Brief Response

• Why is government spending so important to a thriving economy? (3)

• Government spending…. • creates contracts for companies that can hire/keep

employees• develops/maintains infrastructure that benefits public and

private needs and wants• Researches/disseminates new ideas/techniques that help

business progress• Money to low-income/unemployed/retired/disabled is

used by the recipients in the economy.

CH 10, Section 3, p. 267 Terms:

• Balanced budget amendment• 267 a proposed Constitutional amendment

that requires that annual spending not exceed revenues

• Some states already have such amendments in place.

Intergovernmental expenditures

• 268 funds that one level of government transfers to another for spending

• Largest category of state spending• Distributed to counties, cities, towns

Section 4, p. 272 Terms:

• Deficit spending• 272 government spending in excess of

revenues collected.

Federal debt

• 273 all the outstanding federal bonds, borrowed moneys, payments to investors

• Used to finance government deficit spending

Balanced budget

• 273 annual budget in which expenditures equal revenues.

• A virtual miracle in the United States…..JK

Trust funds• 275 special accounts used to fund specific

types of expenditures.– Social Security Insurance (SSI)– Medicare

• Principle funds are increased using payroll tax• Invested in various schemes and earn interest• Distributed, mostly from the interest, – Not supposed to touch the principle funds

Crowding-out effect

• 277 Excessive government borrowing pushes up all interest rates, even private.

• Above normal market interest rates.

Pay-as-you-go provision

• 277 a requirement that new spending proposals or tax cuts must be offset by reductions elsewhere in the budget.– Budget Enforcement Act (BEA), 1990.

• Helps prevent deficit spending• Weaknesses include:– Only applies to discretionary spending– Can be suspended

• in a low-performing economy• if the president declares an emergency.

Line-item veto

• 277 President could select parts of a bill and veto them, but still pass the rest of the bill.

• Supreme Court declared it unconstitutional.

Spending caps

• 278 legal limits on annual discretionary spending

• Balanced Budget Agreement, 1997• Some item limits were unpopular:– Education– Health– Science

Entitlements

• 278 broad social programs• Established eligibility requirements make

payments mandatory…..– Health– Nutrition– Income supplementation

Some Graphic Organizers

• 2011 in graphs…..• Some make not sense at all…. • Others are a bit scary…. Ie: hrs of work/mo

to maintain rent.• worksheet

Reading Graphs• Graph 1 • around what year did outlays and revenues match (balanced

budget)? • Answer together: 1957, 1959, 1967, 2000• what year had the biggest deficit? • 2011• what year had the biggest surplus? • 2004

• Graph 2• Which is most expensive programs of the US government?• health care

Reading Graphs

• Graph 3• in which Congress did Republicans and Democrats work

together (bipartisan) best? Explain.• 90th Congress (1967-68), • both parties lines extend broader into one another than the

other two Congresses.

• Graph 6• Which year saw more job openings and more labor

turnover?• 2007

Reading Graphs

• Graph 8• Have countries in the world become more

economically sound from 1826 to 2011? Explain

• yes. defaults are fewer and inflation is lower.• What problematic trend is increasing by 2011?• public debt in many countries is up to over

80%.

Reading Graphs• Graph 9• According to the graph, around how many million loans should probably

never have been given by lenders since the borrowers were bad credit risks and it led to so many delinquencies?

• around 10 million (high of 35 mill. - low of 25 mill.)• EC: What is the reason so many people (who also had GOOD credit)

found their household loans go delinquent, during that period, 2007 to 2011?

• The financial failure that caused a severe recession, forcing many public and private employers to let workers go (unemployment) and/or reduce pay for millions more. Lending institutions made it very difficult to get loans (afraid of taking risks) even after government money was given to them to fill in the losses and resume the availability of affordable credit.

Reading Graphs• Graph 14• from what you know about bonds, which country is the most

desperate to sell bonds (raise revenue)? • Greece• What does that indicate to you about the economic situation in that

country? • the country probably has too high a public debt and must borrow more

to operate.

• Graph 16• According to the graph, what is the biggest reason for the American

economy "stagnating" since 1977?• less expenditure on innovation and new ideas.

Hwk Assessments, Class Work, to Know

Assessments: Checking for UnderstandingCH 10, S3

• 1• Education• Hospitals• Public welfare• Interest on debts• Highways

CH 10, S3 Assessment

• 3• There are many different methods, but in

most states the process is loosely modeled after the federal government’s system.

CH 10, S3 Assessment

• 4• Intergovernmental expenditures• Public welfare• Insurance trust• Higher education• Highways• Hospitals• Interest on debt

CH 10, S3 Assessment

• 5• Elementary and secondary spending• Public utilities• Police protection• Hospitals• Interest on debt• Public welfare• Highways

Assessments: Checking for Understanding CH 10, S4

• 1• Federal deficit:– The government’s expenditures exceed its

revenues in a given year• Federal deficit adds to the federal debt.

