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U SING E-MAILElectronic mail, or e-mail, involves communicating through the use of a computer terminal.To send or receive e-mail, you need a modem—a device that that allows communicationthrough a telephone line. You also need to subscribe to an Internet service through a serviceprovider, such as America Online, CompuServe, or an independent regional service.
To send an e-mail, type in your message and proofread it for errors. In the “To:” space, type inthe e-mail address of the recipient. In the “Subject:” space, type in the subject of your e-mail. Ifyou want to send a copy of the e-mail to someone, type in the person’s name in the “Cc:” space.
Directions: Find a magazine or newspaper that accepts letters to the editor by e-mail. Then create a newmessage and send the e-mail to the source you chose. Send a copy of the e-mail to one of your classmates.
1. What information should you enter in the “To:” portion of the message header?
2. What information should you enter in the “Subject:” portion of the message header?
3. Why is it not necessary to identify yourself in the body of your message?
4. What do you do to send your message?
New Memo Delete Forward Reply
To:
Fr:
Who Date
Subject
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22
Reinforcing Economic Skills 22
C HAPTER 16 GOVERNMENT SPENDS, COLLECTS,AND OWES
Directions: Read each statement below, and then write the letter of the correct answer.
1. Goods or services supplied by the government, such as education, national defense, and health care
a. Public works b. Public goods c. Public aid
2. One way taxation provides for less wealthy citizens
a. Tax breaks b. Income reduction c. Income redistribution
3. Pays benefits to the unemployed, retired workers, and disabled workers
a. Social insurance program
b. Worker’s compensation
c. Medicaid
4. A state program that provides low-cost health care for the elderly and disabled
a. Medicare b. Welfare c. Medicaid
5. Examples of merit goods in United States society
a. Alcohol, tobacco, injurious drugs
b. Roads, sewers, airports
c. Museums, classical music concerts, ballets
6. Examples of demerit goods in United States society
a. Alcohol, tobacco, injurious drugs
b. Roads, sewers, airports
c. Museums, classical music concerts, ballets
7. Deficit financing occurs when
a. the government spends more than it takes in.
b. the government loans money to banks.
c. the government raises taxes for businesses and individuals.
8. The United States government’s fiscal year runs from
a. July 1 to June 30.
b. October 1 to September 30.
c. January 1 to December 31.
9. A tax such as a state food tax that puts more financial pressure on people with lower income
a. Progressive tax b. Regressive tax c. Proportional tax
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Economic VocabularyActivity 16
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OVERNMENT SPENDS, COLLECTS, AND OWESUnderstanding how and why the government acts can help you, as a future voter, to betterparticipate in the election of government decision makers.
Directions: Indicate whether each of the following taxes is progressive, regressive, or proportional.
1. income tax of $500 on all persons
2. tax of $3 on every $10 earned
3. 50 cent sales tax each time a person buys food in a grocery store, regardless of the amount of the purchase
4. income tax of 10 percent on incomes of less than $15,000, 20 percent on incomes between $15,000 and $30,000, and 30 percent on incomes over $30,000
5. 12 percent tax on all income
Directions: Study the following pie graphs to answer questions 6 through 10. Use the space below to compute your answers.
Rank in order the three taxes that brought in the largest amounts of revenue in:
6. 1932 first: second: third:
7. 1997 first: second: third:
8. Which tax was important in 1997 but brought in no revenue in 1932?
9. Besides this tax, which tax had the greatest increase in percentage of total revenue between 1932 and 1997?
10. Which two taxes had decreased the most by 1997? By how much had they decreased?
Other 2%
Estate andGift Taxes 2%
CustomsDuties
Customs Duties
CorporateIncome
Tax
IndividualIncome TaxExcise Taxes
Other 2%
Estate andGift Taxes 1%
Social InsuranceTaxes and
Contributions
CorporateIncome
Tax
IndividualIncome Tax
Excise Taxes 4%
Revenue of the Federal Government, 1932 and 1997
17%
24% 22%
33%
43%
36%
12.5%
Sources: Historical Statistics of the U.S., Budget of the U.S.Government, Fiscal year 1997, Information PleaseAlmanac, Houghton Mifflin, 1997
1932 1997
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Reteaching Activity 16
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B ALANCING THE FEDERAL BUDGETWhenever the federal government spends more money than it takes in, there is a budgetdeficit. The government must then balance the budget by raising taxes, reducing spending, orborrowing money.
