issues2000    

Background on Budget & Economy


Major components of FY2015 budget
(Pres. Obama's latest budget)

Spending in FY2015's $3.81 trillion budget Federal revenue sources
Non-discretionary spending:
$897 billion (23%) Social Security payments
$860 billion (23%) Medicare/Medicaid/SCHIP payments
$251 billion ( 7%) interest on the National Debt
$659 billion (17%) other ‘mandatory’ payments
Discretionary spending:
$606 billion (16%) national defense
$543 billion (14%) other ‘discretionary spending’

$1,498 billion (39%) individual income taxes
$1,055 billion (28%) social insurance (FICA/Medicare)
$ 412 billion (11%) corporate income taxes
$ 286 billion ( 7%) other taxes & duties
$ 565 billion (15%) budget deficit

Major components of FY2013 budget
(Pres. Obama's first budget for his second administration)

Spending in FY2013's $3.8 trillion budget Federal revenue sources
Non-discretionary spending:
$820 billion (22%) Social Security payments
$811 billion (21%) Medicare/Medicaid/SCHIP payments
$246 billion ( 6%) interest on the National Debt
$583 billion (15%) other ‘mandatory’ payments (including TARP)
Discretionary spending:
$700 billion (18%) national defense
$565 billion (15%) other ‘discretionary spending’
$ 97 billion ( 3%) Overseas Contingency Operations (war supplementals)

$1,294 billion (34%) individual income taxes
$990 billion (26%) social insurance (FICA/Medicare)
$365 billion (10%) corporate income taxes
$234 billion ( 6%) other taxes & duties
$901 billion (24%) budget deficit

Major components of FY2009 budget
(Pres. Bush's last budget)

Spending in FY2008's $2.9 trillion budget Federal revenue sources
Non-discretionary spending:
$610 billion (21%) Social Security payments
$602 billion (21%) Medicare/Medicaid/SCHIP payments
$244 billion ( 8%) interest on the National Debt
$302 billion (10%) other ‘mandatory’ payments
Discretionary spending:
$550 billion (19%) national defense
$392 billion (14%) other ‘discretionary spending’
$192 billion ( 7%) War on Terror ‘supplemental spending’

$1,220 billion (42%) individual income taxes
$910 billion (31%) social insurance (FICA/Medicare)
$345 billion (12%) corporate income taxes
$171 billion ( 6%) other taxes & duties
$246 billion (9%) budget deficit

Major components of FY2000 budget
(Pres. Clinton's last budget)

Spending in FY2000's $1.8 trillion budget Federal revenue sources
$405 billion (23%) Social Security payments
$328 billion (18%) Medicare/Medicaid payments
$215 billion (12%) interest on the National Debt
$226 billion (13%) other ‘mandatory’ payments
Discretionary spending:
$262 billion (15%) national defense
$330 billion (19%) other ‘discretionary spending’.

$900 billion (48%) individual income taxes
$637 billion (34%) social insurance (FICA)
$189 billion (10%) corporate income taxes
$157 billion (8%) other taxes & duties

Budget Deficit versus National Debt

A budget deficit means that the amount the government receives in taxes in one fiscal year is less than the amount that the government has spent. Generally, the government ‘borrows’ money from people by issuing bonds to cover the deficit.

The accumulated borrowing is the ‘National Debt’ that the government must repay in the future. The current federal debt stands at over $13 trillion, which is the equivalent of roughly $40,000 per person. The federal government pays over $200 billion in annual interest on the national debt.

Social Security Trust Fund

The Federal Reserve

Ben Bernanke is the chairman of the Federal Reserve Board, which is known as ‘The Fed.’ (Alan Greenspan was the previous chairman) . The Federal Reserve chairman is appointed to a 4-year term by the President but then cannot be removed, to allow The Fed independence in monetary policy.

Bernanke’s primary responsibility is to set the interest rates that the government pays on its bonds. Those rates in turn determine bank interest rates, mortgage lending rates, and other interest rates.

When the Federal Reserve Bank feels that there is to much inflationary pressure, they are likely to raise interest rates to slow the economy down. Hence, Bernanke raises interest rates (‘tightens money’) when he sees the economy as ‘overheating,’ and lowers interest rates (‘loosens money’) when he sees deflation threatening.

The longest economic expansion in US history ended in October 2001. During 2001, Alan Greenspan lowered interest an unprecedented 10 times in one year, to provide ‘monetary stimulus’ to the lagging economy. President Bush pushed for ‘fiscal stimulus’ by sending out $300 tax rebate checks to millions of taxpayers.

In 2007-2008, to attempt to counter the mortgage crisis leading to a recession, Ben Bernanke tried the same strategy, lowering interest rates repeatedly.

Mortgage Crisis

Great Recession