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Finance and Economics
Transcript of Finance and Economics
Budget Taxes and Other Revenue Federal Spending Spending Priorities The Power to Tax Congress has the power to borrow money "on the credit of the United States". While excessive borrowing has been a major concern in the United States lately, Congress is granted this ability explicitly by the Constitution itself.
The main reason the government borrows money is to finance budget deficits. Unfortunately, the government has not worked out its finances, and there are budget deficits almost every year. With roots in the Great Depression, the repeated national deficits have increased the national debt every year consecutively for the last 80 years. The Great Depression Department of Health and Human Services spend over $700 billion a year
-Medicare, Medicaid, and other entitlement programs Entitlements-benefits that federal law says must be paid to all those who meet the eligibility requirements
-being a certain age, below a certain income level The Constitution first and foremost grants the power to tax to Congress by stating- America's deficit problem began in October of 1929 when the stock market collapsed and triggered the Great Depression of the 1930s. 13.5 million people were unemployed by 1933, and America's economy was in the dumps. Jobs became extremely scarce, and people were working any job they could find, for pennies a day. Americans struggled with the economic drudgery until Franklin D. Roosevelt was elected in 1932 and was able to implement a new method of economic stimulation. The government launched a series of jobs programs and started spending MORE money in an effort to stimulate and bring back to life the dead economy. This method worked, but it made the government feel comfortable with overspending its budget and taking on a deficit. Today, this idea has spiraled out of control. Our deficit today grows annually by leaps and bounds. OASDI (the old age, survivors, and disability, Insurance program)- Also known as social security, is the largest entitlement program today.
The funds for the program come from paychecks of American workers "Congress has the power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and the general Welfare of the United States..."
-Article 1, Section 8, Clause 1 Congress mostly uses their power to tax to raise the necessary money to fund the Federal Government.
Congress also uses the power of taxation to control activities the government believes to be harmful to the public.
Examples would include when -
1. Control of Narcotics
2. The Purchase of Firearms
3. Prospecting Public Lands
4. Hunting of Migratory Birds
5. Phosphorous Matches
6. Bank Notes Controllable and Uncontrollable Spending controllable is prearranged by the president The Federal Budget The President and the Budget OBM-Office of Management and Budget
-presidents budget making agency each agency submits its spending plans to the OMB OBM then checks and revises the spending plans of the agencies Congress and the Budget Fiscal, Monetary Policy and GDP CBO-Congressional Budget Office
-check budgets and money requests of the OBM
-created in 1947 Two budget committees then propose a concurrent resolution for federal receipts and spending in the upcoming fiscal year Section 4 Constitutional Limitations continuing resolution-a measure that allows agencies to continue working based on the previous year's appropriation Price Stability Section 2 Keynesian Economics The absence of change or fluctuations in the prices of goods and services.
Inflation- Refers to the increase in price
Deflation- Refers to the decrease in price Both harm dangerous influences on the economy and can harm it drastically. The power to tax is not unlimited.
Taxes must follow the regulations set by the Constitution.
Four Expressed Limitations-
1. Only for the Public
2. No Taxing Exports
3. Direct Taxes Evenly Distributed
4. Taxes Set Evenly Countrywide New Deal-series of government spending and job programs designed to stimulate the economy and put Americans back to work.
Demand-side economics-if the government has to borrow money to raise employment the tax revenues will go up.
Supply-side economics- lowering taxes raises money in private hands which stimulates the economy How Borrowing Occur GDP is the total value of all final goods and services produced in the country each year.The Gross Domestic Product (GDP) in the United States was worth 15094 billion US dollars in 2011. The GDP value of the United States represents 24.35 percent of the world economy.Historically, from 1960 until 2011, the United States GDP averaged 5525.3 USD Billion reaching an all time high of 15094.0 USD Billion in December of 2011 and a record low of 520.5 USD Billion in December of 1960.
Fiscal Policy is the Governments ability to tax and spend to influence the economy. In general increase in government spending means increase in economic activity and versatility. Taxing causes a decrease in economic growth.
Monetary Policy is the process by which through which the government can influence the nation's economy through changes in the money supply and the availability of credit. Increase in money supply means a increase in spending for people to use but decreases the value overall of the currency. The three tools used by this policy are reserve requirements, discount rates, and open-market operations. "No Tax or Duty shall be laid on Articles exported from and State"
-Article 1, Section 9, Clause 5
The Constitution Congress must authorize all federal borrowing
-borrowing is actually done by the Treasury Department
-long term(IOU) short term(T-Bills) The Public Debt Public Debt-total outstanding indebtedness of the national government
-2013 national debt exceeds 16 trillion dollars
National debt can cause problems for future generations of Americans http://www.brillig.com/debt_clock/ There is one implied limitation on taxes as well.
The federal government cannot tax the state and local government for performing governmental activities.
