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Government Outlays
Federal Government Spending plus Transfer Payments.
Transfer Payments
Payments made to individuals when no good or service is received in return, including Social Security and Income Assistance.
Mandatory Spending
Entitlement programs the government is required by law to spend on, comprising approximately 62% of total spending.
Discretionary Spending
Spending that politicians can decide to increase or decrease, making up about 30% of total spending.
Marginal Tax Rates
An indicator of overall tax rates since 1913.
Medicare
Federal program established in 1965 that funds healthcare for individuals aged 65 and older.
Social Security Tax Rate
Currently set at 12.4%; requires workers to contribute to the Social Security Trust Fund.
Payroll Taxes
Taxes deducted from paychecks, which constituted 81% of federal tax revenue in 2010.
Progressive Tax Income
A tax system where individuals with higher incomes pay a higher percentage in taxes.
Deficit
A shortfall in revenue for a specific year's budget.
National Debt
The total of all accumulated and unpaid deficits.
Expansionary Fiscal Policy
Government increases spending or decreases taxes to stimulate economic growth.
Contractionary Fiscal Policy
Government decreases spending or increases taxes to slow economic growth.
American Recovery and Reinvestment Act, 2009
A fiscal policy measure involving $787 billion in stimulus to increase aggregate demand.
Marginal Propensity to Consume (MPC)
The portion of additional income that is spent on consumption.
Spending Multiplier
Illustrates total impact on spending from an initial change of a given amount; larger MPC leads to higher multipliers.
Crowding Out
A situation where government spending displaces private spending, diminishing the overall change in aggregate demand.
New Classical Critique
The argument that increases in government spending and decreases in taxes are largely offset by increases in savings.