Directions: Assume that you are a presidential adviser and have been asked by the president to recom-mend a plan to reduce the deficit by decreasing spending. However, any cut in spending will hurt somepeople and help others. You will have to weigh the trade-offs.
A. Below is a list of 10 programs that could be cut. Each program serves one or more of the following nationaleconomic goals: efficiency, growth, security, equity, and individual freedom. In the chart below, list the goal(s)that each of these programs serves.
B. Now select six of the above programs that you would keep in the budget. List each one below. State the trade-off you made in economic goals, and who gains and who loses by your choice.
1. 2.
3. 4.
5. 6.
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Program Economic Goals
1. Medical care for the poor and elderly
2. Aid to farmers
3. Grants to states for fighting crime
4. Job training for the unemployed
5. Food stamps for low-income families
6. New weapons for defense
7. Financing road and bridge repairs
8. Financing toxic waste clean-ups
9. Financing drug rehabilitation centers
10. Financing international war on drug dealers
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T HE FEDERAL BUDGETIn 1992 deficits in the federal budget peaked at $290 billion. At that time, no one thought thebudget could be balanced by the year 2000. Unexpectedly, however, the deficit fell to $23 bil-lion in 1997. In 1998 the federal government issued its first balanced budget since 1960. By1999 government officials were arguing about how to spend the government’s surplus money.How would you make federal budget decisions?
Directions: Complete the exercises below to show how you would make budget decisions.
1. Suppose Congress gave the Office of Management and Budget the authority to spend the government’s surplusin the following five main budget areas.
If you were a member of a committee deciding where the surplus money would go, which areas would you target and why?
2. Three members of Congress describe their districts in this way:
Representative A: In my district, almost half the workers are employed by companies that depend on defensecontracts to survive.
Representative B: My district has many old factories, one city that is trying to renew itself, high unemploy-ment, and pollution problems.
Representative C: Many voters in my district are either farmers or retired people.
Which programs would Representative A probably want to expand?
Representative B?
Representative C?
Other socialSocial welfare Other domestic The national
Defense Security programs programs debt
MX missiles Retirement Medicaid Education PrincipalSpacebased benefits Subsidized Energy
weapons Cost of living housing Price supports forNew submarines increases Unemployment farmersNew attack Medicare insurance Public transportation
planes payments Food stamps Public worksForeign military Veterans’ benefits Health research
aid
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15OVERNMENT SPENDS, COLLECTS, AND OWES
A LOOK AT THE FEDERAL BUDGET
Directions: Use the tables provided to analyze federal spending.
1. What were the federal government’s total revenues? Total expenditures?
2. What was the total deficit for the year?
3. Express the deficit as a percentage of revenues.
What does the percentage mean in terms of trying to achieve a balanced budget?
4. Express the deficit as a percentage of expenditures.
What does the percentage mean in terms of trying to achieve a balanced budget?
5. Assuming all other factors remain unchanged, how will the current deficit affect expenditures in the year following the one shown on the table? Assume that the government pays 5% interest on the public debt.
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Federal Revenues for a Recent Year(billions of dollars)
Personal Income Tax $476.0
Social Security Tax 413.6
Business Income Tax 100.2
Excise Taxes 45.5
Other Taxes 28.5
Trust Funds 23.7
Federal Reserve Deposits 22.9
TOTAL
Federal Expenditures for a Recent Year(billions of dollars)
Health and Welfare $585.7
Defense 298.4
Interest on Debt 199.4
Veterans 69.0
Education 45.2
Transportation 33.3
Natural Resources 20.0
International Affairs 17.8
Space and Technology 16.4
Agriculture 15.0
Other 81.6
TOTAL
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Economic Concepts 19
01940 1950 1960 1970 1980 1990
300,000
600,000
900,000
1,200,000
Federal Finance(Millions of Dollars Per Fiscal Year)
Expenditures Receipts
F ISCAL POLICYThis graph shows the relationship between government receipts and government expenditures in ten-year intervals.
1919
Economic Concepts Transparency 19
Primary and Secondary Source Readings 14, 15
this nation still borrowed $244 billion from the next gen-eration for government services that we used but didn’twant to pay for. Such increases in debt can occur in partbecause the U.S.’s federal accounting system seems delib-erately designed to mask borrowing—to hide the truedebt and true deficit. Of course, as long as debt can behidden the problem can be minimized.
