DEPARTMENT OF POLITICAL SCIENCE

AND

INTERNATIONAL RELATIONS

POSC 105

THE FEDERAL BUDGET



  1. THIS MORNING:
    1. Political capacity
    2. Start discussion of the federal budget.
      1. Budget politics is the defining issue of the late 20th century.
      2. Background and major spending categories
      3. Changes in the composition of budget categories and implications for policy and politics.


  2. POLITICAL CAPACITY:
    1. Political capacity: political system can identify and deal with, if not solve, collective problems expeditiously and effectively but also democratically.


  3. BUDGET POLITICS:
    1. There is broad public agreement on these points:
      1. Nearly everyone--Republicans and Democrats alike--believe the federal budget should be balanced, except in emergencies.
        1. That is, revenues should at least equal outlays:
          1. If outlays (spending) equal revenues (mostly taxes) budget is balanced
          2. If outlays exceed revenues, budget is in deficit
      2. The national debt is an unmitigated disaster that means that our children will spend most of their lives working to pay off.
      3. Americans are overtaxed.
      4. The issue is not new: the parties have held this position for decades.
      5. The most popular remedy is cutting government spending.
    2. Public manifestations of this discontent:
      1. Balanced budget amendment
      2. The "Contract" (1995) (Available on the class web site: Documents page)
      3. The politics of "shutdown"
      4. The 1996 election campaign
    3. How much truth do these beliefs have? Are there grounds for the fears?


  4. BACKGROUND TO THE PRESENT BUDGET SITUATION:
    1. 1945-1974 (approximately) Disjointed incrementalism


    2. Federal programs were "paid" for by tapping into economic growth, not by redistribution.
    3. The end of disjointed incrementalism
      1. War but "no new taxes"
      2. The oil and food shocks
      3. New international competition
      4. "The consequences: inflation and high unemployment = "stagflation"
    4. Changes in the composition of the budget
      1. The usual way of looking at the budget can be misleading.
      2. Spending by function and agency does not reveal the total picture.
    5. Growth in entitlements: entitlements are characterized by:
      1. Recipients or beneficiaries are entitled to benefits
      2. Congress does not annually appropriate money for them in the usual fashion.
      3. Costs go up with inflation, changes in demographics, state of the economy, etc.
      4. Means-tested and non-means tested entitlements
      5. Hence, spending on entitlements is called relatively mandatory or uncontrollable.
    6. Major point: since the early 1970s spending on entitlements has increased by leaps and bounds.
      1. Contrary to popular belief, spending on discretionary programs has remained more or less steady; in fact, for many categories it has decreased.
      2. Greatest growth has been in entitlement spending
    7. The first major roll back: the welfare-reform act of 1996


  5. NEXT TIME:
    1. The budget politics continued.
    2. Reading:
      1. Heilbroner and Bernstein, The Debt and Deficits.
      2. Squire and others, Dynamics of Democracy, Chapter 15. Read this material carefully. I will highlight the important concepts.
      3. Please read the material on The Federal Budget Print these graphs:
        1. Read the material and print the graphs:
        2. Trends in Outlays
        3. Outlays by Superfunction
        4. Outlays by Agency
        5. Outlays for Discretionary Spending
        6. Outlays for Entitlements or Mandatory Spending
        7. Outlays for Major Spending Categories
        8. Total Outlays and Receipts as a Percent of GNP
        9. Outlays for Types of Budget Items.

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