Choice, Change, Challenge, and Opportunity选择变化挑战和机会.ppt

Objectives After studying this chapter, you will able to Describe the federal budget process and the recent history of expenditures, taxes, deficits, and debt Examine the supply-side effects of fiscal policy on employment and potential GDP Explain the effects of deficits on saving, investment, and economic growth Explain how fiscal policy choices redistribute benefits and costs across generations Explain how fiscal policy can be used to stabilize the business cycle Balancing Acts on Capitol Hill In 2004, the federal government planned collect in taxes 17.3 cents of every dollar earned. The federal government planned to spend 20 cents out of each dollar earned. So the government planned a deficit of almost 3 cents per dollar earned. For most of the 1980s and 1990s, the government ran deficits, to the extent that the national debt is now about $13,000 per person. What are the effects of government deficits and debt? The Federal Budget The federal budget is the annual statement of the federal government’s expenditures and tax revenues. Fiscal policy is the use of the federal budget to achieve macroeconomic objectives, such as full employment, sustained long-term economic growth, and price level stability. The Federal Budget Fiscal policy operates within the framework of the Employment Act of 1946, which committed the government to work toward “maximum employment, production, and purchasing power.” The President’s Council of Economic Advisers monitors the economy and advises the President on economic policy. The Federal Budget Highlights of the 2004 Budget The projected fiscal 2004 Federal Budget has tax revenues of $1,955 billion, expenditures of $2,256 billion, and a projected deficit of $301 billion. Tax revenues come from personal income taxes, social insurance taxes, corporate income taxes, and indirect taxes. Personal income taxes followed by social insurance taxes are the two largest revenue sources. The Federal Budget Expenditures are classified as transfer pa