13: Government Budgets and Fiscal Policy
- Page ID
- 158676
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 13.1: Introduction to Government Budgets and Fiscal Policy
- This page discusses the federal budget, government spending, and fiscal policy, emphasizing notable shutdowns linked to budget conflicts. It details the significance of fiscal policy in addressing economic challenges like recessions and inflation, while explaining Congress and the President's roles. Key areas include federal deficits, national debt, taxation, and discretionary fiscal policy challenges.
- 13.2: Government Spending
- This page covers U.S. government budgeting over the past fifty years, highlighting trends in federal, state, and local spending. It explains budget deficits and surpluses, noting a record deficit of 15% of GDP in 2020. Federal spending is focused on defense, Social Security, healthcare, and interest, composing around 60% of the budget. State and local spending, primarily driven by education, has risen but mandates balanced budgets.
- 13.3: Taxation
- This page outlines the U.S. taxation system, covering federal, state, and local taxes. It distinguishes between regressive, proportional, and progressive tax structures, highlighting that individual income and payroll taxes are the main federal revenue sources, typically accounting for 17-20% of GDP. State and local governments rely mostly on sales and property taxes, which vary by jurisdiction. The page also notes changes in tax revenue patterns over recent decades.
- 13.4: Federal Deficits and the National Debt
- This page examines the U.S. federal budget, covering annual deficits, surpluses, and national debt while highlighting how economic conditions and demographics affect these figures. It notes historical deficit trends and the looming financial pressures from an aging population on Social Security and Medicare.
- 13.5: Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
- This page explores the impact of fiscal policy on aggregate demand and the economy, distinguishing between expansionary and contractionary approaches. It illustrates how expansionary policies, like increased government spending or tax cuts, stimulate growth, while contractionary measures aim to curb inflation by reducing aggregate demand. The AD-AS model is used to show how contractionary policy can restore equilibrium when output surpasses potential GDP.
- 13.6: Automatic Stabilizers
- This page covers discretionary fiscal policy and automatic stabilizers employed by the federal government to stabilize the economy, explaining the differences between them. It highlights the impact of these policies on budget deficits during recessions, introduces the Congressional Budget Office's standardized employment budget for evaluating budget status, and mentions the expanded Child Tax Credit as a recent initiative to assist families.
- 13.7: Practical Problems with Discretionary Fiscal Policy
- This page discusses the intricate relationship between fiscal and monetary policies, emphasizing the difficulties in implementing fiscal measures during economic fluctuations, including lag times and potential crowding out effects on private investment. It examines the challenges politicians face in understanding countercyclical fiscal policy favoring spending during recessions.
- 13.8: The Question of a Balanced Budget
- This page examines the ongoing debate over the need for a balanced U.S. federal budget, tracing proposals from the 1930s and notable legislative efforts in the 1990s. Economists caution against strict balance mandates, suggesting they weaken economic stabilizers and misalign with macroeconomic objectives.
- 13.9: Key Terms
- This page discusses fiscal policy and budgeting in economics, focusing on automatic stabilizers that modify spending and taxes to impact aggregate demand without new laws. It covers contractionary and expansionary policies, budget terms like surplus and deficit, as well as various tax types (corporate, excise, progressive). Additionally, it introduces the national debt, budget balances, and the lags involved in fiscal policy implementation.
- 13.10: Key Concepts and Summary
- This page examines government spending, taxation, federal deficits, and fiscal policy's role in financial management. It defines key budget terms and explains how fiscal policy addresses economic issues through various measures. Additionally, it discusses discretionary and automatic stabilizers, critiques of fiscal policy, and the effects of balanced budget amendments.