ChapterChapter
Government and the Government and the
EconomyEconomy13
Objectives:
Identify the three basic aspects of governmental spending
Describe the basic principles of taxation Differentiate between progressive,
regressive, and proportional taxes Explain how the national budget is
formulated Define budget deficits and surpluses
Recall: Chapter 11• Negative Externalities
• Public Goods
• Government Regulation
• Standards
Government Spending
Civics Connection: 3 levels of government:
– local, state, federal
Basic Aspects1. Major consumer of goods and services2. Transfer Payments3. Interest Payments
1970s-1980s
Interest 2%
US Budget
98%
Interest Payments
Government Bonds:– Loans the government
owes– Interest rates
2004
Interest 7%
US Budget
93%
Justification for TaxesWhat does the government spend taxes on?
• The principle of benefits received: Gas Tax
• The principle of ability to pay: Welfare
Taxes should be: – broad– simple– Fair– Ex: Income Tax?
Types of Taxes
1. Progressive2. Regressive3. Proportional
A. ExciseB. IncomeC. SalesD. PropertyE. Social Security
The National Budget
• Mandatory Spending
• Discretionary Spending– Defense– International– Domestic– Government Salaries
• Fiscal Year– October 1-September 30
The National Deficit
• Deficits=shortages
• Surpluses
• National Debt
I’m all out of credit on my card.
Can you raise the limit?
I’ll pay you back, I swear!