www-ckhscksdwedneteduSTAFFFisherbudget_2011-.ppt by yan198555


									                                                               BUDGET 2011-12
                                                                     A Senate Budget Committee staff assistant stacks copies of the

                                                                     2011 Budget for distribution to Senate staff on Monday   .

President Obama's $3.8 trillion budget proposal for fiscal year 2011
A budget is comprised of two things:
what comes in and what goes out
Biggest source of Revenue
A note about progressive versus
regressive taxes:
If every year, you spend more than you take in . . .you have a


                                               If you take in
                                               more than you
                                               spend, you have a

    And, if you have a bunch of deficits
      you get a . . . HUGE________

File:Public debt percent gdp world map (2010).svg
GNP (Gross NATIONAL Product): all goods and services produced by
the nationals of a country. This means that whatever Americans produce
around the world counts, even if it is in Japan or France. We add that
stuff in and subtract out goods made by foreign nationals here in the
 That was a confusing system and not that representative of globalization
and its impact on all our economies.

 GDP (Gross Domestic Product) is the more up-to-date term. Its basic
meaning is the value of all final goods and services produced within a
national boundary (ie within our DOMESTIC borders) . For example,
the Toyotas produced by USA Toyota in KY. Often seen as per capita
(per person) though misleading.
                Who owns the national debt
The money is borrowed from buyers of Treasury securities -- which are
basically a big batch of IOUs that are auctioned off every three months.
As the auction date approaches, the Treasury figures out how much it
will need to pay off old debt and cover the government’s latest round of
When the auction day comes, buyers submit bids in the form of the
interest rate they’re willing to accept. You can choose to make a
competitive bid (you ask for a specific rate) or a non-competitive bid
(you agree to accept the average rate of other winning bids.) When all the
bids are in, the Treasury starts at the bottom, taking the lowest bids until
it has collected enough money to cover that round of borrowing.
The money flows in from all over the place: from individual investors
and corporations, pension funds and governments, both in the U.S. and
around the world. Basically, anyone with a large amount of cash looking
for a safe place to put it is a good candidate for holding U.S. Treasury
So just who are these lenders? The biggest holder of Treasury debt is the U.S.
government itself, with about 52 percent of the total $8.5 trillion in paper that's out there.
Most of the government’s holdings are massive savings accounts for programs like Social
Security and Medicare. Just as you may prefer to keep your Individual Retirement Account in
the safe Treasury bonds, the folks who manage the Social Security Trust Fund are looking for
a secure investment, too.
That’s leaves a little over $4 trillion in public hands. The biggest chunk (about 25 percent of
the $8.5 trillion total) is held by foreign governments. Japan tops the list (with $644 billion),
followed by China ($350 billion), United Kingdom ($239 billion) and oil exporting countries
($100 billion).

Other big holders of Treasury debt
include state and local governments
($467 billion); individual investors,
including brokers ($423 billion); public
and private pension funds (319 billion);
mutual funds ($243 billion); holders of
US savings bonds ($206 billion);
insurance companies ($166 billion) and
banks and credit unions ($117 billion.)
Good visuals
Who owns America? Hint: It's not China
Without this increase in foreign
ownership of U.S. debt, interest
rates and inflation would have
been higher; real private
investment, and the growth of real
GDP and employment, would
have been lower.
In an important recent working
paper of the National Bureau of
Economic Research, Francis and
Veronica Warnock of the
University of Virginia estimate that
if foreign governments had not
bought additional treasury
securities from May 2004 to May
2005, the interest rate on 10-year
treasury bonds would have been
nearly one percentage point
higher. That would have raised
the interest rate on business
loans and mortgages by roughly
the same amount

                            Back to : WHAT GOES IN,
                               WHAT GOES OUT

                     Good visuals
   You must be able to distinguish between mandatory and
   discretionary spending to get the budget. . . .
 ___________ spending (often called “auto-pilot” spending) is
 spending over which Congress has no regular means of control
 because it is prescribed by previously passed and enacted
 legislation. It is interest on the debt and _________ spending
 which can’t be controlled because beneficiaries are “entitled” to it
 as long as they meet the qualifications set by law. The largest
 entitlement programs are Medicare, Social Security, and Medicaid.

 Unlike ___________ spending which subject to the annual
 appropriations process, the only way to change mandatory
 spending levels is by changing the law (this is often done through
 the “reconciliation” process).

