Exam IVApril 19, 2011Chapter 15The Congress, the President, & the Budget: The Politics of Taxing & SpendingIntroduction- *Budget: a policy document allocating burdens (taxes) and benefits (expenditures)- *Deficit: an excess of federal expenditures over federal revenueso When expenditures don’t meet the revenueo Leads to federal debt- Expenditures: what the government spends money on- Revenues: sources of money for the governmentIncome tax- Shares of individual wages and corporate revenues- The 16th Amendment permitted Congress to levy an income tax- **Individual taxes are the largest single revenue source for the government- Income tax is progressive: Those with more income pay higher RATES of tax on their incomeSocial Insurance Taxes- Taxes for specific funds: Social Security and Medicare Borrowing- The Treasury Department sells bonds – this is how the government borrows money- **The federal debt is the sum of all borrowed money that is still outstanding- The government compete with other leaders- The government does not have a capital budgetSources of Federal RevenueTaxes and Public Policy- Tax loophole [tax breaks or benefits for a few people]- Tax Expenditures [revenue losses that result from special exemptions, exclusions, or deductions on federal tax law]- Tax Reduction [the general call to lower taxes]- Tax Reform [rewriting the taxes to change the rates and who pays them]o Tax Reform Act of 1986 – extensive tax reformFederal ExpendituresBig Governments, Big Budget- A big government requires lots of money- As the size of government increases, so does its budgetThe Rise and Decline or the National Security State- In the 1950s and 1960s the Department of Defense received more than half the federal budget- Defense now constitutes about one-fifth of all federal expenditures- One reason for growth of government**The U.S. has one of the smallest public sectors; our gov’t is small**“Military, industrial, complex” – EisenhowerThe Rise of the Social Service State- The biggest part of federal spending is now for income security programs- Social Security is largest programo Social Security has been expanded since 1935 to include disability benefits and Medicareo These benefit programs face financial problems with more recipients living longer- Another reason for governmental growthIncrementalism- The idea that last year’s budget is the best predictor of this year’s budget, plus some- Agencies can safely assume they will get at least what they got last year- Focus and debate on the increase over last year- Budgets tend to go up a little each year“Uncontrollable” Expenditures- Spending determined by the number of recipients, not a fixed dollar amount- Mainly entitlement programs where the government pays known benefits to an unknown number of recipients, e.g. Social Security- The only way to control the expenditures is to change the rulesApril 21, 2011The Budgetary ProcessBudgetary Politics- Stakes and Strategieso All political actors have a stake in a budgeto Try and tie their budget needs to national or political needs- The Playerso Lots of players, with the president and Congress playing important roleso Almost all committees are involved in the budget**The Senate Finance Committee & The House Ways and Means Committee: these two committees are extremely important; they write our tax codes- Increasingly important to our budget because it determines how much revenue we bring inThe President’s Budget- Presidents originally played a limited role in the budget- Now budget requests are directed through OMB and president before going to Congress- The budget process is time consuming – starting nearly a year in advance- The OMB, the president, and the agencies negotiates budget responsesCongress and the Budget- Reforming the Processo The Congressional Budget and Impoundment Control Act of 1974: an act designed to reform the congressional budgetary processo It established the following: Fixed budget calendar A budget committee in each House The CBO, which advises Congress on the probably consequences of its decisions, forecasts revenues, and is counterweight to OMBo Budget has to be considered as a wholeo A budget resolution binds Congress to a bottom line for the budget before Congress considers appropriationso The current budget is then reconciled – program authorizations are revised to achieve required savingso The new budget is authorized and appropriated Authorization Bill: establishes a discretionary government program; set goals and maximum expenditures Appropriations Bill: funds programs within limits established by authorization bills**Reconciliation: programs authorizations are revised to achieve the required savings; makes it easier for the budget to actually passo **What is the budget process? o **What is the appropriations process? The back half of the budget process- The Success of the 1974 Reformso Between 1974 and 1998, every budget was a deficit budgeto Congress misses most of its own deadlineso Congress passes continuing resolutions to keep the government going until it passes a budgeto Omnibus budget bills often contain policies that cannot pass on their own- More Reformso Congress passed bills to try and control the deficitso By 1990, Congress focused on increases in spendingo Both parties claimed victory for the budget surpluses that began in 1997o Economic downturn, income tax cuts, and increased military expenditures brought a return to deficits by 2001Understanding BudgetingDemocracy and Budgeting- Many politicians “spend” money to buy votes- With many groups and people asking for government assistance, the budgets getbigger- Some politicians compete by trying not to spend money- People like government programs, but they really do not want to pay for them, this there are deficits and federal debt- Politicians are always going to support spending (military spending) if it means jobs for their constituentsThe Budget and the Scope of Government- In sum, the budget represents the scope of government- The bigger the government, the bigger the budget- Limits on funding (taxes) can limit what the government can doSummary- Federal budget consumes one-fifth GDP- Government growth has meant higher taxes to pay for additional services, often through deficit spending- The budget is use, some argue, to buy votes, leading to an even larger governmentApril 26, 2011Social Welfare PolicymakingWhat is Social Policy and Why is it so
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