Government Spending

Federal Government

Spending

Word Cloud

What are 2 things the Government spends money on?

Government Spending

Class
Date

The federal budget annual plan outlining proposed revenues and
expenditures for the coming year—must be developed and
approved before the government can spend any money. The
President is responsible for developing the budget, while
Congress is responsible for approving, modifying, or disapproving
it. The flowchart below shows the easiest and fastest route the
federal budget can take from the President through Congress
and back to the President. Study the chart carefully, then use it
and your text to answer the questions about what can happen to
complicate the budget process.

Open Ended

Tracking the Flowchart: Looking at the flowchart, trace the steps involved in deciding how much the government will spend on things like education, healthcare, and infrastructure. At which stage(s) do you think there would be the most debate? Why?

Open Ended

What happens if the House and the Senate can't agree on the budget?

Open Ended

What does the President do at the end if they don't agree with the budget and than what happens next

Mandatory Spending

Something mandatory is something you have to do. You don’t get a
choice. When Congress and the president are deciding how to budget
the nation’s money, there are some things they must spend money on.
This is called mandatory spending – spending that is required by law.
There is no choice about this spending, because lawmakers in the past
have said it must happen. It would take a new law to change it.
Programs that get mandatory spending include things like Social
Security and Medicare for older Americans, and assistance for
low-income families, the disabled, and military veterans.

Draw

Draw 2 things that would fit into the category of Mandatory Spending

Discretionary Spending

Discretionary is the opposite of mandatory. When something is at
your discretion, that means it is your choice. Discretionary
spending is spending that Congress decides on each year. Some of
the things that receive discretionary spending might surprise you:
The entire national defense budget is funded through
discretionary spending. The list also includes things like air traffic
control, nuclear energy, the federal justice system, and national
parks.

Draw

Draw 2 things that would fall into the category of Discretionary Spending

How Should the Office of Management and Budget use Fiscal Policy to

advise the President about the Federal Budget?

Overview: Every fiscal year the President is assigned
the task of presenting a budget for the federal
government to Congress for approval. The Office of
Management and Budget is a key organization to help
the President prepare the budget. In this DBQ you are
asked the question: How Should the Office of
Management and Budget use Fiscal Policy to advise the
President about the Federal Budget?

Open Ended

Directions: No one likes going into debt, but sometimes going into debt can be considered good or beneficial. Look at the following situations below and decide if they are good debt or bad debt and why. Then come up with one example of each on your own.

Buying an expensive automobile:

Taking out student loans to graduate college:

Maxing out your credit card for a fun vacation:

Using your credit card to buy proper work attire for your first career:

Background Essay

The current federal budget law mandates that the President submits to Congress
the budget between the first Monday in January and the first Monday in February.
The budget process is divided into different stages. First the President prepares
the budget with help from the OMB (Office of Management and Budget) they
compile all the estimates for spending, revenue and borrowing levels to help make
the budget. Second the House and various sub-committees review the budget.
The committees report to the entire house and the whole house votes on the
budget. Next the budget goes to the Senate for a similar process as the House.
Finally the budget goes back to the President to sign it for approval.

To create the budget and influence the economy politicians use Fiscal Policy which is
when a government increases or decreases it’s spending and tax rates to monitor and
adjust a country’s economy. The two major examples of expansionary fiscal policy are
tax cuts and increased government spending. They are typically employed during
recessions or amid fears of one. Fiscal policy is one of the two demand management
policies available to policy makers. Government expenditures and the level and type of
taxes are discretionary fiscal policy tools.
The U.S. government is often blamed during times of unemployment, decreasing
GDP, or inflation. Many economists believe that the federal government can (and
should) help to alleviate these problems by traditional, discretionary fiscal policy.
Traditional (demand-side) fiscal policy advocates that in times of recession and
above-normal unemployment, the government should deliberately increase spending
on goods and services and/or reduce taxes to increase aggregate demand

Poll

Is a hotdog a sandwich?

• YES

• NO

In theory, this spending has multiplier effects and stimulates other
spending, resulting in increased production and more jobs. In times of
inflation, traditional fiscal policy calls for reduced government spending
and/or increases in taxes to decrease aggregate demand. Reductions
in demand should then lead to decreased inflation. Traditional fiscal
policy has its critics, for several reasons. Economists do not know with
certainty how large the multiplier effects are or how long it takes for
fiscal policy to work. Therefore, by the time an expansionary fiscal
policy takes effect, the economy may no longer be in a recession and
the policy may actually lead to inflation. Also, events in other countries
can greatly affect the outcome of U.S. fiscal policy measures.

Most economists recognize the possibility of crowding out, which occurs if government
borrowing (for example, to finance expansionary fiscal policy) causes interest rates to rise
and private investment spending to decrease. Some economists emphasize possible
supply-side effects of fiscal policy, particularly with respect to tax cuts. In this scenario,
because people and businesses have more after-tax income to spend as they choose,
business tax cuts would lead to increased production and investment in capital goods. These
outcomes should in turn lead to a direct increase in aggregate supply and to lower
unemployment and lower inflation. Reasoning Whether fiscal policy is effective or not
depends in part on how people respond to incentives. For example, if you are given a tax
cut, will you spend the extra money or save it? If you spend it, it becomes someone else’s
income, and if they spend their income (and their tax cut), this has a stimulative effect on the
economy. However, if everyone saves the tax cuts, which may also be rational, the desired
effect of the fiscal policy may be much smaller or nonexistent. Issues like these make the
effects of fiscal policy difficult to predict.

Open Ended

Questions:

1. The traditional fiscal policy calls for what during what times?

2. What do the critics say about traditional fiscal policy?

3. What determines whether fiscal policy is effective or not?