Fiscal Policy (Part I) - Lecture 9

Fiscal Year

• Budget: Defined as the difference between government tax receipts and government spending outlays.
  • $Budget = Government Tax Receipts - Government Spending Outlays$
• Budget Surplus: Occurs when government tax receipts exceed government spending outlays.
• Budget Deficit: Occurs when government spending outlays exceed government tax receipts.
• National Debt: The accumulation of past budget deficits minus past budget surpluses. It represents the total amount of money owed by the government to its creditors.

The Federal Budget in Fiscal Year 2023

• Total Outlays: Amounted to $6.1 trillion$, equivalent to $22.7\%$ of GDP.
• Total Revenues: Amounted to $4.4 trillion$, equivalent to $16.5\%$ of GDP.
• Net Interest: Accounted for $659 billion$, which is $2.4\%$ of GDP.
• Mandatory Spending: Constituted $3.8 trillion$, or $13.9\%$ of GDP.
  • Social Security: $1.3 trillion$, which is $5.0\%$ of GDP.
  • Medicare: $839 billion$, accounting for $3.1\%$ of GDP.
  • Medicaid: $616 billion$, which is $2.3\%$ of GDP.
  • Income Security Programs: Totaled $502 billion$, or $1.9\%$ of GDP.
  • Other Mandatory Outlays: Included federal civilian and military retirement benefits, some veterans’ benefits, and other mandatory programs, minus income from offsetting receipts (excluding those for Medicare).
• Discretionary Spending: Summed up to $1.7 trillion$, or $6.4\%$ of GDP.
  • Defense: $805 billion$, representing $3.0\%$ of GDP.
  • Non-Defense: $917 billion$, which is $3.4\%$ of GDP. Non-defense outlays cover programs related to veterans' health care, education, transportation, certain health programs, income security programs, and other activities.
• Individual Income Taxes: Generated $2.2 trillion$, which is $8.1\%$ of GDP.
• Payroll Taxes: Contributed $1.6 trillion$, equivalent to $6.0\%$ of GDP. These taxes primarily fund social insurance programs like Social Security and Medicare’s Hospital Insurance program.
• Corporate Income Taxes: Amounted to $420 billion$, or $1.6\%$ of GDP.
• Other Revenues: Included collections from customs duties, excise taxes, estate and gift taxes, miscellaneous fees and fines, and remittances from the Federal Reserve, totaling $229 billion$, accounting for $0.8\%$ of GDP.

Federal Budget Surplus/Deficit

• The graph illustrates the federal surplus or deficit in millions of dollars over time.
• The data is sourced from the U.S. Office of Management and Budget.

National Debt Clock

• Graph displaying Federal Debt: Total Public Debt as Percent of Gross Domestic Product over time.
• Sources: Federal Reserve Bank of St. Louis; U.S. Office of Management and Budget