Applied Learning 1

The deficit is the difference between what the U.S. Government takes in from taxes and other revenues, called receipts, and the amount of money it spends, called outlays. The items included in the deficit are considered either on-budget or off-budget.

You can think of the total debt as accumulated deficits plus accumulated off-budget surpluses. The on-budget deficits require the U.S. Treasury to borrow money to raise cash needed to keep the government operating. It borrows the money by selling securities to the public.

Graph 1: Using Fred data, prepare a graph for the Federal Surplus or Deficit [-] . Note that this graph is not be adjusted for inflation

The graph above represents Millions of dollars in an annual fiscal year from the year 1900-2010 which is not adjusted for inflation. The Left side represent the amount of money in millions of dollars. The bottom numbers represent the fiscal year. The Gray areas on the graph represent the recessions happening in the united states. The blue line represents the federal Government debt. In the year 2007 the US was in a recession that made our debt drop -14,122,688.

Graph 2: Using Fred data, prepare a graph for the real Federal Surplus or Deficit that is adjusted for inflation

Along the X axis represents the years from 1950-2019. Along the y axis is the amount in millions of dollars. The graph has been adjusted for the federal surplus or deficit for inflation. The graph shows consumer price index of 2019 which was 257.953 and we are dividing that by the consumer price index of any given year. The gray lines on the graph represent the years of recession. As you can see on the graph in 2009 the graph shows a huge drop between 2005-2009 due to the housing market crash the federal surplus took a tremendous dive toward a defecit.

Graph 3: Using Fred data, prepare a graph for the Federal Surplus or Deficit as a Percent of Gross Domestic Product

On this graph the Y axis represents the percent of GDP. on the x axis the numbers represent the years from 1960-2019. The gray lines represent a recessions happening in the united states. As you can see up until 1980 the Gdp percentage was low. After 1980's it looks like maybe the united states has borrowed more money or it could even income might be going down which reflects a higher GDP defeceit. We were already over 100% of how much total public debt as a percent of gross domestic product I would love to see what will happen to this debt after the coronavirus pandemic. I wonder if our economy would be able to with stand this percent or would it collapse?

Graph 4: Using Fred data, prepare a graph for the Federal Debt: Total Public Debt as Percent of Gross Domestic Product

On the Y axis is the negative numbers in billions. on the x axis it shows the years from 1950-1970.The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. This graph depicts the inflation from 1970 up to 2019. in 2010 we see a huge drop in pecerntage of cpi becuase during that time the economy was suffering from the great recession and the housing market crash.

Where does the money come from? Using National Priorities Project website explain what are the main sources of revenues for the Federal government. Policy Basics: Where Do Federal Tax Revenues Come From?

In 2015, total federal revenues in fiscal year 2015 are expected to be $3.18 trillion.² These revenues come from three major sources:

Income taxes paid by individuals: $1.48 trillion, or 47% of all tax revenues.
Payroll taxes paid jointly by workers and employers: $1.07 trillion, 34% of all tax revenues.
Corporate income taxes paid by businesses: $341.7 billion, or 11% of all tax revenues.

What has happened to corporate taxes as percent of Federal Revenues over time?

Corporate Taxes

Corporations pay income taxes similar to those paid by workers. Depending on how much profit a corporation makes, it pays a marginal tax rate anywhere from 15 to 35 percent.⁴ The top marginal tax rate for corporations, 35 percent, applies to taxable income over $18.3 million. As you can see in the line chart below, individual income taxes make up a much larger share of all federal tax revenues than corporate taxes do, in part because the wages and salaries of all Americans are much larger than profits of all U.S. corporations. The share of federal tax revenue paid by corporations has also declined substantially over time.

Where does the money go? Using National Priorities Project website explain the federal spending? What is discretionary and mandatory spending?

Mandatory and Discretionary Spending

The U.S. Treasury divides all federal spending into three groups: mandatory spending, discretionary spending and interest on debt. Mandatory and discretionary spending account for more than ninety percent of all federal spending, and pay for all of the government services and programs on which we rely. Interest on debt, which is a much smaller amount than the other two categories, is the interest the government pays on its accumulated debt, minus interest income received by the government for assets it owns. The pie chart shows federal spending in 2015 broken into these three categories.

Discretionary Spending

Discretionary spending refers to the portion of the budget that is decided by Congress through the annual appropriations process each year. These spending levels are set each year by Congress.

This pie chart shows how Congress allocated $1.11 trillion in discretionary spending in fiscal year 2015.

By far, the biggest category of discretionary spending is spending on the Pentagon and related military programs. Examples of other well-known programs paid for by discretionary spending include the early childhood education program Head Start (included in Housing & Community), Title I grants to disadvantaged schools and Pell grants for low-income college students (Education), food assistance for Women, Infants and Children (WIC), training and placement for unemployed people provided by Workforce Investment Boards (in Social Security, Unemployment and Labor), and scientific research through the National Institutes of Health (NIH) and National Science Foundation (NSF), among many others.

Mandatory Spending

Mandatory spending is spending that Congress legislates outside of the annual appropriations process, usually less than once a year. It is dominated by the well-known earned-benefit programs Social Security and Medicare. It also includes widely used safety net programs like the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), and a significant amount of federal spending on transportation, among other things.

Many mandatory programs' spending levels are determined by eligibility rules. For example, Congress decides to create a program like Social Security. It then sets criteria for determining who is eligible to receive benefits from the program, and benefit levels for people who are eligible. The amount of money spent on Social Security each year is then determined by how many people are eligible and apply for benefits.

Congress therefore does not decide each year to increase or decrease the budget for Social Security or other earned benefit programs. Instead, it periodically reviews the eligibility rules and may change them in order to exclude or include more people, or offer more or less generous benefits to those who are eligible, and therefore change the amount spent on the program.

Mandatory spending makes up nearly two-thirds of the total federal budget. Social Security alone comprises more than a third of mandatory spending and around 23 percent of the total federal budget. Medicare makes up an additional 23 percent of mandatory spending and 15 percent of the total federal budget.

This chart shows where the projected $2.45 trillion in mandatory spending will go in fiscal year 2015.

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