are eligible

• Came as a result of the Depression– Old Age– Survivors– Disability

The 1960’s brought more

• Medicare (covers almost everyone 65 or older, certain people on Social Security disability, and some people with permanent kidney failure) Administered by SSA. Medicare is paid for (in part) through paychecks.

• *Medicaid (covers low-income and financially needy people, including those over 65 who are also on Medicare. Administered by states. Paid for by states.

• Food stamps• Unemployment insurance• Veterans pensions and benefits

All* are administered by the Social Security Administration

Defense Spending has grown

• Because of wars

Answer these questions:

• What caused big spending to start (3 examples)?

• What are examples of entitlement programs

• What social programs began in the 60’s that have led to budget issues today?

• What three areas take up a large chunk of our national budget?

Federal Spending

• Controllable—the income that is decided upon in the budget– Aid to education–military hardware– Civil Service Pay– Etc……

• Discretionary Spending is that which Congress and President makes decisions

Uncontrollable

• Spending that must be done (about 80%)– Interest on public debt

• (define public debt)• Social Security Benefits– How uncontrollable? – How controllable?

If at the end of the day, there is not enough money collected (taxes) to pay the bills, the

President asks for permission to borrow money to cover them.

• He is asking for the “debt ceiling” to be raised. Right now, our debt—the amount we owe above the money we actually have—is over $17 trillion.

• Obama is asking for a stop gap measure—the debt ceiling to be raised to pay the bills…

Until What?

A budget has been passed

The Republican House says ok, but take out “Obamacare” first.

But if you don’t, we’ll have to

shut down the government…

Watch the video to answer these

questions:1. Who controls

the budget?2. What is the

president’s role in the budget process?

3. What is and why raise the debt ceiling? Why would this be important?

After the video, you will be expected to

summarize these answers you have

gathered.

Summarize why having a “debt ceiling” is important; why is being able to raise this ceiling

important and why continuing

to raise the ceiling is a

“dangerous” thing to do…

Debt ceiling hyperlink

The Federal Budget

• Congress controls the purse– How much –What

• The Budget is a HUGE political statement• Just ask the current Congress and

President

The President starts the process

• Each agency asks for money (submits)

• The President (actually the Office of Management and Budget) then reviews the requests

• Each agency may defend it’s requests

• The President then submits the budget to Congress

Congress

• The Independent Congressional Budget Office provides data and analyses to Congress.

• Budget is sent to Appropriations Committees in both the House and Senate– Study, question, testimony from those

asking for money.

• Lobbyists present cases for the special cases.

Lobbyists“Legislative counsels” “public representatives” whatever!

• People who present special interests to legislators for “consideration.”– Good: research and bring all the information a

legislator might need to know. They will get the expert opinions needed to get their interest “passed.” They can represent “the people.”

– Bad: well, bribery—but they don’t call it that. The organizations with the most money can get the most done….

Answer this question in sentence (paragraph) form: Many students equate "lobbying" with "bribery." In your opinion, where's the line between the two? What's a common sense regulation that should be in place?

Lobbyists hyperlink

Lobbying money available to Congress in 2006

• $2.45 Billion• That’s $4.5 million for every

Congressman• The most controversial issues employ

the top lobbyists– Insurance companies– Doctors,– Internet industry– NRA… (what’s this?)

Why would these organizations

pay a great deal to get their point of view across?

The Appropriations Committees present their measures to “the Floor.”

• They come up with a “Concurrent Resolution”– Their take on what should be spent (and how)

• May 15• They return to committee to hammer it out• Secondary Budget Resolution by Sept 15.• This sets spending for the coming year• Fiscal Year begins Oct. 1

It’s a nice story but doesn’t happen that way!!!!

If a budget is not passed

• The government is in danger of shutting down

• Something must be done to continue to run the government

• Decisions must be made what to fund and what not to….

Furlough workersClose down those they cannot pay…

Continuing Resolutions

• Emergency funding to run the government to avoid government shutdown.

• They are passed by the Congress to keep things going.

• The last budget truly passed was in 2009.

• You and I would be in jail…

Let’s Review

Debt ceiling by #

President

Office of Management and Budget

Various Government

Agencies

Senate House of Representatives

Congressional Budget Office

Senate Appropriations

Committee

House Appropriations

Committee

Various Special Interests/Lobbyists

Putting Together

the Federal

Budget!!

Concurrent Resolution

Where are we now…• No budget—we’re running on “stop gap

resolutions”—have been since 2009.• Why? Fundamental philosophical differences:

Too much government v. promote the general welfare… Where’s the line?

• Immediate problem is The Affordable Health Care Act--“Obamacare”—the universal health care system that is opposed by MANY.—It is the law so can’t be changed—so the (Republican) House wants to “defund” it.

• The Conservative Republican House will not pass the continuing “stop gap” resolution unless Obama care is defunded. The Democratic Senate and President says “beepbeep.”—or something like—”not on your life, buddy!!!!” so No continuing resolution—NO money!!!

Don’t copy—summarize!!!!

Oy Vey!!

So what is “Affordable Healthcare Act”

• AKA: Obamacare.• Watch the video. Be

prepared to answer these questions:–What is good about it?–Why would people oppose it?– Do you see it as something

necessary?

Obama care explained

So what’s the problem?

Opponents (Republicans)1.  Increases Health Care Costs2.  Causes Insurance Premiums To Rise3.  Hurts Quality Of Health Care4.  Nearly $570 Billion In Tax Hikes5.  Adds Over $500 Billion To The Debt

Supporters (Democrats)

Arizona hyperlink

So now what?

• Options:

Cbs news what happens…

Who pays for the Government?

Risks associated with the debt

The CBO reported several types of risk factors related to rising debt levels in a July 2010 publication:• A growing portion of savings would go

towards purchases of government debt, rather than investments in productive capital goods such as factories and leading to lower output and incomes than would otherwise occur;

• Rising interest costs would force reductions in important government programs;

• To the extent that additional tax revenues were generated by increasing marginal tax rates, those rates would discourage work and saving, further reducing output and incomes;

• Restrictions to the ability of policymakers to use fiscal policy to respond to economic challenges; and

• An increased risk of a sudden fiscal crisis, in which investors demand higher interest rates.

Risks associated with the debt