Spending and the Budget

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• Tuesday, 3/10/15, Day 3
• Essential Skill Explicitly Assess Information
  and Draw Conclusions
• 1- Spending and the Budget
• 2-Homework Notes
• Wed, 3/11 16.1
• Fri, 3/13 16.2
• 3-Economic Policy Test
• Wed, 3/18
•  

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Spending and the Budget
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Entitlements People have a right to
these Benefits that federal law says MUST BE
PAID to all those who meet the eligibility
requirements.
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• Entitlements
• OASDI the Old Age, Survivors and Disability
  Insurance program a.k.a. SOCIAL SECURITY, if you
  are a certain age or below a certain
  income-level.
•  Social Security is the largest entitlement
  program today funded by social insurance taxes
  withheld from paychecks.
• Medicare
• Medicaid
• food stamps
• unemployment insurance
• veterans pensions

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• The Social Security Act of 1935
  
• Enacted by FDR during the Great Depression
• Attempt to limit the dangers in American life
• Old age, poverty, unemployment and the burdens of
  widows and fatherless children.
• A contract between the government and the people.
• Provides a safety net for U.S. citizens.
  
  
  
  
  
  
• FDR the first president to advocate for federal
  assistance for the elderly.

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Largest Categories of Federal Spending The 4
largest items on the federal budget 1-Department
of Health and Human Services Medicare, Medicaid,
childrens entitlement programs, FDA 2-Social
Security Administration 3-Department of
Defense Not including other defense-related
spending Departments of Energy nuclear weapons
development and Homeland Security 4-Interest on
the public debt

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Discretionary Spending Controllable Congress
and the President decide each year just how much
will be spent on many of the things the federal
government does   National parks, highway
projects, aid to education, civil service
pay....   Defense Spending is the LARGEST
CONTROLLABLE item in the federal budget
today.   Called discretionary spending by
economists.   Term used to describe spending on
those budget items about which Congress and the
President can make choices at their
discretion.
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• Mandatory Spending Uncontrollable
• Levels of spending cannot be changed unless
  Congress changes the law that set the funding for
  these programs.
• Interest on the public debt
• Social Security
• Food Stamps
• Other entitlement programs
• Once Congress has set the standards of
  eligibility for those programs, it really has no
  control over just how many people will meet those
  standards...
• Congress can control by changing the
  eligibility standards and/or reduce the amount of
  benefits. But do not/ WHY?
•  

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Think about your household budget

• List 3 things that your parents MUST spend money
  on? Uncontrollable Spending
• List 3 things that your parents MIGHT spend money
  on? Discretionary/Controllable

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Public good vs Private good

• In the old days ships began crashing at night
  because there were not enough lighthouses.
  Shipping companies would not pay for lighthouses
  and the US government did not have enough money
  to pay for lighthouses.
• See Reffonomics example

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Public good

• Also known as a collective good
• You cant withhold it from other people
• Non-excludable
• Lighthouse
• National defense
• Street light
• Police
• Public education
• Roads/Bridges

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Private good

• You can withhold it from other people
• Excludable
• houses
• phones
• cars
• d. pizza
• e. tickets to an event

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The Free Ride Problem

• Goods and services that are accessible and
  beneficial to all
• Things that you could benefit from, whether or
  not you paid!
• This is called the free ride problem
• Hence the need for taxes
• The government provides goods and services to all
  but cant afford to have free riders
• Places a heavier tax burden
• Privatize instead??
• Why keep it in the public sector?

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Question?

• How many of you think the government spends too
  much money?
• How many of you think the government doesnt
  spend enough money?
• How many of you think the government spends just
  about the right amount of money?

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Federal Debt Clock

• Does the US spend too much money?
• How do you know?

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Is taxation necessary?

• What do you think?

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In class activity

• Using your notes
• Complete chart of different types of taxes
• Complete sample pay stub

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Regressive vs Progressive Taxes

• How do we compute?

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Federal Revenue Sources Pie Chart
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Taxes and Other Revenue Homework

• Complete worksheet

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Progressive Taxation Debate

• Answer questions
• Be prepared to debate