Matthew's Public Finance/ Policy Webpage

APPLIED LEARNING ASSIGNMENT #1

Tasks:

Define Federal Deficit and Debt
Graph 1: Using Fred data, prepare a graph for the Federal Surplus or Deficit [-] . Note that this graph is not be adjusted for inflation
Graph 2: Using Fred data, prepare a graph for the real Federal Surplus or Deficit that is adjusted for inflation
Graph 3: Using Fred data, prepare a graph for the Federal Surplus or Deficit as a Percent of Gross Domestic Product
Graph 4: Using Fred data, prepare a graph for the Federal Debt: Total Public Debt as Percent of Gross Domestic Product
Carefully describe and analyze each graph. You should first explain what exactly the variable on the graph is. Next, you should comment on the relationship between the variable and the periods of recessions (shaded areas) and expansions. You should mention the periods when the variable on the graph was at its peak and why. When was is at the lowest level and why? For each graph I am expecting at least two paragraphs (300 words) of detailed explanations.
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?
What has happened to corporate taxes as percent of Federal Revenues over time?
Where does the money go? Using National Priorities Project website explain the federal spending? What is discretionary and mandatory spending?

Learn About the Concept of a Budget DeficitA budget deficit typically occurs when expenditures exceed revenue. The term is typically used to refer to government spending and national debt. A budget deficit is an indicator of financial health.

The National Debt ExplainedWe know it's growing, but we don't know exactly how. An in-depth look why the U.S. Government's debt continues to balloon and what it all means for you.

APPLIED LEARNING ASSIGNMENT #1

Federal Deficit- the amount by which the US government's spending is bigger than the money it gets from taxes in a particular year.

Federal Debt- the amount of money the United States has borrowed that has yet to be paid back.

Federal Surplus or Deficit

Below is a graph displaying the federal surplus or deficit over the span of four years beginning from the end quarter of 2014 to the first quarter of 2018. On the left hand side of the chart you see the measure of millions of dollars scaled from 440,000-800,000. As you go down further right of the chart, you will see on the horizontal axis the years 2014-2018. A line will intersect, showing correspondence, to the value that is being evaluated. Overtime, government can choose to make financial decisions that will have an impact, resulting in either surplus or deficit for the United States federal government.

We see the federal deficit decrease in this span at the highest rate at the end of 2015, beginning of 2016. This, I believe, was in response to the Obama administration fostering growth from the financial crisis of 2008. From here up until in early 2018 we see a steady increase in the federal deficit. This can be attributed, at least in my opinion & experts, to heavy regulations across the financial and labor sectors. The transfer of power in the white house is clearly represented by the steady decline following 2015.

President Trump passed a bill that lowered the taxes for the wealthy, which in turn, automatically leads to less revenue for the government. We see Trump to mitigate this by starting a trade war with China, charging higher tariffs for imports. This would be viewed as effective, if United States exports were a hot commodity, which they are not. This alone has significant influence on the increase in deficit, as well as, providing a means to borrow more. The United States government loses revenue, creates inefficient alternatives and borrows more than it should. By analyzing this graph, these are the determinations I’ve come to.

Graph 1- Federal Surplus or Deficit

Real Federal Surplus or Deficit

In this graph, you will find the real surplus or deficit adjusted for inflation. Unlike the last graph, this one represents the value of federal surplus/deficit at the rate of inflation of one constant year. The year that we are keeping constant here will be 2018. On the vertical axis there will be numbers from the equation that measures real federal surplus/deficit ranging from 0 to -1,800,000. There is a sharp increase in deficit during the 2008 recession, but a steady decrease in deficit spending as the years go along.

What this shows me is that from 2011 to 2016 the economy was sufficient for growth. Right at the end of 2008, towards beginning of 2009, the deficit was at its highest. This was due to heavy amounts of government spending on safety net programs to keep Americans afloat during the financial crisis. As the money used to prop-up the economy, this in turn led to economic growth in the United States which is seen with an upward trend on the chart representing a decrease in federal deficit.

