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Chapter 10 Government Spending

Chapter 10 Government Spending. By Mr. Pillsbury. The Economics of Government Spending Section 1. AS: How much money does the government give out in welfare/veterans pensions? (base it on a $50,000 salary with a 30% tax bracket).

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Chapter 10 Government Spending

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  1. Chapter 10 Government Spending By Mr. Pillsbury

  2. The Economics of Government Spending Section 1 • AS: How much money does the government give out in welfare/veterans pensions? (base it on a $50,000 salary with a 30% tax bracket) Answer: Well that depends on how you file. The answer is actually 1%.

  3. 2 KINDS of SPENDING 1. Goods or services: Tanks, Offices, Land, Paper Clips, Soap, Gas. 2. Transfer payment: Support incomes of disadvantaged Americans. IE: Social Security, welfare, unemployment, compensation.

  4. Impact of Government Spending: • 1. Affecting resource allocation: If you choose to spend your money on missiles that will affect welfare. • IE: Our decision to support the prices of milk, and grains keeps the prices stable and farmers working. • 2. Redistribution Income: Government spending directly affects families. • IE:If the government buys something from one factory and not another peoples lives are impacted. Think about the El Toro airbase closure, did that impact people? • 3. Competing with the Private sector: Sometimes the government indirectly competes with the private sector. • IE: Hospitals that are veteran hospitals compete with private sector hospitals.

  5. Federal Government ExpendituresSection 2 • Government year begins Sep 30-Oct 1 • Budget done by Jan 3 • Congress has power to modify or disapprove • It goes to the house first • House assigns appropriations bills, sets fed. $ aside for a specific purpose • After House/ Senate approves or disapproves the bill President signs and we are all done!

  6. State and Local Government ExpendituresSection 3 turn to pg. 263

  7. What are the categories: • National Defense • Social Security • Income Security • Medicare • Health • Education • Veterans Benefits • Transportation • Natural Resources • Agriculture

  8. Deficits, Surpluses and the National DebtSection 4 • It has grown: • 1900 (1.3 billion) • 1929 16.9 billion • 1940 50.7 billion • 1980 908.5 billion • 2001 5.7 trillion • 2009 6 trillion • Go here

  9. Impact of Deficit SpendingPublic vs. Private • Public : Debt we owe ourselves.(federal debt) • Private: Is money we owe others. • Public: No plans to pay back • Private: When they borrow money they usually makes plans to pay back • Public: No loss of purchasing power because more taxes will be collected. • Private: Loss of purchasing power

  10. Here is the Problem . . . • 1. The federal debt can have a significant impact on the distribution of income within the economy. If the government borrows money from the wealthy, and if the burden of taxes falls on the middle class and the poor, taxes would be transferred to the rich in the form of interest payments on the debt. • 2. The larger the debt the larger the interest payments and the more taxes we need! • GOOD TIMES! I am not really that motivated to work for debt that I had no part of.

  11. THE END • How does government raise money? • Taxes, license fees, traffic violations, and of course bonds. • Bonds- Must be over 18 with a SS number. • Minimum purchase-25.00 • Maximum purchase-30,000 • Min/max time: 12 months-30 years • Average return: 2.15%

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