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Chapter 9 Federal Spending

Chapter 9 Federal Spending. Federal Spending as a Percentage of GDP. The Budget Process. Both houses of Congress must pass identical bills President must sign or have veto overridden President sends Congress a proposed budget

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Chapter 9 Federal Spending

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  1. Chapter 9Federal Spending

  2. Federal Spending as a Percentage of GDP

  3. The Budget Process • Both houses of Congress must pass identical bills • President must sign or have veto overridden • President sends Congress a proposed budget • Congress passes its version of the budget (the president does not have to sign or veto) • Congress passes Appropriations Bills • President signs or vetoes Appropriations Bills • Tax Law changes must originate in the House of Representatives

  4. Mandatory vs. Discretionary Spending • Mandatory Spending: those items for which a previously passed law requires the money be spent • Examples (Medicare, Medicaid, Social Security, variety of welfare programs, interest on the debt) • Discretionary Spending is on those items for which a previous law does not exist.

  5. Spending in FY2009

  6. International Comparisons of Defense Spending

  7. Non Defense Discretionary

  8. Real Health Spending

  9. Using Marginal Analysis • The question of the size of government • The optimal size of government is where the marginal benefit of the last dollar taken from the private sector and placed in the public sector equals its marginal cost. • The question of the distribution of government • The optimal distribution of government spending is where the marginal benefit of spending on one program equals the marginal benefit achieved in all other programs.

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