How can the true state of budget be camouflaged? It’sfairly easy when the stated federal debt doesn’t reveal allthe debts we actually leave to the next generation. Everyyear this country adds dramatically to the costs left to thenext generation through something called “unfunded lia-bilities”—obligations left to our children for benefits weare now enjoying: military pensions, federal civil servicepensions, increases in Social Security and Medicare. . . .
To be sure, deficit spending is worldwide and can befound at every level of government. But at least Europeancountries are starting to debate what it will take to retire thebaby boomer generation. One way we avoid that debate isprecisely through the clever accounting system called theUnified Budget, which allows legislators to borrow from alarge number of federal trust funds without having thatborrowing reflected in the consolidated federal budget. . . .
In essence, our government has constantly understat-ed the extent of the debt we are leaving our children bysurreptitiously borrowing “off the books.” . . .
We have presented, then, two good reasons for bal-ancing the budget. One is the moral imperative to pay forthe services we enjoy. The other grows out of a moralimperative to be truthful about the money we spend: ifAmericans really had an accurate accounting of howmuch their nation’s spending exceeds its fundingresources, they would, we believe, be more likely todemand that their country’s fiscal house be put in order.
There are of course, equally good practical reasons tobalance the budget. If this country does not achieve fiscalresponsibility, the next generation will face national bankruptcy. . . .
One of the reasons Americans have such a hard timebalancing the budget—or even being honest about thefull extent of obligation on the next generation—is thatfiscal responsibility means we must make some painfuladjustments in America’s most popular programs. . . .There is no silver bullet that will bring about a balancedbudget.
Lamm, Richard D., and Hank Brown. “The Best of Legislation, the Worst ofLegislation.” The Christian Century, December 3, 1997.
30 Primary and Secondary Source Readings
ANALYZING THE READING
1. According to the article, what was beneficial about the 1998 budget?
2. Why is it important to balance the budget?
3. What are “unfunded liabilities”?
4. What are, according to the authors, the moral and practical reasons for balancing the budget?
5. Based on your reading of this article, do you feel that the budget should be balanced? Why or why not?
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EXAMINING THE CARTOON
Multiple Choice
1. What movie does the cartoon allude to?
a. Gone With the Wind b. The Wizard of Oz c. Casablanca d. The Phantom Menace
2. Where are the flying monkeys going?
a. to collect taxes b. to report to Congressc. to audit taxpayers d. to pay for government programs
Critical Thinking
3. Analyzing the Cartoon What is the significance of the witch’s words to the monkeys?
4. Expressing Your Opinion Do you think the commentary by the small characters in the lower left adds to ordetracts from the cartoon? Why?
�
F LIGHT OF THE IRSThe Internal Revenue Service (IRS), charged with collecting taxes, is quite possibly everyone’sleast favorite government agency. Under fire in recent years for using bullying tactics it’s nowonder that the IRS is a favorite target of political cartoonists.
Directions: Study the cartoon below. Then answer the questions that follow.
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OLIPHANTcUNIVERSAL PRESS SYNDICATE. Reprinted with permission. All rights reserved.
Economic Cartoons Activity 14
A. Federal Spending B. GDP C. Federal Spending Percent(in billions of Percent (in billions of Percent Per Capita Increase or
Year 1992 dollars) Increase 1992 dollars) Increase (in 1992 dollars) Decrease
E VALUATING INCREASES IN FEDERAL SPENDING
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Spending by the federal government increased from $590 billion in 1980 to nearly $1.7 trillion in 1998 (adjusted for inflation to 1992 dollars in the table below). During the same period other economic indicators, such as theConsumer Price Index and the Gross Domestic Product, also rose. To find whether federal spending increased fasterthan other parts of the economy, complete the table below.
To calculate the percent of increase over 5 years in columns below, subtract the figure for 5 years earlier from the figure forthe given year. Then divide that amount by the earlier figure. For example, the solution to problem (1) would look like this:
(1,210 � 1,020) � 1,020 � 0.186, or 19%
Source: Statistical Abstract of the United States: 1998
During which 5-year period did federal spending (using inflation-adjusted dollars) increase the most?
(13) During which 5-year period did federal spending per capita increase the least?
(14) How is using the percent of increase helpful in answering questions 13 and 14?
