Federal Budget
The federal budget refers to the government's plan for spending and revenue over a specific period, typically a fiscal year. It outlines how public funds will be allocated to various programs, services, and initiatives, as well as how the government will generate revenue through taxes and other sources. The budget is a critical tool for policymakers to manage the country's finances and address economic priorities.
7 Key excerpts on "Federal Budget"
eBook - ePubCountry Analysis
Understanding Economic and Political Performance
- David M. Currie(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...CHAPTER 5 Evaluating Fiscal Policy Spending and taxing are two of the most important decisions governments make. Together, they constitute the government’s budget, which reflects the government’s priorities about its role in society, the services it performs, and the direction of the economy. The budget has important implications for a country’s economic performance because the government can use the budget to stimulate or restrain an economy. An outside analyst can develop a feel for the wisdom of a country’s decision makers by examining their success in managing the budget. Learning Objectives After reading this chapter, you should be able to: 1. explain the sources of government revenue and purposes of government spending; 2. explain the difference between a budgetary surplus and a budgetary deficit; 3. explain the difference between a budget deficit and the national debt; 4. compare and contrast the concepts of tax base and tax rate; 5. explain the incentive effects of taxes and subsidies; 6. explain the economic justification behind government taxation and spending policies; 7. explain measures of government fiscal risk; 8. use budgetary and debt figures to analyze investment risk. Budget of the United States Government Like businesses and individuals, governments operate with a budget. A budget is an estimate of the receipts and spending over a period of time by an entity such as a government or a business. The budget details how the government will raise funds, primarily through taxes, and how it will spend the funds that it obtains. Unlike businesses and individuals, government budgets are laws, at least in developed countries such as the US. When any level of government – federal, state, or local – taxes its citizens and spends on their behalf, the action requires a series of laws. At the federal level in the US, the laws must be passed by both houses of Congress and signed by the President...
eBook - ePub- Anthony J. Makin(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...C H A P T E R 7 The government budget and fiscal policy Since the 1950s, the relative size of the government sector in advanced and emerging economies has grown significantly. Government expenditure accounts for around 40 per cent of GDP on average in advanced economies and about 30 per cent in emerging economies. Government tax revenue routinely falls short of government spending, giving rise to persistent budget deficits that tend to be larger in advanced than emerging economies. In turn, budget deficits increase public debt, with important implications for the wider economy. The public accounts therefore play a major role in the economy, which we now bring to the forefront. Fiscal policy is the use of government spending and taxation to influence economic activity. In theory, the stance of fiscal policy can be contractionary (decreasing economic activity), expansionary (increasing economic activity) or neutral (no net effect). Theories of the fiscal transmission mechanism link changes in government spending and taxation to the key macroeconomic variables – saving, investment, interest rates, exchange rates, exports, imports, national output, employment and the price level. This chapter introduces the basic elements of fiscal policy and explains its effects in open economies. The government budget and the fiscal stance A government’s annual budget details its expenditure and revenue raising plans for the forthcoming fiscal year. Budgets also usually include official forecasts of the important macroeconomic variables, such as GDP growth, inflation, unemployment and the current account balance. Budgets are keenly anticipated by economists and media commentators as they reveal the government’s proposed fiscal stance and policy priorities. The fiscal number that attracts most attention is the overall budget balance. The budget balance is simply defined as the difference between total revenue and outlays and is either in deficit or surplus...
eBook - ePubComparative Public Budgeting
Global Perspectives on Taxing and Spending
- George M. Guess, Lance T. LeLoup(Authors)
- 2010(Publication Date)
- SUNY Press(Publisher)
...system. Fragmentation and the division of control between national and subnational governments can make governing harder in some cases. Conversely, federalism can be a source of innovation in budgetary practices. The United States differs in other important ways as well. It is at the low end of levels of taxation and share of GDP allocated to government, but spends proportionately more on national defense than the vast majority of nations. Its tax structure relies more on payroll and income taxes than on consumption taxes that dominate so many national tax systems. It has a larger private sector component in health care than most other nations. The United States has also shown volatility in fiscal balances, moving from a position of large and projected surpluses in 2000, to significantly high and persistent deficits in a matter of a few short years. We begin by looking at the economic and political context for budgeting in the United States. POLITICAL CULTURE AND THE ECONOMIC CONTEXT FOR BUDGETING IN THE UNITED STATES The United States still maintains the largest economy in the world, with a GDP in 2008 of $14.5 trillion (CBO 2007). It is among the top six countries in the world in per capita GDP (Economist 2006). Throughout its history, however, the United States has a political tradition of limited government, which extends into the realm of public budgeting. It might be accurate to say that Americans have a love/hate relationship with government. While many depend on government benefits and programs, tax cutting is usually much more popular than social spending, excepting Social Security and Medicare. While Europe was shaped by a rigid class system that defined an individual's opportunities at birth, the United States had a more fluid class structure. The European notion of “noblesse oblige,” that the wealthy had an obligation to take care of the poor, was less present in the United States...
