Exam IV April 19 2011 Chapter 15 The Congress the President the Budget The Politics of Taxing Spending Introduction Budget a policy document allocating burdens taxes and benefits expenditures Deficit an excess of federal expenditures over federal revenues o When expenditures don t meet the revenue o Leads to federal debt Expenditures what the government spends money on Revenues sources of money for the government Income 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 income Social 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 budget Sources of Federal Revenue Taxes 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 reform Federal Expenditures Big Governments Big Budget A big government requires lots of money As the size of government increases so does its budget The 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 Eisenhower The Rise of the Social Service State The biggest part of federal spending is now for income security programs Social Security is largest program o Social Security has been expanded since 1935 to include disability benefits and Medicare o These benefit programs face financial problems with more recipients living longer Another reason for governmental growth Incrementalism 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 rules April 21 2011 The Budgetary Process Budgetary Politics Stakes and Strategies o All political actors have a stake in a budget o Try and tie their budget needs to national or political needs The Players o Lots of players with the president and Congress playing important roles o 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 in The 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 responses Congress and the Budget Reforming the Process o The Congressional Budget and Impoundment Control Act of 1974 an act designed to reform the congressional budgetary process o 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 OMB o Budget has to be considered as a whole o A budget resolution binds Congress to a bottom line for the budget before Congress considers appropriations o The current budget is then reconciled program authorizations are revised to achieve required savings o 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 pass o What is the budget process o What is the appropriations process The back half of the budget process The Success of the 1974 Reforms o Between 1974 and 1998 every budget was a deficit budget o Congress misses most of its own deadlines o Congress passes continuing resolutions to keep the government going until it passes a budget o Omnibus budget bills often contain policies that cannot pass on their own More Reforms o Congress passed bills to try and control the deficits o By 1990 Congress focused on increases in spending o Both parties claimed victory for the budget surpluses that began in 1997 o Economic downturn income tax cuts and increased military expenditures brought a return to deficits by 2001 Understanding Budgeting Democracy and Budgeting Many politicians spend money to buy votes With many groups and people asking for government assistance the budgets get bigger 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 constituents The 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 do Summary Government growth has meant higher taxes to pay for additional services often Federal budget consumes one fifth GDP through deficit spending The budget is use some argue to buy votes leading to an even larger government April 26 2011 Social Welfare Policymaking What is Social Policy and Why is it so Controversial Social welfare policies provide benefits to individuals through Entitlement programs government benefits that certain qualified individuals are
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