The budget and domestic programmes
The federal budget shows government's real priorities, and most of it is spent before Congress even debates it.
Mandatory and discretionary spending
Mandatory spending is required by existing law, mainly entitlement programmes such as Social Security, Medicare, and Medicaid, which pay anyone who qualifies. It makes up the majority of federal spending. Discretionary spending, including defence and education, is set each year through appropriations bills.
Taxes, deficits, and debt
Most federal revenue comes from individual income taxes and payroll taxes that fund Social Security and Medicare. A deficit occurs when spending exceeds revenue in a year; the national debt is the total accumulated borrowing. Fiscal policy uses taxing and spending to influence the economy, while monetary policy, run by the independent Federal Reserve, adjusts interest rates and the money supply.
Major programmes
Social Security, created in 1935, provides retirement and disability income. Medicare (1965) provides health insurance for people 65 and older, and Medicaid (1965) covers many low-income people, funded jointly with states. The Affordable Care Act (2010) expanded health coverage through insurance marketplaces and an expansion of Medicaid.
Flashcard
A programme that pays everyone who meets its criteria
Check your understanding
The Federal Reserve raises interest rates to slow inflation. This is an example of: