Economics 1B Lecture 18 S2011

Economics 1B Lecture 18 S2011 - 6/3/2011 Economics 1B UC...

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6/3/2011 1 Economics 1B UC Davis Professor Siegler Spring 2011 Final Exam Information y 50 Multiple Choice Questions (100 points) y Comprehensive y Two problems/essays (50 points) y Involve mathematical reasoning, graphical analysis, and verbal explanation. y Essays and problems focus on material since Exam #2 y I will post office hours and chat room info on SmartSite by Sunday evening. The answer key for Quiz #8 will also be posted at 10:30 on Sunday night. y Final is Wednesday, June 8 from 8:30 10:30 p.m.
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6/3/2011 2 I. Introduction y Tonight we are going to examine fiscal policy issues in the United States and in California, both at the current time but also looking forward several decades. y There are huge issues for both the United States and California, but often public opinion is wrong about what the important issues are. y Compared to other advanced economies, total government spending (federal, state, and local) as a percentage of GDP is quite low in the United States (36.5 percent vs. over 53 percent in France, Denmark, and Sweden, for example). 3 II. The Federal Budget y The U.S. government is a large insurance company with the world’s biggest army. y Americans like government programs, but they don’t like paying taxes. y As a matter of simple arithmetic, there can be future spending cuts, future tax increases, hyperinflation, or some combination of all of these. 4
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6/3/2011 3 Othe Sources of Federal Revenue, 2010 Individual Income Taxes 41% Payroll Taxes 40% Other 10% 5 Corporate Income Taxes 9% NetIt ee Federal Expenditures, 2010 National Defense 20% Medicare, Medicaid Social Security 20% Net Interest 6% Other 12% 6 Medicaid, and Health 24% Income Security 18%
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6/3/2011 4 II. The Federal Budget y The “Other” Category of Federal Expenditures is 12 percent of the budget and it includes: y Spending on roads, bridges, and infrastructure y The wages and benefits of all federal employees y All federal courts, prisons, and the FBI y Foreign aid and border security y The National Institute of Health and the National Science Fd t i Foundation y The Food and Drug Administration, the Environmental Protection Agency, and all other regulatory agencies y Federal financial aid to students y Farm subsidies 7 II. The Federal Budget y A decade ago, the Congressional Budget Office (CBO) was forecasting federal budget surpluses for decades. The 2001 forecast estimated an average annual surplus of $850 billion for the years 2009 to 2012, for example. y Instead, the budget deficit is $1,215 billion. y What happened to the two trillion dollar annual difference? 8
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6/3/2011 5 9 III. Future Federal Budget Projections y The biggest causes of concern are rising health care expenditures (Medicare, Medicaid, and other subsidies), and interest on the debt. y The U.S. spends more on health care per capita than any other country and almost 50 percent of it is funded by the federal government. Controlling ft hl t h di i k future health care spending is key.
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This note was uploaded on 02/07/2012 for the course ECON 1b taught by Professor Sheffrin during the Spring '07 term at UC Davis.

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Economics 1B Lecture 18 S2011 - 6/3/2011 Economics 1B UC...

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