THE FEDERAL BUDGET:
I
s a plan for how the government spends taxpayers’
money
T
he plan is proposed by the President and approved
by Congress
HOW BIG IS THE FEDERAL BUDGET?
$
3.5 trillion/year
$
291 billion/month
$
9.7 billion/day
$
405 million/hour
$
6.8 million/minute
$
112,500/second
Estate & Gift Taxes.9%Miscellaneous
6.1%Corporate Taxes
7.7%
Payroll Taxes40.3%
Income Taxes45.0%
Income Taxes
Payroll Taxes
Corporate Taxes
Miscellaneous
Estate and Gift Taxes
SO WHERE DOES ALL THAT MONEY COME FROM?
AND THEY CREATE DEBT
40 cents of every dollar spent is created by debt
The federal government has to raise the “debt
ceiling” in order to borrow money to for items
already approved by Congress
The “debt ceiling” is the amount of money the
federal government can have as debt – currently
that is $16.7 trillion
IF THE DEBT CEILING IS NOT RAISED:
T
he government cannot pay its bills• Social Security checks, Medicare, Medicaid, etc.
B
ond holders do not get paid • This is us! And China
B
anks could become insolvent
D
ollar could lose value
I
nterest rates could rise
S
tock market could fall
WHAT IS THE NATIONAL DEBT?
A
mount owed by the federal government to all sources as a result of borrowing
A
pproximately $16.9 trillion• 4 inch stack of $1,000 bills = millionaire• 1 trillion = stack would be 67 miles high!
E
verybody has a share• $53,000 per person• $148,000 per taxpayer
SO HOW MUCH DO THEY SPEND?
2
010• The government will spend 3.5 trillion• The government will take in 2.3 trillion• What is the difference?• The difference between how much Congress spends and
how much they take in (in one year) is called the deficit.• The government will add 1.2 trillion in deficit spending to
the national debt
DEFICITS AND SURPLUSES 1995-2009
Chart 4: The Federal Deficit
($164)($107)
($22)
$69$126
$236
$128
($158)
($378) ($412)
($319)($248)
($163)
($459)
($1,400)
($1,600)
($1,400)
($1,200)
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Do
lla
r A
mo
un
t in
Bil
lio
ns
NO REALLY, HOW DO THEY SPEND ALL THAT MONEY?
Mandatory (uncontrollable) spending is required by LAW:
Examples: • Interest payments on the national debt• Entitlements (Social Security and Medicare)• About 60% of the overall budget
Discretionary (controllable) spending is decided upon yearly by
Congress and the President
Examples: • Defense (20%)• Everything else: Education, NASA, Foreign Aid, Science,
Research, etc. (19-20%)
SO HOW MUCH GOES WHERE?
Medicare & Medicaid 20.7%
Social Security19.4%
Discretionary: Non-Defense
19.1%
Other Mandatory16.8%
Net Interest on Debt3.8%
Disaster Costs.3%
Discretionary: Defense19.7%
TARP.2%
Discretionary: Defense
Discretionary: Non-Defense
Social Security
Medicare & Medicaid
TARP
Other Mandatory
Net Interest on Debt
Disaster Costs
IS THE BUDGET MISMANAGED?
6
0 Minutes Disability Spending
O
n the back of your paper, answer this question:• What more could be done to ensure there is less
fraud in government spending?
THE BOTTOM LINE: The president proposes a budget for discretionary spending
only (39-40% of the total budget) every year.
Congress must pass the proposal and the President must sign
it for the budget to go into effect
60% of the budget is authorized by permanent laws, and not
affected by the President or Congress!
WHAT IS THE “SEQUESTER”?
$
85 billion in mandated spending cuts
O
nly for discretionary spending (40% of the budget)
2
.4% of total spending
6
% of total discretionary spending
SO WHAT DOES THIS MEAN?
A
s my cabinet, you must make the best use of your budget• A portion of the red slice (19%) is yours• Unless you are the Department of Defense
Y
ou are responsible to the American people for your agency's
fiscal management
Y
ou must prepare a proposal outlining your most pressing
needs