(15)
Now look at data sets A, B, and C. Which set or sets would you use to support an argument that federal spending
has grown excessively in the last 20 years? (16)Which set or sets would you use to support an argument that federal spending has not grown in comparison to the
rest of the economy since 1980? (17)
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1980 1,020 4,615 4,476
1985 1,210 (1) 19% 5,324 (5) 5,017 (9)
1990 1,350 (2) 5,744 (6) 5,438 (10)
1995 1,410 (3) 7,265 (7) 5,354 (11)–
1998 1,440 (4) TK (8) 5,337 (12)–
Application and EnrichmentTeaching Transparency
Application and Enrichment
Review and Reinforcement
422A
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 16
resident Clinton and the Republican and Democraticleadership made national news in August when theysigned the 1998 federal budget legislation andannounced that at long last the federal budget was goingto be balanced. How much should we celebrate? To para-phrase Charles Dickens, it was the best of legislation, itwas the worst of legislation. Indeed, the legislation’s ambi-guity is a wonderful example of why citizens find it so hardto evaluate public-policy actions—or even to know who istrustworthy enough to deserve a hearing.
That Congress got a bipartisan agreement inWashington’s partisan atmosphere is no small achieve-ment. Political in-fighting on Capitol Hill often allows ournation to go months into the new fiscal year without afederal budget. . . .
The legislation [this year] did numerous things likereduce the capital gains tax and restore benefits to legalimmigrants. . . . Most importantly, though, this agreementreflected a sharp philosophical change across the entirepolitical system. There is now bipartisan agreement—ver-bal at the least—on the need to balance the federalbudget. That both political parties seem to recognize thatwe can’t borrow indefinitely from the future is a majorstep forward. Debt is economic cocaine: it is a hard addic-tion to break.
But this was also, to continue the Dickens paraphrase,the worst of legislation. It did not balance the budget, andit did not acknowledge or take into consideration the truenature of the budgetary challenge that lies a few years inthe future. . . .
But many Americans, probably many readers of thisarticle, will ask why it is important to balance the federalbudget. The question needs answering. First, as a matterof sheer principle, we feel that every generation shouldpay its own way. Thomas Jefferson said it so well: “No
generation can contract debts greater than may be paidduring the course of its own existence. The earth alwaysbelongs to the living.” We agree that it is appropriate toborrow from the future in emergency circumstances—when you’re fighting Hitler and a Depression, for example.But this country is now borrowing from the next genera-tion to maintain our standard of living. . . .
Thomas Jefferson said it so well:
“No generation can contract debts
greater than may be paid during the
course of its own existence. The
earth always belongs to the living.”
Look at how we have been increasing the borrowingcompared to the size of the economy (gross domesticproduct)—one good indicator of the magnitude of theborrowing:
Debt GDP1981 $1 Trillion $3 Trillion1986 $2 Trillion $4 Trillion1992 $4 Trillion $6 Trillion1997 $5.4 Trillion $7.8 Trillion
In a few short years, the present generation hasincreased the federal debt from one-third of the GDP tofive-sevenths. . . .
Second, we feel that our legislators should tell thetruth about our nation’s finances. Though political leadersbragged last year of “the smallest federal deficit in years,”
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Primary and Secondary Source Readings 29
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T HE BEST OF LEGISLATION,THE WORST OF LEGISLATION
Balancing the federal budget is one of the top priorities of the government every year, and avery difficult one, according to Richard D. Lamm, former governor of Colorado, a Democrat,and Hank Brown, former Colorado senator, a Republican. The effectiveness of legislation tobalance the budget will determine the amount of debt left to future generations. As you read theexcerpt below about the legislative debate in 1998 and the need to balance the federal budget,consider why budgets are necessary and what makes a budget successful or unsuccessful.
15
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95% of all government aid to the poor. Today, as tradi-tional welfare ends, nearly a third of all benefits for theneedy come from the $28 billion earned-income credit—which cost barely $2 billion a decade ago.
Most new tax breaks are aimed at the middleclass. . . . But these goodies aren’t free. Just like spending,
somebody has to pay for them. That’s why tax rates havebeen creeping up.
Gleckman, Howard. “Break the Tax-Break Habit.”Business Week, February 16, 1998.
28 Primary and Secondary Source Readings
ANALYZING THE READING
1. What is the author’s thesis?
2. What are “targeted tax breaks”?
3. When the article was written, how much did the mortgage interest deduction cost? Why does the author citethis example?
