The Role of Government: The Federal Government and Fiscal Policy

How does the Federal Government spend the trillions of dollars it raises from taxes?  Students will read excerpts from “A Citizen’s Guide to the Federal Budget” and use infographics from the Congressional Budget Office to identify the major spending categories of the Federal Budget and sources of revenue. They will also compare U.S government spending to the government spending of other industrialized countries.

How does the Federal Government spend the trillions of dollars it raises from taxes?  Students will read excerpts from “A Citizen’s Guide to the Federal Budget” and use infographics from the Congressional Budget Office to identify the major spending categories of the Federal Budget and sources of revenue. They will also compare U.S government spending to the government spending of other industrialized countries.

• Explain what the Federal Budget is and which branch of government is responsible for preparation of the the Federal Budget.
• Identify the major categories of government expenditures.
• Identify the major categories of government revenue.
• Compare U.S. government spending as a share of GDP with the spending of other industrialized nations.

• Background information about the Federal Budget.
• https://www.brookings.edu/blog/up-front/2018/12/13/the-hutchins-center-explains-federal-budget-basics/
• The Federal Budget 2015 — Infographic from the Congressional Budget Office showing expenditures and revenues.
• Infographics detailing discretionary and mandatory spending from the Congressional Budget Office.
• OECD Chart on general government spending as a share of GDP. 

1. Ask students if they have ever made a budget for their own personal spending.

2. Explain that the government of the United States passes a Federal Budget each year to plan how much will be spent on defense, Social Security, education, etc.

3. Ask students to brainstorm a list of other categories for government spending.

4. Have students read the Background Information about the Federal Budget and Hutchins Center Explains: https://www.brookings.edu/blog/up-front/2018/12/13/the-hutchins-center-explains-federal-budget-basics/. Then view the infographics from the Congressional Budget Office.

5. Students will use the information from these documents to answer the following questions:

• View Interactive Activity In your own words write a brief paragraph that explains what the Federal Budget is. [The Federal Budget is a plan for how the US government spends taxpayer money. It raises money through different kinds of taxes: income taxes, excise taxes, and social insurance payroll taxes. It spends money for national defense, national parks, the FBI, Medicare, meat and fish inspection and much more. If revenues are greater than spending the government runs a surplus. When the economy is doing well people earn more and unemployment is low. Revenues increase and the deficit shrinks.]
• What government official is ultimately responsible for the preparation and submission of the Federal Budget? [The President of the United States (executive branch)]
• List government revenues by category, beginning with the largest percentages. Note – students will need to calculate these figures themselves. [Individual Income Taxes 47%, Payroll Taxes 34%, Corporate Income Taxes 10%, Other 9%]
• What is the estimated revenue for the Federal Government in 2015? [$3.2 Trillion]
• List government expenditures by category beginning with the largest percentages. [Social Security 24%, Nondefense 16%, Defense 16%, Other 14%, Medicare 15%, Medicaid 9%, Net Interest 6%]
• What types of expenditures are classified as “Nondefense”? [transportation, education, veterans’ benefits, health, housing assistance]

6. Have students refer to the OECD chart on general government spending as a share of GDP and answer the following questions:

• What share of GDP did the U.S. allocate to government spending in 2013? [38.8%]
• Which industrialized nation allocated the highest percentage of GDP to government spending? [Greece]

Which budget issues are most important in the 2016 elections? Ask the students to conduct independent research and write an essay on this topic.