Fiscal Policy
a government policy for dealing with the budget (especially with taxation and borrowing)
Budget Deficit
an excess of expenditures over revenues
budget surplus
an excess of tax revenue over government spending, a situation in which the government takes in more than it spends
monetary policy
The management of the money supply and interest rates
fiscal year
The period from Oct. 1 to Sept. 30 for which government appropriations are made and federal books are kept.
council of economic advisers (CEA)
an organization in the executive office of the president made up of a small group of economists who advise on economic policy, a group of three respected economists that advise the President on economic policy
North American Free Trade Agreement (NAFTA)
Created to allow the free movement of goods between Canada, Mexico, and the U.S. by lessening and eliminating tariffs, Agreement signed by the United States, Canada, and Mexico in 1992 to form the largest free trade zone in the world.
Monetarism
A theory that government should control the money supply to encourage economic growth and restrain inflation.
Milton Friedman
United States economist noted as a proponent of monetarism and for his opposition to government intervention in the economy (born 1912)
inflation
a general and progressive increase in prices
recession
the state of the economy declines
keynesianism
The belief that the government must manage the economy by spending more money when in a recession and cutting spending when there is inflation.
John Maynard Keynes
British economist who thought deficit spending would create jobs and stimulate the economy., English economist who advocated the use of government monetary and fiscal policy to maintain full employment without inflation (1883-1946), British economist who
economic planning
The belief that government plans, such as wage and price controls or the direction of investment, can improve the economy.
price and wage controls
during inflation,the government should regulate the prices and wages in large industries.
supply-side theory
The belief that lower taxes and fewer regulations will stimulate the economy
arthur laffer
Name of the economist who argued that lower tax
rates would lead to greater government revenue, United States economist who proposed the Laffer curve (born in 1940)
reaganomics
The federal economic polices of the Reagan administration, elected in 1981. These policies combined a monetarist fiscal policy, supply-side tax cuts, and domestic budget cutting. Their goal was to reduce the size of the federal government and stimulate ec
adam smith
Scottish economist who advocated private enterprise and free trade (1723-1790)
federal reserve
The central bank of the U.S. Controls the the supply of money and attempts to control interest rates.
scarcity
limited quantities of resources to meet unlimited wants
substitutability
the degree to which people have alternatives in accessing resources
opportunity costs
to obtain more of one thing, society forgoes the opportunity of getting the next best thing, cost of the next best alternative use of money, time, or resources when one choice is made rather than another
debt ceiling
the maximum borrowing power of a governmental entity
budget
a sum of money allocated for a particular purpose
deficit
the amount by which expenditures exceed income
expenditures
Federal spending of revenues. Major areas of such spending are social services and the military.
revenues
the financial resources of the government. The individual income tax and Social Security tax are two major sources of the federal government's revenue.
interest on debt
The payments required each budget year for at least the owed interest on the public debt of the United States.
income tax
Tax paid to the state, federal, and local governments based on income earned over the past year.
internal revenue service (IRS)
governmental agency responsible for collecting federal income taxes
regressive tax
a tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers
progressive tax
a tax that takes a larger percentage of higher incomes than lower incomes
flat tax
a tax in which people pay an identical rate regardless of income
federal debt
all the money borrowed by the federal government over the years and still outstanding
tax loopholes
exceptions or oversights in the tax law that allow some people and businesses to avoid paying taxes
indexing
Providing automatic increases to compensate for inflation.
means test
an inquiry into the financial position of someone applying for financial aid
means tested
welfare policy eligibility based on income level
social security act (1935)
Created both the Social Security Program and a national assistance program for poor children, usually called AFDC
medicare
health care for the aged
tax reform act of 1986
tax policy measure..simplified tax code; lowered tax burden; eliminated many loopholes, Gave low rates with small deductions. Individuals gained while businesses suffered., A law that effected a major change in tax policy resulting from the resurfacing of
clinton tax plan (1993)
- signed into law by President Clinton.It created 36 percent and 39.6 income tax rates for individuals in the top 1.2% of the wage earners. It created a 35 percent income tax rate for corporations. The cap on Medicare taxes was repealed. Transportation fu
gross domestic product (GDP)
the total output of all economic activity in the nation, including goods and services.
Military industrial complex
Eisenhower's term for the close ties between the defense industry and the Pentagon that might influence government policy., Eisenhower first coined this phrase when he warned American against it in his last State of the Union Address. He feared that the c
Medicare (1965)
provided for the health health care neds of older adults, poor, and disabled people who might be vulnerable to impovershment resulting form high medical bills or to poor health status from inadequate access to health care, Technically known as the Social
Great Society
President Johnson called his version of the Democratic reform program the Great Society. In 1965, Congress passed many Great Society measures, including Medicare, civil rights legislation, and federal aid to education.
Incrementalism
A description of the budget process where the best predictor of this year's budget is last year's budget, plus a little bit more (an increment). According to Aaron Wildavsk, "Most of the budget is a product of previous decisions.
Mandatory or uncontrollable expenditures
Mandatory spending set forth by the Federal budget.
office of management and budget (OMB)
Presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements for government agencies., oversees and coordinates the Administration's procurement, financial management, information, and regulatory policies.
House ways and means committee
The House of Representatives committee that, along with the Senate Finance Committee, writes the tax codes, subject to the approval of Congress as a whole.
senate finance committee
The Senate committee that, along with the House Ways and Means committee, writes the tax codes, subject to the approval of Congress as a whole.
congressional budget office (CBO)
government agency that provides economic data to Congress, Advises Congress on the probable consequences of its decisions, forecasts revenues, and is a counterweight to the president's OMB (Office of Management and Budget).
Appropriations Committee
congressional committee that deals with federal spending
General Accounting Office (GAO)
Created in 1921 to perform routine audits (inspection) of the money spent by executive departments. It also investigates agencies and makes recommendations on every aspect of government.
Budget and Accounting Act (1921)
Created the Bureau of the Budget and the General Accounting Office., Championed by Secretary of the Treasury Andrew Mellon, this act created the Bureau of the Budget and General Accounting Office to prepare a unified federal budget. Realized a long held p
Congressional Budget and Impoundment Control Act (1974)
An act designed to reform the congressional budgetary process. Its supporters hoped that it would also make Congress less dependent on the president's budget and better able to set and meet its own budgetary goals., Act that reformed the congressional bud
Budget resolution
a resolution binding congress to a total expenditure level, supposedly the bottom line of all federal spending for all programs
reconciliation
A congressional process through which program authorizations are revised to achieve required savings. It usually also includes tax or other revenue adjustments.
authorization bill
Sets up a federal program and specifies how much money may be spent for that program
appropriations bill
an act of Congress that allows federal agencies to spend money for specific purposes
continuing resolutions
When Congress cannot reach agreement and pass appropriations bills, these resolutions allow agencies to spend at the level of the previous year.
omnibus spending bills
a bill that sets the budget of many departments at once.
gramm-rudman-hollings (1985)
This law provided for automatic across-the-board spending cuts ("sequesters") to take effect if the president and Congress failed to reach established targets; because the automatic cuts were declared unconstitutional, a revised version of the act was pas
sequestrations
Automatic across-the-board spending cuts made if Congress failed to meet the deficit goals.
PAYGO
pay-as-you-go budget rule that requires that any tax cut or spending increase by offset by tax increases or spending cuts elsewhere in the budget