4. Which expenditures consume the bulk of the federal budget?
5. Do you agree with the author’s position that too many tax deductions are available to middle class citizens?Explain your answer. C
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balanced budget—the first in 30 years—is a stunningachievement. But in its crusade to eliminate the federaldeficit, Washington has dramatically changed how itspends and how it taxes. With Congress reluctant toincrease spending, politicians are turning to the tax codeto further their agendas—whether boosting child care orrewarding investors.
The cost of targeted tax breaks—tax credits anddeductions aimed at specific constituencies—hasincreased more than 40% over the past decade to $535billion a year. That’s almost as rapid as the well-publicizedgrowth of Medicare and Social Security spending. Taxloopholes now cost the Treasury almost as much as thegovernment spends on all non-entitlement programscombined.
It’s a dangerous game that makes an already complextax code even more complicated. Worse, it hides all sortsof subsidies. If Washington wants to encourage certainpractices, it should do so by spending, rather thanthrough back-door tax breaks.
President Clinton’s fiscal 1999 budget perpetuatesthe trend. His plan would add 30 new breaks to the 150now in the code. The dollars are modest—about $24 bil-lion over five years. But history shows that once enacted,such loopholes almost never go away and just get bigger.Just think about what has happened to the deduction formortgage interest. A decade ago, it cost the treasuryabout $20 billion. This year, the deduction has grown tomore than $53 billion. Most new spending, by contrast,must be approved by Congress each year. Says formerCongressional Budget Office Director Rudolph G. Penner:“We’re seeing the face of the new middle-class entitlements.”
Clinton, however, is only carrying on a tradition thatthe gop has observed for years. In fact, Republicans andDemocrats will spend much of this year wrangling overdueling tax breaks. The President, for instance, wantsincentives to expand day care; Republicans would rather
reward stay-at-home moms. Clinton is pushing tax incen-tives for public schools; the gop wants new tax breaks toboost private education.
Sometimes, new loopholes even fight existing breaks.To encourage clean energy usage, Clinton would providemore than $1.5 billion in tax breaks for everything fromwindmills to high-efficiency autos. Yet the law alreadygives away $1.5 billion to boost production of the veryfossil fuels Clinton wants to curb. . . .
If Washington wants to encourage
certain practices, it should do so by
spending, rather than through
back-door tax breaks.
Recently, the focus of tax subsidies has been shiftingfrom corporate welfare to social engineering. Before theTax Reform Act of 1986, about 27% of special tax bene-fits went to companies. Today, it’s only about 11%. SaysHouse Majority Leader Richard K. Armey (R-Tex.). . . . “Thecode is being used to reward you for what they want youto do.”
These tax tactics are no surprise considering what hasbeen happening to spending: While retiree benefits haveballooned, other programs have shriveled. In 1969, 18%of the budget went to Social Security and Medicare. In fiscal ‘99, those programs will cost twice that. Total spend-ing for senior citizens, interest on the debt, and nationaldefense will eat up a staggering 85% of the budget.
With only 15% left for everything else, from aid topoor families with kids to export subsidies, pols [politi-cians] turn to the tax code. Take welfare policy. In 1989,direct spending on such programs as welfare, foodstamps, and housing subsidies accounted for more than
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Primary and Secondary Source Readings 27
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B REAK THE TAX BREAK HABITFew issues are more contentious than taxation. At the most basic level, the government uses our money to pay its bills and provide public services. But the American tax code is long and complex and the source of regular heated debate. In the article below, analystHoward Gleckman discusses the phenomenon of expanding tax loopholes for middle class citizens. Consider your own opinion about this issue as you read the commentary. Thenanswer the questions that follow.
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P AYING TAXES
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Many factors affect how much income tax you pay. Two important factors are how much youearn and where you live. The amount you pay in federal taxes does not depend on where youlive, but the amount you pay in state taxes varies from state to state.
Take a look at federal income tax first. Currently there are four tax brackets for individuals: 15 percent, 28 percent,31 percent, and 36 percent. In addition, individuals with taxable incomes over $250,000 must pay a 10 percent surtax,which actually creates a top tax rate of 39.6 percent.