Entitlement programs: A federal program under which individuals, businesses, or units of
government that meet the requirements or qualifications established by law are entitled to receive
certain payments if they seek such payments. Major examples include Social Security, Medicare,
Medicaid, unemployment insurance, and military and federal civilian pensions. . . .. Congress
cannot control their expenditures by refusing to appropriate the sums necessary to fund them
because the government is legally obligated to pay eligible recipients the amounts to which the
law entitles them, and recipients can take legal action if the government fails to do so.
. . . Ent Programs are gov’t sponsored programs providing mandated/guaranteed/required benefits
to those who meet eligibility requirement/qualifications (CB def)
       Social Security

  President Roosevelt signing Social
  Security Act of 1935 in the
  Cabinet Room of the White House.
  Also shown, left to right:
  Rep. Robert Doughton (D-NC);
  Sen. Robert Wagner (D-NY); Rep.
  John Dingell, Sr. (D-MI);
  Unknown man in bowtie;
  Secretary of Labor, Frances
  Perkins; Senator Pat Harrison (D-
  MS); Congressman David L.
  Lewis (D-MD). Library of
  Congress photo, LC-US262-

Provisions of the SSA of 1935:
Insurance program: for unemployed and elderly to which workers would contribute and
from which they would benefit
Assistance program: for blind, dependent children (poor) and aged
Who qualifies?—with exception of ADC, no means test—(you do not have to prove you l
the means to qualify) --if fit one of categories, even if upper income, you qualify
It is paid for by a “payroll tax” which is
collected from current workers, put into a
“trust fund” and then used to pay out to
retired workers

                                     Technically, the funds credited to these accounts are
                                     restricted by law to their designated programs or uses
                                     and are not available for the general purposes of
                                     government. Nevertheless, the Treasury borrows from
                                     them for that purpose and the borrowings become part
                                     of the public debt.
But . . .
•   Is it bankrupt? Now it is not—it still takes in more
    than it pays out—so when will the it start to reverse:
    From “Factcheck” there are two official projections
    -- one by the Social Security Administration
    (SSA) and a somewhat less pessimistic projection
    by the Congressional Budget Office (CBO). The
    President referred to the SSA projection, which
    calculates that the system's trust fund will be
    depleted in 2042. After that, the system would have
    legal authority to pay only 73 percent of currently
    promised benefits -- and that figure would decline
    each year after, reaching 68 percent in the year
    2075.The CBO doesn't project trust-fund depletion
    until a decade later, in 2052, and figures that the
    benefits cuts wouldn't be so severe, a reduction to
    78% of promised benefits. But either way, even a
    "bankrupt" system would continue to provide
    most of what's promised currently.
                                                President Johnson signing the Medicare
                                                amendment. Harry Truman and his wife,
                                                Bess, are on the far right

Medicare is a social insurance program administered by the United
States government, providing health insurance coverage to people who
are either age 65 and over, or who meet other special criteria. It was
originally signed into law on July 30, 1965 by President Lyndon B.
Johnson as amendments to Social Security legislation. At the bill-signing
ceremony President Johnson enrolled former President Harry S. Truman
as the first Medicare beneficiary and presented him with the first
Medicare card
              And now you have . . . .
The Medicare Prescription Drug, Improvement, and Modernization Act
(Pub.L. 108-173, 117 Stat. 2066, also called Medicare Modernization Act or
MMA) is a law of the United States which was enacted in 2003. It produced the
largest overhaul of Medicare in the public health program's 38-year history.
The MMA was signed by President George W. Bush on December 8, 2003, after
passing in Congress by a close margin.
                    The Process
• Article I, Section 8, states that Congress
  "shall have Power To lay and collect
  Taxes, Duties, Imposts and Excises, [and]
  to pay the Debts. . ." Section 9 declares:
  "No Money shall be drawn from the
  Treasury, but in Consequence of
  Appropriations made by Law. . . ."

See handout . . .
REAL BUDGET CALENDAR Forget any other boring "How Congress
Passes a Budget" information. Use our calendar to see where Congress
is with the budget right now. Some things never change! \

President submits recommended budget to Congress in early part of the
month. Both parties use the event as an opportunity to trash the other
person and push their own agenda.
April 15
Congress fails, as it almost always does, to pass a budget resolution. A
budget resolution is supposed to set the big picture goals, but it doesn't
have any teeth and doesn't have the force of a law - the President doesn't
have to sign it. Instead of doing the budget resolution as required by law,
Congress passes a bunch of other bills that say, in other words, taxes suck.
(They fail to acknowledge that taxes are paying for them to be able to
stand up and say taxes suck.)
Congress finally passes the aforementioned virtually meaningless budget
resolution with all kinds of instructions that the committee with real
power, the Appropriations Committee, will ignore.
June and July
The House and the Senate pass as many of the 13 Appropriations bills as
they are able. (For more information about the 13 bills, check out the 54
Kings page.) The real key is to see how many they have passed by the time
Congress takes its annual summer break in August.
August Recess
After a week where they say they will tackle lots of thorny issues, but
really put them all off until September, the House and Senate leave town
for a month-long recess.
September 31
Fiscal year runs out with some work left undone. Congress passes a law
which says, "Hey, we need just a little more time to figure out the rest of
the budget." They repeat this until they actually get their work done. In
1999 they did this seven times.
Late September and October
Finally, Congress gets down to brass tacks, real negotiations happen, and
agreements get ironed out. Whether it's through original 13 spending bills,
or a giant bill where they combine a bunch of the bills that haven't been
passed, the Congress and the President finally agree on the budget for the
After passing the last appropriations bill, Congress adjourns for the year.
All the big issues they didn't get to will just have to wait until the next

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