Taxing and Spending

1. Chapter 20 Taxing and Spending

2. Background • Authority for the budget process rests with Congress. • I-7-1, I-8-1, I-8-2, I-9-7, 16th Amendment

3. Budget and Impoundment Control Act of 1974 • Requires President to spend the funds Congress appropriates instead of withholding funds • Forces Congress to examine total national taxing and spending at least twice in each budget cycle

4. The Budget Cycle • Operates on a fiscal year from October 1 – Sept 30 • FY 2011 = October 1, 2010 through September 30, 2011 • FY 2011 estimated budget is 3,833,861,000,000 in outlays (3.8 trillion) [www.gpoaccess.gov]

5. The Budget Cycle • 18 months prior to fiscal year, executive branch prepares budget • OMB receives advice from the CEA bargaining begins • Spring review – all agencies are required to review their programs, activities, and goals then submit requests to OMB • Fall review – OMB works under President’s guidelines and reviews the requests • November – director’s review : director of OMB meets with cabinet secretaries and budget officers • Budget must be completed by January to be included in the Economic Report of the President

6. The Budget Cycle • 9 months prior to the fiscal year • President takes the OMB’s proposed budget, approves it, and submits it to Congress • Congressional budget process takes over • First budget resolution is to be passed in May – it sets overall revenue goals and spending targets  bargaining • Second budget resolution is to be passed in September – it sets “binding” limits on taxes and spending • Authorization and Appropriation • Appropriation occurs only when final bill is passed (meaning the budget = law)

7. The Budget Cycle • Notables: • Between 1978 – 1996 Congress did not pass a complete budget by October 1 leading to continuing resolutions

8. Current Domestic Spending Issues • Health Care • Estimated to account for 17.3% of total US Economy in 2009 • Cost of advanced technology : MRI = $2 million • 45.7 million of US population is uninsured

9. Current Domestic Spending Issues • Health Care (cont’d) • Medicare & Medicaid benefits approx 35-40 million people for each (although some receive both due to age and income) • Medicare is 2nd largest domestic spending program (after Social Security); $325 billion in 2005 • Medicaid is a joint Federal – State program established in 1965; focus upon poor, disabled, and children. Federal government funds 57% of program.

10. Current Domestic Spending Issues • Health Care (Cont’d) • New York State has over 25% enrollment in Medicare/Medicaid programs • 43% of Medicaid spending(2004) goes towards persons with disabilities; the next highest allocation is for nursing home care

11. Current Domestic Spending Issues • Anti Poverty Programs • FY 2010 allocated $686 billion (1/6th of all federal expenditures) to federal programs that support persons of limited income (includes unemployment, housing, disability ins, etc.) • TANF (Temporary Assistance to Needy Families) … 2 yrs of assistance at a time / lifetime limit of 5 years • Food Stamps – FY 2010 $99 billion

12. Current Domestic Spending Issues • Crime • FY 2010 federal law enforcement = $55 billion • Check fraud costs = $10 billion a year • Stocks, bond fraud = $40 billion a year • Insurance fraud = $80 billion a year • US has the highest incarceration rate in the world at 748 per 100,000 people (2009)

13. Budget Summary • For every program that is funded, choices must be made as to who receives and who does not. • Groups that are most influential and persuasive will often be heard over those that are not. • Self Interest vs. The Interest of the Whole

14. Sources • www.gpoaccess.gov • www.federalbudget.com • http://www.washingtonpost.com/wp-srv/politics/interactives/budget101/ • http://americanpublicmedia.publicradio.org/engage08/budgethero/