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Budget, Deficit, Debt

Budget, Deficit, Debt. By PresenterMedia.com. The Budget Process. Some vocab…. The Budget: A plan for how the government spends your money A plan for how the government pays for its activities Something that impacts the national economy Something that is impacted by the national economy

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Budget, Deficit, Debt

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  1. Budget, Deficit, Debt By PresenterMedia.com

  2. The Budget Process Some vocab… • The Budget: • A plan for how the government spends your money • A plan for how the government pays for its activities • Something that impacts the national economy • Something that is impacted by the national economy • Budget Resolution • The annual framework within which Congress makes its decisions about spending and taxes. • Includes: targets for… • Total spending, • Total revenues, • Allocations for discretionary and mandatory spending

  3. The Budget Process More Vocab… • Discretionary Spending: • What the President and Congress must decide to spend for the next fiscal year. • 12 appropriations bills (Acts of Congress that enable Federal Agencies to spend money for specific purposes). • FBI, education, space exploration, highway construction • Mandatory Spending • Authorized by permanent law • Social Security • Can be changed, but if no changes are made it automatically continues at current levels

  4. The Budget Process More vocab… • Balanced Budget • Total revenues = total outlays • Outlay – actual spending in a given year • Budget authority – what the law allows the Federal government to spend for programs or activities. May be spread over several years. • Budget deficit • Total revenues < total outlays • NOT the same thing as Debt • National Debt • The sum of all cumulative budget deficits, minus all cumulative budget surpluses. • Budget Surplus • Total revenues > total outlays

  5. The National Debt How does the Treasury borrow money? • It issues “securities” • Savings bonds • Treasury bills, bonds, notes • Treasury inflation-protected securities (TIPS) • Securities pay the investor interest • Interest = the cost of borrowing money • Subject to a debt limit (more later)

  6. The Budget Process • First Monday in February – President submits proposed Federal budget to Congress (for next fiscal year, which begins October 1) • Congress reviews the President’s budget, then develops and passes the budget resolution. • Congress then passes 12 appropriations bills, plus any “authorizing” bills to change mandatory spending/revenue. • Fiscal year starts October 1.

  7. The Budget Process 2013 • Congress fails to pass a budget resolution! • Senate and House each pass different budget resolutions • As of August – House has passed only 4 appropriations bills, Senate has passed none. • Homework Pass: • Congress can pass a “Continuing Resolution” – allowing Federal spending to continue, temporarily, until a budget is passed. • August/September 2013 – Congress fails to pass a Continuing Resolution. • October 1…….Government Shutdown

  8. Debt Ceiling As if government shutdown isn’t enough • Treasury – issues securities to borrow money to cover annual budget deficits • WWI/WWII – Congress creates a “debt limit” to allow Treasury freedom to issue debt to cover any expenses. • Replaced old system requiring Congress to authorize all debt for specific purposes • Made borrowing money easier. Limit made sure Treasury didn’t go nuts with the national credit card. • Does NOT authorize spending, only borrowing to pay the bills for spending authorized by Congress. • Routinely raised to cover authorized spending

  9. 14th Amendment • Section 4: “…The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. ”

  10. Second Debt Ceiling Crisis This Year! • August 2, 2013: Debt Ceiling for 2013 nearly reached. Congress reaches temporary deal to increase debt ceiling…will run out on October 17, 2013.

  11. What happens if US doesn’t raise debt ceiling? • Treasury doesn’t have enough cash on hand to pay the bills… • Interest rates rise... • Confidence is lost

  12. THE DEAL!!! • Government is funded through January 15 • President given unilateral authority to raise debt to cover spending – through February 7 • Furloughed workers will get back pay • Individuals requesting healthcare subsidies under Obamacare must have their income confirmed.

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