Examples of non-taxable activities-
1. Providing Public Education
2. Furnishing Healthcare
3. Raising Police Forces
4. Building and Repairing Roads and Highways http://www.law.cornell.edu/constitution/articlei
McClenaghan, W. A. Magruder's american government. Pearson: Mary Magruder Smith, 2009. Print.
http://www.tradingeconomics.com/united-states/gdp The Federal Reserve The Federal Reserve System serves as a united central bank. The Reserve Board controls monetary policy by changing the availability of loans and changing interest rates. When the federal reserve seeks to alter a money supply it operates through open market operations to provide money between banks. The Federal Reserve influences and alters money circulation by using reserve requirements.The third tool the Federal Reserve can use is discount rate this determines the amount people may borrow money and the interest rate of said money.
Open Market Operations-the process by which the federal reserve buys and sells government securities from bank to bank.
Reserve requirements-the amount of money a bank can keep in their vaults determined by the federal reserve board.
Discount Rate- the rate of interest a bank must pay when it borrows money from a Federal Reserve. Current Federal Taxes There are currently 7 Federal Taxes in place.
1. Income Tax
Authorized by the 16th Amendment
Largest source of Federal money
It is a Progressive Tax, or a tax that can be modified based on an individuals income.
2. Individual Income Tax
All taxable incomes
Different incomes receive different tax rates
3. Corporation Income Tax
Each corporation pays taxes on its net income
4. Social Insurance Tax
A Payroll Tax, or a tax pulled straight from an individuals pay
Also a Regressive Tax, a tax that is at a fixed rate
5. Excise Tax
A tax on Goods and Services
Some called "Luxury" Taxes for non-necessities
Some called "Sin" Taxes for things like tobacco, alcohol, and gambling
6. Estate and Gift Tax
Estate Tax- Tax levied on the property of the dead
Gift Tax- Tax levied on gifts (obviously)
7. Customs Duties
Taxes laid on imports US and World Economic Relations Global Economic Trends: The Relationship of Virginia and the US to the Global Economy The US government as compared to other countries In a federal system, such as the governments in Mexico and the US, the power is divided between the different branches in the government. In a unitary system (UK and China) all government power is in a central government. Legislative branch holds the power of the legislative and executive branches. Limited governments have restraints on government and encourage participation in the political process
Unlimited governments don't place any limits on any one person having power Some US businesses have become international entities. Huge companies like Google, Microsoft and Apple have become so large that they impact the population of the entire world. Several of these companies use off-shore labor in order to reduce costs and increase profits. Due to less minimum-wage laws overseas, the employee costs can be drastically lower. While this tactic can keep production costs and prices down, it also removes thousands of jobs which could help boost the US economy. Outsourcing jobs is especially damaging to the US employment rate when large amounts of immigrants come into the United States and raise the supply of labor. This means more people for fewer jobs and can cause problems.
Another international topic is the subject of oil and natural resources. As foreign and third-world countries become more developed, they require more natural resources and in particular, oil. Higher demand without an equally increased supply means higher prices for everyone.
The United States imports more than any other country in the world. Annually, the US imports $ 2,314,000,000,000 worth of goods, while exporting only$1,497,000,000,000. This means the United States is faced with a trade deficit. We are importing more than we're exporting, which means that money is leaving the country and not coming back in. Major trading partners of the US are Canada, Mexico, the EU, China and Japan. Analyzing Global Economic Trends and the US relationship to the Global Economy Economies
Mexico: Market economy with government ownership of some major industries
United Kingdom: Generally market economy and private ownership of property
China: Command economy with an importance for markets Non tax Revenues
Interest- A charge on borrowed money
Usually a percentage of the borrowed amount Virginia and the Global Economy US and Virginia Trade Since 1980's Recent Initiatives in foreign policy to benefit trade.
1. Trade with China
Trade with China has improved relations with the Communist country.
2. Stopping Human Rights Abuses
Fighting the abuse of humans rights has begun to stop the use of sweatshops and other workplaces with horrible conditions.
3. Controlling Nuclear Weapons and Arms
Having nuclear arms has secured Americas position as a world power.
4. Controlling Drug Traffic
The stopping of drug trafficking has not only cut off illegal drug rings but also has improved relations with other countries.
5. Improving The Global Environment
The United States has sent many different organizations around the globe to improve the natural environment and political environments. Virginia and the United States are multinational in their economic relations to obtain resources, markets, and profits.
For the goods and services that Virginia and the United States do not possess or compare with other counties, they use international trade to obtain these luxuries.
When Virginia and the US can provide goods and services, they benefit by being able to trade for other items. United States Trade Agreements
North American Free Trade Agreement (NAFTA)
Countries involved: Mexico, Canada, United States
Intention: Eliminate trade barriers, promote fair competition, increase investment opportunities
World Trade Organization (WTO)
Intention: Administer trade agreements, handle arguments, provide a place of negotiation Presented by: