The
congressional appropriations committees decide the allocation of federal
discretionary spending. If a program needs funding then the appropriations
committees are the source of that funding.
Artificially cheap refers to an undervalued currency caused by foreign central
banks holding large dollar reserves. The foreign currency is cheap relative to
the dollar.
The budget
resolution is the framework within which Congress makes its annual decisions on
taxes and spending. It sets targets for total spending, discretionary spending,
mandatory spending, total revenues, and predicted budget surplus or deficit.
The
Congressional Budget Office is responsible for “reviewing congressional budgets
and other legislative initiatives with budgetary implications” (self described).
The United
States is dependent on foreign countries to fund its investments and finance its
debt, and foreign countries are dependent US consumption in order to sustain
their trade surpluses.
Consumption is the amount of money spent on non-capital goods, goods that do not
generate money. Examples include movie tickets, food, and toys. Consumption is a
part of GDP.
Currency
pegging refers to the practice of fixing currency exchange rates. When a
currency is pegged to the dollar, its value relative to the dollar does not
change.
Discretionary spending is the portion of government spending that is debated
yearly by Congress. It does not include the costs of entitlement programs.
Entitlements guarantee specific benefits to a segment of the population
according to a legislated formula. They are not part of the budget resolution.
Examples include Social Security, Medicare, and Medicaid.
Excess
cost growth is growth of expenditures in excess of GDP growth. Expenditures
growing with zero excess cost growth would grow at the same rate as GDP.
Externalities are economic side-effects. They are the costs or benefits from an
economic activity that affect somebody other than the people engaged in the
economic activity. They are not reflected fully in prices. An externality is a
form of market failure. Examples include pollution and education.
GDP, or
Gross Domestic Product, is the broadest measure of economic activity in a
country. It measures the total annual output of a country. GDP per capita is the
best measurement of economic well being.
Generational accounting is a method of calculating the burden of debt, in the
form of taxes, on future generations.
Inflation
is the increase in the overall price level of the economy. When the price level
of the economy rises everything costs more. To compensate, wages also rise. This
causes the currency to devalue.
Interest
is the cost of borrowing. It is usually expressed as an annual rate.
Investment
is the amount of money spent on capital goods, goods that are used to generate
money. Examples include factory equipment, long-haul trucks, and computers.
Investment is a part of GDP.
Medicaid
is the government program that provides healthcare for the poor.
Medicare
is a government program that provides healthcare to senior citizens and the
disabled.
National
debt is the total amount of borrowed funds that have not been paid back by the
federal government. The federal debt takes the form of treasury bonds sold to
the public.
National
savings is the total amount of savings in a country. Debt is negative savings.
The amount of savings determines the amount of money available for loans.
Net
exports are the amount of money generated by exports minus the amount of money
spent on imports. Negative net exports are trade deficits. Net exports are a
part of GDP.
The
payroll tax is the tax that funds social security. Half of the tax is paid by
the employer and half is paid by the employee.
Per Capita
Per unit of population; per person.
Preventive
health care is basic health care intended to prevent healthy individuals from
needing more serious health care.
Price
indexing is the practice of adjusting prices to account for inflation.
Social
Security is a federal entitlement program that gives benefits to elderly and
disabled persons. The Social Security plan takes a portion of workers paychecks
and distributes the money to retirees. It is a pay-as-you-go system meaning that
tax revenues from current workers pay for current retirees.
Tax-preferred accounts are savings accounts that are excluded from various taxes
and thus the holder receives a tax incentive.
The Tequila crisis
occurred when foreign investors lost confidence in the Mexican government’s
ability to maintain the artificial high value of the peso (the Mexican
currency). When this happened foreign investors started getting rid of their
entire peso denominated stocks and bonds. This caused the value of the peso to
plummet, creating inflation as import prices rose. Furthermore, interest rates
rose in order to encourage foreign investment. All of these factors caused
Mexico to go into a recession and its GDP decreased by 7% according to Trond
Gabrielsen.18
Transparency refers to “the full, accurate, and timely disclosure of
information.”
The
taxable income cap is a limit to the social security tax. Only the first $94,200
of a person’s income can be taxed each year. Adjusting this cap changes the
amount of revenue generated by the tax.