eBook - ePubThe Politics of Bad Ideas
The Great Tax Cut Delusion and the Decline of Good Government in America
- Bryan Jones, Walter Williams(Authors)
- 2021(Publication Date)
- Routledge(Publisher)
...This position has been enabled by the muddled economic thinking we analyzed in earlier chapters—both supply-side economics and starve-the-beast theories justify tax cuts without the need to match programs to the resulting revenue flow. We are used to thinking of public budgeting as a dry and essentially boring topic, run by professional accountants and budget specialists with green eyeshades. But budgeting is not left to professionals, because public budgeting is profoundly political. A public budget puts numbers to public priorities, and public priorities are determined through the interplay of political actors. So public budgeting is a profoundly political activity. IF AN ECONOMIST SAYS IT, IS IT ECONOMICS? Because public budgeting is political, economic theories may be of limited utility in the setting of budgetary priorities. That does not mean, however, that we are free to ignore good economic advice in the budgetary process. When former Federal Reserve chairman Alan Greenspan told Congress of his concerns that the budget deficit will hurt the economy, as he has told Congress repeatedly in recent years, he was offering sound economic analysis. Here is what Greenspan said before the Senate Budget Committee in April 2005 (Bold added for emphasis.): Indeed, under existing tax rates and reasonable assumptions about other spending, these projections make clear that the Federal Budget is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years. But most important, deficits as a percentage of GDP in these simulations rise without limit...
eBook - ePub- James O'Connor(Author)
- 2017(Publication Date)
- Routledge(Publisher)
...But it has also been difficult (although less so) to establish national goals for social investment and military spending. (Under the Nixon Administration systems analysis has suffered a decline even in the Defense Department.) The scope for the determination of budgetary priorities by special interests remains fairly wide, albeit not as wide as in the past. Thus, PPBS has had “limited application [because of] the inability of the (Budget) Bureau to significantly overhaul its own or the bureaucracy’s budget traditions.” 28 In sum, even after widespread experimentation with program budgeting, budgetary priorities still are based on a mixture of class and special-interest needs. Overall budgetary planning based totally on monopoly capital’s class needs is not an accomplished fact, but a future goal which will not be realized until administrative power is effectively centralized within the executive branch. 29 There is one important exception to this conclusion— aggregative fiscal policy, or the determination of the total volume of spending and taxation. The Federal Budget is closely connected with general economic movements (revenue, e.g., is determined by ups and downs in the tax base). In turn, general economic conditions are determined in part by the Federal Budget (by changes in the tax rate and level of spending). As federal spending and taxation have grown in absolute and relative terms, the executive (the only branch structurally capable of fiscal planning) has had to take into account the two-way movements between total taxation and spending and total employment, income, and production. This has required even greater executive control over state finances—and a third step toward centralization of budgetary authority. The budget contained the first analysis of expenditures and receipts on a national-income accounting basis. As early as 1947, the CED recommended the adoption of a cash-consolidated budget as a guide to fiscal planning and policy...
eBook - ePubWorking the Federal Budget
A Guide
- George D. Krumbhaar(Author)
- 2017(Publication Date)
- Routledge(Publisher)
...11 The Budget and the Economy Each Affects the Other The budget is sensitive to changes in the economy. Changes in the Federal Budget balance, in turn, can affect the economy. This chapter takes a look at those changes and describes their significance for budget planning, including the use of budget deficits during business downturns. The Economy’s Effect on the Budget In the upswing of a business cycle, demand for goods and services rises, wholesale and retail sales pick up, more people get hired, firms hand out bigger bonuses, and inflationary pressures eventually grow. Because incomes are going up, individuals and firms pay more in taxes. Inflation, however, causes interest rates to rise, which can increase the cost of debt service. In the downswing, the opposite happens: business revenue growth slows or can even go negative, more people become unemployed, personal income stagnates, and stress-related illnesses climb. Interest rates can fall almost to zero, as they did during the 2008–9 recession. Falling income means falling tax revenues, and more people in poverty means that the government must spend more on income maintenance programs (e.g., unemployment compensation, food stamps). Thus, each of these events has an effect on government revenues, individual programs and the surplus or deficit position of the budget. Effects on the Revenue Side Because they form the largest share of federal revenues, personal income taxes are the biggest contributor to changes in the budget balance over the course of the business cycle. The following graph (Figure 11.1), from the administration’s FY 2017 budget, charts income tax receipts from 1980 through 2015 (actual). The 1981–2 and 1990–91 recessions show up as modest but distinct stoppages in income tax revenue growth. The 2001 recession came at about the same time as the 2001 tax cuts, which were followed by more cuts in 2003; hence, the revenue downturn is exaggerated and not due entirely to the recession itself...
eBook - ePub- John W. Swain, B.J. Reed(Authors)
- 2014(Publication Date)
- Routledge(Publisher)
...Public managers engage in political situations involving budget and organizational politics, but without becoming overtly partisan political actors. Budgetary Politics Budgetary politics is a particular kind of policy politics. The policy questions that budgetary politics addresses generally deal with amounts of revenues or expenditures. The revenue question tends to be, How much revenue from whom? The expenditure question tends to be, How much expenditure for what? Inevitably, some situations combine the questions: How much revenue from whom, and how much expenditure for what? Revenues do have to come from some places in order to go to some other places as expenditures. The politics arising in relationship to state financial aid to local schools provides a particularly fascinating area for observing the question of how revenues from particular revenue measures are used as state expenditures to provide revenues to schools so that the schools have money to expend without raising the revenue themselves from local revenue payers. The various potential revenue payers tend to be in favor of education funding coming from someone else, and schools currently benefiting from state aid prefer not to give up any of that aid regardless of how strongly their officials feel that other schools need more financial aid. As a result, states operate widely varying systems of financial aid for education. The political activities associated with revenue decisions can be fairly described as policy and partisan politics in which public managers do not participate. The collection of resources from publics for collective activities has been a continual issue in human history. Those seeking resources justify their collection with various arguments, such as pleasing a god or gods, serving the common good, providing specific benefits, or taking because they can...
