APK Activation of Prior Knowledge Write at least

APK: Activation of Prior Knowledge __________________________ Write at least 2 -3 sentences describing a time when… __________________________ You had to make tough financial decisions/choices to make __________________________ sure everything worked out right and you had everything you __________________________ needed. ___________________________________________________ Former President Johnson ___________________________________________________ ___________________________________________________ ___________________________________________________ __________________________ Question of the Day ___________________________________________________ Why does the United States government need to make __________________________ good financial decisions? __________________________

How does the Federal budget process work? • The president sends a budget bill to Congress by the first Monday in February each year. • Both houses then passes a budget resolution [vote] which totals how much the government can spend. • Spending is divided into mandatory [needed] and discretionary [optional]. • Certain members of Congress try to add budget spending items for their states. • Most of these items are considered discretionary [optional] and extra or unnecessary. • These items are called pork or pork barrel because they add fat to the budget. • Since this pork is added to a bill and must be accepted if passed they are also called riders. • Citizens’ groups who keep track of how the federal government spends money are called government watchdogs. • Watchdog groups just like real watchdogs “bark” to alert citizens to wasteful spending and wrongdoing.

Government Finances and budgets • Finance and financial [two] words associated with money. • A plan for spending money. • Government receives and spends money totaling in the trillions of dollars. • Individuals and governments do this. • Revenue is money received (receipts) from taxes. • The better the plan the more you can have. • Expenditures are monies spent with taxes. • Annually the total United States budget is roughly $6, 000, 000.

Deficit versus Surplus • Government budgets that after expenses have money left over have a surplus. • Government budgets that need to borrow to meet expenses are in deficit (in the negative -) • Too much deficit leads to a national debt currently $15, 000, 000 and climbing!

Revenue • To raise revenue the government taxes its citizens. • Principal [main] tax revenue? [A] Personal Income tax • Amount-$4, 000, 000 • People have a portion of earnings deducted [taken out] • • Some people send the money at the end of the year or as they earn money [those are usually people who are selfemployed] This is collected in order pay the largest share of federal expenditures and also to ensure that wealth is kept in check due to progressive taxation (higher wages are taxed at higher rates)

Revenue [B] Payroll taxes • Amount-$1, 000, 000 • What are they? • Taxes taken in order to pay for welfare programs such as Social Security and Medicare • Employers pay this [match what the employee pays]

Revenue [C] Corporate profit (income) tax • Amount-$500, 000, 000 • Money a company or business pays on money earned • Usually huge sums of money • Companies try to get around this by paying high salaries to bosses instead of paying the taxes to the federal government. • This tax is taken in order to fill federal budget gaps (ex. Not enough other tax revenue to pay for government programs).

Revenue • Other/Miscellaneous • Amount-$500, 000, 000 Excise taxes on non-essential items [luxuries] items such as fuel, cable t. v. , telephones, tobacco and alcohol provide extra income to pay for expenses. The federal government also sells bonds which are promises to pay citizens back with interest for money they lend to the government. This is used to pay the cost enforcing regulations for all of the goods and services.

Expenditures [D] Social Security • Amount-$1, 000, 000 • A welfare program created during the Great Depression to fight poverty (especially among retired and handicapped people) • Federal government sends out payments to people a monthly basis.

Expenditures [E] National Defense • Amount$2, 000, 000 • Money spent on defending the country’s border against foreign threats and supplying the military what it needs. • Huge expense but protects the country from dangers.

Expenditures [F] Medicare: A program that provides health insurance coverage for low income and retired people. • Amount-$500, 000, 000 [G] Income security: monthly payments made to retired federal employees such as postal workers and congressmen. • Amount-$800, 000, 000 [H] Interest on debt: Because our expenditures have exceeded revenue the government must borrow and pay interest on loans. • Amount-$800, 000, 000

Expenditures [I] Infrastructure construction/repair: Building and repairing roads, bridges and other public facilities cost many billions of dollars. Amount-$750, 000, 000 [J] Health Care: Programs such as Medicaid provide free medical care for very low income citizens [mostly children and disabled], medical research to cure diseases and obtain information is also expensive. Amount-$800, 000, 000

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