THE FEDERAL BUDGET

How much power does the

President have over the federal

budget?

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

WHAT WILL HAPPEN IF CONGRESS DOES NOT

RAISE THE DEBT CEILING?

DEBT CEILING VIDEOS

I

nvestopedia

T

he Debt Ceiling Explained

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

DEBT, OVERTIME, AS A % OF GDP

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

D

eficits and Surpluses

$3.5 TRILLION:WHAT DO THEY SPEND IT ON?

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?

HERE’S ANOTHER WAY TO LOOK AT IT:

This graphic is just discretionary 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

h

ttp://www.icivics.org/

YOUR BUDGET ESTIMATE

h

ttp://congress.indiana.edu/learn_about/launcher.htm

THE ACTUAL BUDGET

h

ttp://congress.indiana.edu/learn_about/launcher.htm

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