Government Spending

Where does the Government get its money?

How does the Government spend its money?

Mandatory and Discretionary Spending

Mandatory –spending on certain programs that is mandated or required by law.

Ex. Social Security, Medicare

Discretionary – government planners can make choices about how money is spent.

Ex. Defense, Education

Federal & State SpendingFederal (National Issues)-Defense-Energy-Agriculture-Transportation-Education-Health

State-Education-Public Welfare-Hospitals-Health-Corrections-Natural Resources-Highways-Government Employees and Benefits

Federal SpendingThe federal government devotes much of its spending attention to Entitlement program.

Entitlements – social welfare programs that people are entitled to if they meet certain eligibility requirements.

Social Security Medicare Medicaid

Social SecuritySocial Security is one of the largest categories of mandatory federal spending.

Over 50 Million people receive monthly payments from Social Security.-Retired-Disabled-Families of those who already receive benefits

Medicare

Serves about 42 million people, most over the age of 65

Pays for hospital care and for the cost of physicians and medical services.

Pays the health care bills for people that suffer from certain disabilities and diseases.Ex. Schizophrenia, Mental Retardation

Medicaid

Medicaid provides medical benefits for low-income families and the elderly in nursing homes

It is the largest source of of funds for medical and health related services for some of the poorest Americans

The federal government shares the cost of Medicaid with the states

Other Mandatory Spending

Food Stamps

Retirement benefits for Federal workers

Veteran’s Pensions

Unemployment Insurance

Etc.

Federal Deficits and Surpluses Deficit – when the the outlays (money paid out by the federal government) exceeds revenues (the money received by government through taxes) a deficit is created.

Current US Deficit – $10,635,772,096,222.74

Current US Population – 305,577,611

Translation - $34,805 per person

Surplus – when revenues exceed outlays

The last federal surplus occurred during the Clinton Administration.

State BudgetsStates operate under two kinds of budgetary guidelines

Operating Budget – pays for day-to-day expensesEx. Salaries of state employees, maintenance of state assets (Parks, Roads, Bridges)

Capital Budget –pays for major capital or investment projectsEx. New Bridges and Highways, New State Buildings

Most capital investment project expenses are met by long-term borrowing or the sale of bonds.

Balanced Budget – revenues are equal to spending (required by law in many states)

States can also borrow money from the federal government if needed

Pork Barrel Spending and Earmarks

Pork Barrel Spending – government spending that benefits the constituents of a politician in a certain area (State, County)

Ex. New Hospitals, Parks, Recreation Areas

Earmarks – government spending measures inserted by members of Congress into bills to direct taxpayer dollars to fund “pet projects” (Projects that benefit a certain number of people in a given location)

Examples of Pork Barrel Spending

The Absurd

-$375,000,000 for an unrequested and unneeded amphibious assault vehicle in the state of Mississippi.

-$1.2 Million to study the breeding habits of woodchucks

-$219,000 to teach college students how to watch TV

-$1 Million to study why people do not ride bikes to work

Examples of Pork Barrel Spending

Private Concerns

-$3.1 Millions to convert a ferry boat into a crab restaurant in Baltimore

-$33 Million to pump sand onto the private beaches of Miami hotels

-$13 Million to repair a privately owned damn in South Carolina

-$3 Million to repair private garages in Chicago

Examples of Pork Barrel Spending

For Congress Itself

-$6 Million to upgrade to two-block long Senate subway

-$350,000 to renovate the House beautiful salon

-$150,000 for therapeutic horseback riding

-Congress approved a total of $110 Billion of pork barrel spending for the 2007/2008 fiscal year