1 / 17

Chapter 9

Chapter 9. Federal Spending. Chapter Outline. A Primer on the Constitution and Spending Money Using our Understanding of Opportunity Cost Using our Understanding of Marginal Analysis Budgeting for the Future. Federal Spending as a Percentage of GDP. A Primer on the Constitution.

orde
Download Presentation

Chapter 9

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 9 Federal Spending

  2. Chapter Outline • A Primer on the Constitution and Spending Money • Using our Understanding of Opportunity Cost • Using our Understanding of Marginal Analysis • Budgeting for the Future

  3. Federal Spending as a Percentage of GDP

  4. A Primer on the Constitution • “No money shall be drawn from the treasury, but in consequence of appropriations made by law;..” • Both houses of Congress must pass identical bills • President must sign or have veto overridden

  5. The Budget Process • 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

  6. Shenanigans in the Process • Pork-Barrel spending guided by important committee chairs. • Conference committees meet to settle differences between House and Senate versions of the appropriations bills. • Members of conference committees often add provisions that were not in either bill to help their constituents.

  7. Dealing with Disagreements • When dealing with a disagreement • Congress can give in to the president • The president can give in to the Congress • They can stalemate and shut the government down • They can pass a Continuing Resolution • Continuing Resolution: a bill passed by Congress and signed by the president that allows the government to temporarily spend money in a fashion identical to the previous year

  8. Using Opportunity Cost • Crowding Out: the opportunity cost of government spending is that private spending is reduced • Money spent on one government program can not be spent on another

  9. 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.

  10. Spending in FY2000

  11. Mandatory vs. Discretionary

  12. Non Defense Discretionary

  13. Federal Spending by Category

  14. Real Health Spending

  15. International Comparisons of Defense Spending

  16. 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 benefit. • 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.

  17. Budgeting For the Future • Baseline Budgeting: using last year’s budgeted figure to set this year’s budgeted figure • Current Services Budgeting: using an estimate of the costs of providing the same level of services next year as last

More Related