Federal Budget, Taxes, and National Debt: Key Concepts and Policies

What is fiscal policy?

Fiscal policy involves government spending and taxes to influence the economy.

Who conducts fiscal policy?

Fiscal policy is conducted by the Federal Government, specifically the President and Congress.

What are the goals of fiscal policy?

The goals are to achieve full employment and economic growth.

What are the two main tools of fiscal policy?

The two main tools are government spending and taxes.

What is the Federal Budget?

The Federal Budget is an annual statement of the revenues, outlays, and surplus or deficit of the government.

What is the process for creating a Federal Budget?

1. President submits a budget request. 2. Congress passes budget resolutions. 3. Appropriations subcommittees markup bills. 4. Congress votes on bills. 5. President signs bills into law.

What percentage of tax revenue comes from Individual Income Tax?

50% of tax revenue comes from Individual Income Tax.

What is a progressive tax?

A progressive tax is one where the marginal tax rate increases with income.

What are the three largest mandatory spending programs?

1. Social Security 2. Medicare 3. Medicaid

What is the difference between mandatory and discretionary spending?

Mandatory spending is required by law, while discretionary spending is determined by annual appropriations.

What is a budget deficit?

A budget deficit occurs when tax revenue is less than outlays.

What is the national debt?

The national debt is the total amount owed to the owners of federal government securities.

What types of government securities are used to finance the national debt?

Types include Treasury Bills, Treasury Notes, Treasury Bonds, and U.S. Savings Bonds.

What are the main sources of budget deficits?

1. War Time Funding 2. Growing entitlement programs 3. Stabilizing policy.

What is the crowding out effect?

The crowding out effect refers to reduced capital stock for the future due to high public debt.

What is the average tax rate?

The average tax rate is the total taxes owed divided by taxable income.

What is the significance of the Social Security Trust Fund?

It is funded by payroll taxes and is depleting as benefits paid out exceed payroll taxes collected.

What is the current U.S. corporate income tax rate?

The U.S. corporate income tax rate was recently reduced from 35% to 21%.

What is the role of the Federal Financing Bank?

It holds securities and is involved in intragovernmental holdings.

What are the concerns regarding public debt?

Concerns include default risk, income redistribution, and incentives affecting economic growth.

What is the purpose of the American Rescue Plan?

It is a fiscal policy response aimed at economic recovery during the COVID-19 pandemic.

What is the difference between a budget surplus and a balanced budget?

A budget surplus occurs when tax revenue exceeds outlays, while a balanced budget occurs when they are equal.

What is the impact of higher taxes on economic incentives?

Higher taxes can decrease productive incentives.

What are excise taxes?

Excise taxes are taxes on specific goods, such as gas tax.

What is the significance of the average tax rate being less than the marginal tax rate?

It indicates that as income increases, the average tax rate rises due to the progressive nature of the tax system.

What is the role of Treasury securities in financing the national debt?

Treasury securities are issued to borrow money and finance budget deficits.