Economics by Hannah Castro https://padlet.com/castro_hannah_18/augcpbxt8lo en-us 2017-06-22 19:14:29 UTC 2017-06-22 20:08:13 UTC hello@padlet.com https://padlet-assets.s3.amazonaws.com/icons/Growing.png 12-1: The Federal Budget Process castro_hannah_18 https://padlet.com/castro_hannah_18/augcpbxt8lo/wish/177236700
  • The federal budget is a plan of outlays and revenues for a specified period.
    • The share of outlays going to national defense dropped from over half in 1960 to only 15% in 2016.
    • Social Security's share has grown every decade.
    • Medicare was introduced in 1965 and has also grown sharply. 
    • Social Security and Medicare combined for 38% of federal outlays in 2016.
    • In 2016, welfare spending accounted for almost 14% of federal outlays.
    • Interest payments on the federal debt were a little over 7% of federal outlays in 2016.
  • Since the 1960s, the federal government has shifted its focus from national defense to income redistribution.
  • U.S.  federal outlays in 216 totaled about $4 trillion, or about $12,200 per capita. 
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  • Reforms are meant to improve budget process
  • Biennial Budget: an annual budget that could become a two-year budget
  • Two-year policies preferred by Congress because they would not be continually involved with budget deliberations and cabinet members could focus more on running their agencies
  • Drawbacks of a two-year budget include requiring longer-term economic forecasts and would be less useful than one-year budget as a tool of discretionary fiscal policy
  • Another possible reform would be to simplify the budget document by concentrating only on major groupings and eliminating line items
  • Drawbacks include agency heads having different priorities than those of elected representatives
    • ]]>     2017-06-22 19:25:31 UTC https://padlet.com/castro_hannah_18/augcpbxt8lo/wish/177236709     12-1b: Problems with the Federal Budget arami40 https://padlet.com/castro_hannah_18/augcpbxt8lo/wish/177236773
  • Continuing Resolutions Instead of Budget Decisions
    • -Budgets typically run from year to year based on continuing resolution which are agreements to allow agencies to spend at the rate of the previous years budget.
    • Lengthy Budget Process
    -The budget is used as a tool of discretionary fiscal policy, but the process takes long and relies on continuing resolutions.
    - ex: average recession since WWII has lasted only eleven months, yet budget preparation begins more than a year and a half before the budget takes effect.
    -By the times congress and the president agree on a fiscal remedy, the economy has usually recovered on its own.
    • Uncontrollable Spending Categories 
    -Congress has limited control over much of the budget, so most federal outlays are determined by existing laws.
    -ex: Once Congress establishes eligibility criteria, entitlement programs, such as social security, medicare, and medicaid take on lives of their own, they reflect the amount required to support the expected number of entitled beneficiaries.
    -Health care reforms introduced another major entitlement programs, the cost of which has not been fully calculated.
    -Congress has no say in such appropriations unless it chooses to change benefits or eligibility criteria.
    • Overly Detailed Budget 
    -Federal budget is divided into thousands of accounts and sub-accounts.
    -Budget is a way of making political payoffs, such as micromanagement allows elected officials to reward friends and punish enemies. 
    -When economic conditions change or when the demand for certain public goods shifts, the federal government, can not reallocate funds.
    -Detailed budgeting is not only time consuming, but it also reduces the flexibility of discretionary fiscal policy and is subject to political abuse.


    ]]>     2017-06-22 19:26:13 UTC https://padlet.com/castro_hannah_18/augcpbxt8lo/wish/177236773     12-1a: Presidential and Congressional Roles castro_hannah_18 https://padlet.com/castro_hannah_18/augcpbxt8lo/wish/177237883
  • The Budget Cycle: 
    • In late January or early February, the president submits to Congress The Budget of the U.S. government, a pile of books detailing spending and revenue proposals for the upcoming fiscal year.
    • About the same time, the president's Council of Economic Advisers sends congress the Economic Report of the President, which offers the president's take on the economy.
    • Budget Resolution: Budget committees in the House and the Senate rework the president's budget until they agree on total outlays, spending by major category, and expected revenues.
  • The size and composition of the budget and the difference between outlays and revenues measure the budget's fiscal impact on the economy. 
  • Deficit: when outlays exceed revenues
    • A deficit stimulates aggregate demand in the short run but increases the federal debt and reduces national saving, which in the long run could impede economic growth. 
  • Surplus: when revenues exceed outlays
    • A surplus dampens aggregate demand in the short run but reduces the federal debt and boost domestic saving, which in the long run could promote economic growth. 
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