Respond to at least two of your peers' posts in a substantive manner. Provide information that they
Question:
Respond to at least two of your peers' posts in a substantive manner. Provide information that they may have missed or may not have considered about the 2018 President's Budget. Do you agree with your peers' findings? Why or why not?
Post 1:
Determine how many times since 1950 the budget has shown a surplus and how many times it has shown a deficit.
According to Table 1.2, the budget has shown a surplus 9 times from 1950 -2016. I did not include 2017-2022 since these were estimated numbers.
1951 (1.9), 1956 (0.9), 1957 (0.7), 1960 (0.1), 1969 (0.3), 1998 (0.8), 1999 (1.3), 2000 (2.3), 2001 (1.2).
And a deficit in 54 years. 1950, 1952-1955, 1958, 1959, 1961-1968, 1970-1997, 2002-2016. With deficits ranging from -0.2 to -9.8.
Identify the 3 years with the highest deficits, and the year with the highest surplus as a as a percentage of GDP. What were the surplus and deficit percentages for these years?
The 3 years with the highest deficits are 2009 with a deficit of -9.8, 2010 with a deficit of -8.7, and 2011 with a deficit of -8.5. The year with the highest surplus is 2000 with a surplus of 2.3 percent of the GDP.
Identify whether the highest deficits incurred in the identified years from Table 1.2 were paid with tax revenues (receipts) or borrowed funds (outlays).
The three years with the highest deficits as shown above are 2009 (-9.8), 2010 (-8.7) and 2011 (-8.5) and were paid with borrowed funds (outlays). The government runs a fiscal deficit when, for a specific period, it spends more money than it takes in from taxes and other revenues.
Discuss how the government gets money and where the government spends money on.
Per Antony Davies (2010), the main way the government gets the money it spends is through taxation. Forty-five percent of federal tax revenue comes from personal income taxes. Another 39 percent comes from Social Security and Medicare withholdings. Since half of Social Security and Medicare taxes come directly out of people's paychecks, about 65 percent of taxes the federal government collects come from individuals. Thirty-two percent of taxes come to the government from corporations. Estate and gift taxes account for only 1 percent of federal tax revenues.
Government spending can be broken down into two primary categories: mandatory and discretionary. Federal government spending pays for everything from Social Security and Medicare, SNAP (food stamps) to military equipment, highway maintenance, building construction, research, and education.
Discuss major discretionary budget eliminations.
The Major Savings and Reforms volume describes major savings and reform proposals included in the 2018 President's Budget. This volume highlights 2018 savings of $57.3 billion in discretionary programs, including $26.7 billion in program eliminations and $30.6 billion in reductions.
Some of the reasons for eliminations of programs include the duplication of programs and the lack of evidence that it is being effectively implemented, and failure to meet the program goals and improper management. Another reason for elimination is that the Administration (at the time) believed that the private sector sources should fund certain activities.
Why is it important that government budgets accurately estimate future revenues during economic downturns?
Accurate estimation of future revenues, especially during an economic downturn, is important for government budgets for several reasons: fiscal planning and stability, deficit management, and policy effectiveness.
Post 2:
According to the data in Table 1.2, there have been nine years from 1950 to 2022 where the budget showed a surplus. These years include 1951, 1956, 1957, 1960, 1969, 1998, 1999, 2000, and 2001. On the other hand, there have been 64 years where the budget showed a deficit. Looking specifically at the years since 1950, the three years with the highest deficits were 2009 (-9.8), 2010 (-8.7), and 2011 (-8.5). It's interesting to note that in the year 2000, there was a surplus that amounted to 2.3% of the GDP.
The years 2009, 2010, and 2011 had the largest deficits, with -9.8, -8.7, and -8.5 respectively. On the other hand, the year 2000 had the highest surplus at 2.3% of the GDP.
During economic downturns, accurately estimating future revenues in government budgets becomes crucial. Major discretionary budget eliminations involve significant reductions in spending on non-essential government programs and services. It is important for governments to have precise revenue estimates to make well-informed decisions about resource allocation and deficit management. Accurate revenue projections enable policymakers to plan for potential shortfalls and adjust spending priorities accordingly. This ensures the maintenance of essential services while minimizing the impact on the overall economy. By carefully assessing future revenues, governments can make strategic budgetary adjustments, prioritize critical areas, and effectively navigate economic downturns. This approach helps maintain fiscal stability and ensures that limited resources are allocated where they are most needed during challenging economic times.
References:
Davies, A. (2010). Where does the government get the money it spends?Retrieved from https://www.mercatus.org/research/research-papers/where-does-government-get-money-it-spendsLinks to an external site.
United States Senate Committee on Appropriations. (n.d.).Budget processLinks to an external site.Links to an external site.. Retrieved from https://www.appropriations.senate.gov/about/budget-processLinks to an external site.
U.S. Government Publishing Office. (n.d.).Budget of the United States GovernmentLinks to an external site.Links to an external site.. Retrieved from https://www.gpo.gov/fdsys/browse/collectionGPO.action?collectionCode=BUDGETLinks to an external site.
Auditing A Business Risk Approach
ISBN: 978-0538476232
8th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg