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Fiscal Responsibility. Indiana State Revenue. Pg. 386 #6 Identify at least three kinds of state taxes and fees that businesses pay. Pg. 386 #9 What are the main sources of state revenue? Skip B. Make Up of State Budget. Pg. 386 #4. Entitlements.

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Indiana state revenue
Indiana State Revenue

Pg. 386 #6

Identify at least three kinds of state taxes and fees that businesses pay.

Pg. 386 #9

What are the main sources of state revenue?

Skip B



Entitlements
Entitlements

  • Benefits people MUST receive if they meet certain requirements.

    • Ex. Social Security, Military Pension, Medicare

  • Not everyone receives means-tested entitlements. Pg. 380 #1

    • Ex. Medicaid, Section 8

      * People learn to expect these benefits because they are guaranteed under certain conditions. *


Shared state and federal spending pg 380 7
Shared State and Federal SpendingPg. 380 #7

  • Medicaid - pg. 380 #6

    • Provides health insurance for low-income families

  • Unemployment

  • Education

  • Lower-income housing

  • Highway construction

  • Mass-transit

  • Healthcare

  • Employment training


Make up of the federal budget
Make Up of the Federal Budget

Pg. 380 #8

Discretionary:

Mandatory:



Pg. 380 #5 ; Whose retirements are funded by the money today’s wage earners are now paying into Social Security?


Needy seniors or greedy geezers

Needy Seniors or Greedy Geezers today’s wage earners are now paying into Social Security?

Pg. 380 #9

What problems do entitlement programs cause?

b. Why might it be difficult for lawmakers to make changes to entitlement programs?


Lyndon b johnson 1965

“Don’t ever argue with me [about health]. I’ll go a hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

- Lyndon B. Johnson, 1965


Pg. 380 #10 hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”a. Why have some members of Congress pushed for additional government programs related to healthcare?b. Describe their suggestions to help solve this problem?


In summary
In Summary hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Our current outlook on health care and social security cannot continue to support our growing population.

  • What do you think we should do differently?


What is fiscal policy
What is Fiscal Policy? hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • The use of government spending and revenue collection to influence the economy (Pg. 398 #3)

  • The federal government makes key fiscal policy decisions each year when it establishes the federal budget. (Pg. 398 #3)

    • The federal government prepares a new budget for every fiscal year, which goes from October 1 to September 30. (Pg. 398 #4)


The federal budget process
The Federal Budget Process hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

Pg. 398 #7

  • Federal agencies send requests for money to the Office of Management and Budget.

  • Office of Management and Budget works with President to create budget. President sends budget to Congress.

  • Congress makes changes to budget and sends new budget to President.

  • President signs budget into law.

  • OR President vetoes budget.

    • A. Congress overrides veto by 2/3 majority.

    • B. Congress and President compromise to create a new budget.


Budget hold ups
Budget Hold Ups hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Appropriations bills must be adopted and submitted to the President by 9/30.

    • Appropriations bill – a bill that authorizes a specific amount of spending by the government (Pg. 398 #5)

  • If Congress cannot finish them in time, it must pass “Stopgap funding”.

  • If Congress and the President cannot agree on temporary funding, then the government shuts down.


Types of fiscal policy
Types of Fiscal Policy hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

Expansionary

(pg. 398 #6)

Contractionary

Reduces economic growth

Decreased spending

OR

Higher taxes

Implemented to slow down inflation

  • Encourages economic growth

  • Increased budget spending

  • OR

  • Tax cuts

  • Usually implemented during recessionary periods


Which type of fiscal policy pg 398 9
Which type of fiscal policy? hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”Pg. 398 #9

Situation

Policy

  • Inflation is rising, and real GDP is up by 4%

  • GDP is down, and the unemployment rate has increased to 10%


National budget simulation
National Budget Simulation hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Go to this website:

    • http://bit.ly/MpQP3p

  • Work with a partner to change the budget the way you think it should be changed. (15 minutes)

  • Discuss as a class.


Budget deficit and national debt

Budget Deficit and National Debt hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”


Budget surplus hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”- more revenue(taxes) was collected than spent (pg. 414 #3)

Budget deficit- more money was spent than collected


Response to the deficit
Response to the Deficit hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

Print Money

Borrow Money

To avoid hyperinflation, the government borrows money to pay deficits. (pg.414 #4)

Treasury bills – short term maturity: 26 weeks or less

Treasury note – medium term maturity: 2 – 10 years

Treasury bond – long term maturity: 30 years

  • The government controls the treasury and can have money printed at any time.

  • An increase in the money supply can cause inflation to rise.

    • Happened in Germany after WWI


National debt pg 414 5
National Debt (pg. 414 #5) hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Deficit is the amount borrowed for ONE fiscal year (October 1 – September 30).

  • Debt is the amount of money the government owes to bondholders.


Is the debt a problem
Is the debt a problem? hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • “crowding-out effect” – the loss of funds for private investment caused by government borrowing (pg. 414 #6)

    • People buy bonds instead of stock.

  • Government must pay interest to bondholders

    • The more money borrowed the more interest that must be paid.

  • About ¼ of the National Debt is owned by Japan, China and the U.K.


Recent deficit debt problems
Recent Deficit / Debt Problems hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Clinton created a surplus.

  • The Bush administration planned to use the surplus to secure Social Security, provide additional medical benefits to seniors and reduce income taxes.

  • His plan was thwarted when the stock market slowed down, tax revenue decreased and the Terrorist Attacks of 9/11 required unexpected military spending.


Think pair discuss
Think:Pair:Discuss hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • Answer questions 7 – 9 on page 414 on your own paper. (5 minutes)

  • Pair with your neighbor and discuss your answers. (2 minutes)

  • Discuss answers as a class.


Questions
Questions: hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You go to have flour and coffee in your house. Education and health. I’ll spend the money. I may cut back some tanks. But not on health.”

  • #7 Why does the federal government usually not create new money to cover a budget deficit?

  • #8 What are the three possible problems with national debt? Which problem do you see as the most serious?

  • Why did the federal government budget show a large deficit for several years following 2001?


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