GRAPH 2 - Federal Surplus or Deficit *251.994/CPI

Federal Surplus or Deficit as a Percent of Gross Domestic Product

Below is a graph called the “Federal Surplus or Deficit as a Percent of Gross Domestic Product.” Gross domestic product is expressed in billions, while GDP is expressed in millions. The value on the vertical axis represents GDP expressed in millions to determine the percentage of federal surplus or deficit that as percentage of GDP. The numbers range from -1 to -10, years being from 2008 to 2018. The federal deficit percentage of GDP was at its lowest, negative one percent, in late 2007 or early 2008.

This was right before the financial crisis of 2008, indicated by the shaded region on the graph. Deficit being low at this time might mean the economy was working efficiently until the events of the financial crisis in 2008. No more than a year later, in 2008, the deficit increased tenfold literally to negative ten percent. Due to the large increase in government intervention, the following years, we see an increase in the real rate of deficit decreasing steadily overtime for about two to three more years before beginning to flatten out.

Graph 3- Federal Surplus or Deficit/ Gross Domestic Product

Federal Debt: Total Public Debt as Percent of Gross Domestic Product

This graph will be representing the period Q4 2008 thru Q4 2012. On the vertical axis there is numbers, representing percentage of GDP. We are measuring GDP as it relates to public debt and its percentage of GDP. The graph shows a range of 65 to 105, with 70 percent of GDP attributed to public debt in the fourth quarter of 2012. Throughout five years this graph shows that public debt as a percentage of GDP rose steadily, with a short flattening in 2011.

The fact that total public debt, as shown, reaches one hundred percent in 2012 is as remarkable as it is profound. How can a system be so inefficient? This means if every dollar were paid back the country would not have made any significant output at all. In simpler terms, the United States did not make that much money—at all! Just as the financial crisis began, public debt was relatively low due to the stability of the economy up until 2008. As more people had to borrow to get back on their feet, this was clearly reflected as the public debt was only seventy percent in 2008.

Graph 4- Federal Public Debt as a percentage of GDP

What Are Payroll Taxes? | Types, Employer Obligations, & MoreWhat are payroll taxes? Employers need to withhold payroll taxes from employee wages. And self-employed people need to pay payroll taxes too.

Where does the money come from? Using National Priorities Project website explain what are the main sources of revenues for the Federal government.

According to the National Priorities Project website, the main sources of revenues for the United States government are as follows: Income taxes paid by individuals, payroll taxes paid jointly by workers and employers, corporate income taxes paid by businesses and borrowing.The individual income tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest, and other income a person earns throughout the year. The tax is generally imposed by the state in which the income is earned. However, some states have reciprocity agreements with one or more other states that allow income earned in another state to be taxed in the earner’s state of residence.

Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff. Payroll taxes generally fall into two categories: deductions from an employee's wages, and taxes paid by the employer based on the employee's wages.

Policy Basics: Where Do Federal Tax Revenues Come From? What has happened to corporate taxes as percent of Federal Revenues over time?

The government can raise revenue through taxes such as excise and custom duty taxes. Customs duties are taxes on imports, paid by the importer, while excise taxes are taxes levied on specific goods, like gasoline. Income taxes make up 47% of all tax revenue at $1.48 trillion. Payroll taxes paid by employers and employees make up 34% of tax revenue at $1.07 trillion. Corporate income tax made up 11% of tax revenue at $341.7 billion.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. The United States imposes a tax on the profits of US resident corporations at a rate of 21 percent (reduced from 35 percent by the 2017 Tax Cuts and Jobs Act). The corporate income tax raised $297.0 billion in fiscal 2017, accounting for 9 percent of total federal revenue. Above you can find two relevant links to the topics covered.

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

The money collected as revenue by the government goes to the U.S. Department of Treasury. The treasury then divides the spending into three categories: discretionary spending, mandatory spending, and interest on debt. Mandatory mixed with discretionary spending pay for all the services and programs in the country. 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. 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.

The interest on the national debt is how much the federal government must pay on outstanding public debt each year. The interest on the debt is $479 billion. That's from the federal budget for fiscal year 2020 that runs from October 1, 2019, through September 30, 2020. Below are graphs representing discretionary, mandatory & interest on debt.

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