U.S. Fiscal Policy

Mr. Rae

U.S. Federal Deficit• 13.8 Trillion Dollars!– Size of government increasing?– PAY FREEZE DUE TO SHRINKING OF THE PRIVATE

SECTOR?

• Government is spending more than they are taking in. – Deficit spending-borrowing!

Federal system of gov’t

• Federal government– National security, economy

• State government– Education, roads, prisons

Federal Spending

• Looked at as a percent of GDP– Dollar value of all goods and services produced in

a year

George W. Bush

• Increased deficit

• Funding wars in Afghanistan (2001) and Iraq (2003)

Federal Revenue• 3 sources of revenue:

individual income, FICA, and corporate income taxes

• Payroll taxes-automatically deducted from paycheck-FICA

• Ind. Income tax- taxed individually-IRS

FICA

• Federal Insurance Contributions Act• Social Security-6266 – Help elderly– Funds running out by 2039?– 70 million baby boomers

Medicare

• Health insurance program for those 65 and above

• Helps elderly pay for hospital stays, lower prescription costs

Mandatory Spending

• Federal Government has no choice but to spend money on Social Security and Medicare– Required by law

Discretionary Spending•Part of the U.S. Federal Budget which the President and Congress debate

Discretionary Spending

• Health and Human Services -

• Transportation- UPDATE OUR NATIONS RAIL LINES?

• Education- SPEND MORE ON EDUCATION?• Estonia and Poland? PISA

• Housing and Urban Development – REDUCING SLUMS?

Defense

• Should the U.S. spend $844 billion on defense?

• New aircraft?– F-22 Raptor?

• Improve nuclear facility security?

U.S. Military Arsenal

Mr. Rae

Air

Aircraft

• B-52-ND, LA• F-18 A/F• F-16• F-15• F-22• F-35• A-10• C-130

• B-1

Sea

Ground

Income Taxes

• A tax which increases with income– Progressive tax-– The more you make, the more they take!– Ability to pay tax

• Places less of a burden on those who make less money

Should we have a flat tax?

• Proportional tax = taxpayers at all incomes pay the same %

• All individuals regardless of income pay the same rate.

• Who would most likely support a flat tax?

Poverty Line

• $10,830

• $22,050 for a family of four

Regressive Tax

• Everyone pays the same rate regardless of income.

• A tax which bares a higher burden on those making less money

Will a heavier beer tax reduce underage drinking?

• Accidents cost $20 billion a year

Excise tax• taxes paid when purchasing a particular good

• Tanning Salons – 10%?• Gasoline- 8 cents per gallon• Cigarettes = $4.35! (New York is #1)– $5.85 in NYC!

• Alcohol = Current tax on beer and wine per bottle:Beer: 7.4 centsWine: 36.9 cents

Surtax

• An add-on tax; or a tax on top of a tax

• NYC = Receipts from the sales of the service of parking, garaging, or storing motor vehicles– 6% + 8%!

Other sources of revenue

• Fines– Disturbing the peace ($200)– Littering– Speeding Tickets

Sources of state revenue

• Income tax - 4-6.85%

• NY Sales tax-4 %

State spending