CH 10, S4 Assessment

• 3• When the federal government runs a deficit, it

must borrow to cover the shortage of revenue, adding to the total federal debt.

CH 10, S4 Assessment

• 4• May reduce purchasing power of economy • affect the distribution of income, • transfer purchasing power from private to

public sector, • reduce the incentive to work, save, and invest, • cause a rise in interest rates.

CH 10, S4 Assessment

• 5• Balanced Budget and Emergency Deficit

Control Act of 1985 (Gramm-Rudman-Hollings)

• Budget Enforcement Act, 1990• Omnibus Budget Reconciliation Act of 1993• Balanced Budget Agreement, 1997

CH 10, S4 Assessment

• 6• Social Security• Medicaid• Medicare• Agricultural price supports• Federal employee retirement and health benefits• Unemployment compensation• Aid to the poor

• Question• Elementary and secondary education• Utilities• Police protection• Intergovernmental expenditures• Public welfare• Higher education

Image, p. 269

• Question• State

Image, p. 270

Image, p. 273

• Question• Tax reductions and a recession in 2001

• Question• It has increased• + Why do you think it increased? (consider:

GOP Congress had legislated a balanced budget requirement in the late 1990s and it should NOT have increased)

• Wars in Afghanistan and Iraq• Tax cuts to the richest sector (individuals and

corporations over $200,000/year income)

Image, p. 274

• Question• They tend to disregard the portion of the debt

held in trust funds– Because the funds represent money the

government owes to itself• Economists focus instead on the public portion

of the debt.

Image, p. 275

Who uses this public funding?

• According to FOX News:– It is abused by welfare “parasites”– And deservedly used by corporate “job creators”

• Worksheet:• Jon Stewart responds. The original Stewart

response.

Who uses this public funding?• What was FOX News' original complaint about people using their

EBT (food stamp) card?• the poor are gaming the welfare system and eating foods they do

not deserve.• Jon Stewart replied on his show how the use of the EBT card is the

business of the recipient so long as it's within the law. His observation upset FOX mouthpiece, Eric Bolling.

• According to Bolling, FOX is pointing out what? • waste, fraud, and abuse_• Stewart counters that that is bad, but FOX' coverage exaggerates.

He shows a FOX graphic that portrays EBT users as what? • selfish, thieving beggar’s hand crashing through the middle of the

US, abusing the welfare of America_

Who uses this public funding?• What other labels/images/"facts" does FOX use to make their

point? (5)• food stamp abusers • poor living the good life• culture of dependency• teaching our kids to be takers, not makers• Moochers • parasites, • sucking off the nipple of the government, • freeloading, • draining the society, • 99% have refrigerators!

Who uses this public funding?• What sample population does FOX use to make their point? • One White guy. (1 “surfer dude”)• What do they claim about this example? • uses EBT card to buy lobsters /he's a parasite, he's a rat/"he represents millions of

Americans"• Stewart continues by pointing out how FOX claimed ordinary people's abuse/fraud of EBT

wasted • $_3 billion +_• in 2013-14, and FOX calls that criminal, but when profitable oil companies are allowed to

receive • $_4 billion +• in subsidies (also welfare; “corporate welfare”), FOX called that a "pittance"(nothing, not a

problem). Stewart points out the hypocrisy of the FOX position (ordinary people who use welfare are

• _all that is bad_, • but businesses who use it are• all that is good_

Who uses this public funding?

• He then points out that business pay lower to no • taxes_• to the total of some • $150 billion• dollars and more in loopholes while still taking

money from the government. He points out FOX’ attitude about this business practice that basically says,

• _they are doing what is legal and makes them successful_

Who uses this public funding?

• What successful bank processes those EBT card accounts for many state governments?

• JP Morgan-Chase. • (One of the major banks that destroyed the

economy in 2007-8, causing much of the unemployment for the next six years.)

• How has the bank saved money dealing with its business calls (and not hiring American workers)?

• moved the service to India where the workers get $3.50 an hour.

Who uses this public funding?• In your mind and using the facts you've seen, should the programs currently

supporting millions of Americans who need relief be ended, reduced, continued as is? Explain

• ended: the system is just abused.• reduced: lower benefits or get stricter on who can use it.• continued as is: there is no real evidence that most recipients are abusing

the system.• In your mind and using the facts you've seen, should the tax cuts, loopholes,

and subsidies businesses receive be ended, reduced, continued as is? Explain.• Ended: Corporations make billions and are not in need of any welfare money.• Reduced: corporations should pay their fair share of the tax burden but still

have some opportunities to save.• Continued as is: corporations are entitled to earn government money

because they are people in need, too.

• Question• May reduce purchasing power of economy• Affect the distribution of income• Transfer purchasing power from private to

public sector• Cut down incentive to work, save, and invest• Cause rise in interest rates

Image, p. 276

Brief Response

• Should the US government strive for a perfectly balanced national account? (ie: no national debt? (answer both ways (4))

• Yes:

• No: