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11-26-07 - Outlays= taxes and borrowing-outlays tend to be...

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Fiscal policy -federal budget 1. Finance govt activities Y -House and Senate write a budget bill -president advises and has ultimate approval -fiscal year begins Oct 1 Recent budget Tax revenue- Income tax $1098 billions Soc security tax $949 In directed tax $177 Total tax 2521 trillion Outlays Transfers $1738 trillion govt expenditures $837 Interest on debt $316 billion Total $2891 trillion -when outlays > tax revenue budget deficit -deficit is approved $1370 billion -to fund deficit, govt borrows $370 billion -govt outlays must be financed from taxes and borrowing
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Unformatted text preview: Outlays= taxes and borrowing-outlays tend to be unpredictable day to day-if govt not allowed to borrow-them taxes also unpredictable day to day-budget deficits are measure as % of GDP-3% of economy is “magic” cut off-don’t confuse deficit with debt-debt is the sum of all past deficits minus all past surpluses-is debt a problem? Depends is debt used to finance consumption or investment-debt for consumption must be repaid in future-debt for investment pay...
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