Economics Understanding Government Budgets Government Budgets l A

Economics Understanding Government Budgets

Government Budgets l. A government budget is a plan for outlays (expenditures or spending) and revenue (collecting taxes) l All governments - local, state, and federal - are required to revise budgets every fiscal year l Only the federal government is not required to balance its budget annually l The US Constitution does not require a balanced budget

Two Categories of Government Spending l Mandatory – Required by law l Discretionary Congress – Voted on by

What is Mandatory Spending? l Social Security (1 st largest #) 21% l Medicare (3 rd largest) 12% l Interest on National Debt (sixth largest #) 10% l Admin. of Justice 1%

What is Discretionary Funding l Defense/Military (2 nd largest #) 20% l Health–Medicaid (5 th largest) 11% l Education 4% l Agriculture 1% l Welfare and Food Stamps (4 th largest) 14% l Transportation 2% l Science, Energy, and Natural Resource Development 3% l International Affairs and Aid 1%

What is Government Debt? l A deficit in the budget occurs when government expenditures are greater than revenues l l US Deficit for 2009 was over $1 trillion (highest ever) The National Debt is the total accumulated deficits l l $13 Trillion in 2010 http: //www. usdebtclock. org/

Government Surplus §Occurs when government revenues exceed government expenditures § 1997 -2001 were the only surplus in five decades

History of Deficit and Surplus

Creditors l Those people or entities to whom the U. S. government owes money l Owed $8 trillion in Treasury bonds and US notes l l 1/3 American people 1/3 Foreign governments l l China and Japan largest creditors US Government borrows $4 trillion from itself l l l Mostly to Social Security Interest is $450 million a year $1. 5 Trillion due in 2011