Here is how to calculate federal tax for a single individual:
If taxable income But not more than You pay of the amountis more than over
$0 $22,100 15% $022,100 53,500 $3,315 + 28% 22,10053,500 115,000 12,107 + 31% 53,500
115,000 250,000 31,172 + 36% 115,000250,000 79,772 + 39.5% 250,000
Directions: Use the table to compute the tax that would be paid on each of the following incomes:
(1) $12,000
(2) $28,000
(3) $53,600
(4) $120,000
(5) $260,000
What you pay in state income tax depends on what state you live in. Some states have a range of tax rates. Some,such as Illinois, Michigan, and Pennsylvania, have a flat rate, which applies to all incomes. Other states, like Connecticut,have a graduated tax. Still other states, such as South Dakota, have no state income tax at all.
Suppose your taxable income was $12,000.
(6) If you lived in Illinois, you paid 3 percent, or $ .
(7) If you lived in South Dakota, you paid 0 percent, or $ .
(8) If you lived in Michigan, you paid 4.3 percent, or $ .
(9) If you lived in Connecticut, you paid $300 plus 4.5 percent of earnings above $10,000, or .
(10) If you lived in Pennsylvania, you paid 2.8 percent, or $ .
If your taxable income was $43,000, how much would you pay in state income tax in
(11) Illinois? (12) Michigan?
Sales tax rates also vary from state to state. For example, the state sales tax in Hawaii is 4 percent, in Mississippi 7 percent, in Florida 6 percent, and in Indiana 5 percent.
How much sales tax would you have to pay on a $12 CD bought in
(13) Hawaii? (14) Mississippi? (15) Florida? (16) Indiana?
How much sales tax would you pay on a $975 couch bought in
(17) Hawaii? (18) Mississippi? (19) Florida? (20) Indiana?
Math Practice for Economics Activities 14, 15
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F EDERAL INCOME TAX AND YOUFederal income taxes appeared on the American scene in 1913. That year, the tax was a flatrate of 1% on incomes more than $3,000 and only one in every 271 Americans paid incometaxes. How things have changed! Today even dependent children may pay income taxes, asthe following tax rules show.
Any child under age 19, or a full-time student under age 24, must file a return if he or she:
• earned $4,300 or more during the year
• received unearned income (i.e., stock dividends or interest on savings accounts) of $700 or more
Most children are taxed at the lowest rates:
• 15% for wages and bank interest
• 10% for dividends on stocks and other capital gains
The exception is the “kiddie rule,” which states that children must pay at their parents’ rate if:
• the child is under age 14
• the child has investment income of more than $1,400
Parents should declare their children’s income on their own income tax return if the child is
• under age 14, and
• makes an income of less than $700 in bank interest and dividends
Directions: Use the information above to complete the exercises.
Last year Maria, a high school senior, made $3,900 baby-sitting and $500 in dividends from stocks her grandmothergave her.
1. Does Maria have to file an income tax return? Why or why not?
2. Does the government get any tax money from Maria’s earnings? Explain.
This year Perry is a college freshman and plans to use the $3,000 his investments will earn to pay for his entertainment expenses, such as rock concerts.
3. How much should Perry set aside for income taxes?
Tomo has banked all the checks he ever received as birthday gifts. Now, at age 13, he earns $1,500 interest on hissavings each year.
4. How much tax will Tomo have to pay on the interest?
5. How did you arrive at your answer?
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Consumer ApplicationsActivities 14, 15
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T AX HOLIDAYAlmost all states levy sales taxes. Some states try tomake sales taxes easier to pay by not taxing foodbecause poorer people spend a higher proportion of their income on this need than do more affluentpeople. Suppose, in an effort to make sales taxes fairer, that one state’s governor declared a “tax holiday” on its 8.5% sales tax just before schoolopened. Any article of clothing that could be wornto school with a price of less than $100 would betax-free for three days.
Directions: Calculate the amount of tax that would be saved onJuanita’s purchases, shown in the chart, during this tax holiday. Thencomplete the exercises.
1. a. How much would the total tax have been on these purchases before the tax holiday?
b. How much is the total tax during the tax holiday?
c. How much did the buyer save in sales tax?
2. Why do you think items priced $100 or more were ineligible for the tax break?
3. How do you think people with limited incomes might have benefited from a tax break on more expensive items? Explain.
4. Choose a taxed item that you think should have been included in the back-to-school tax holiday. Explain yourchoice.
5. Suppose that critics claimed that the tax holiday did little to help poor people and was merely a gimmick toenhance the image of the governor. Would you agree? Why or why not?
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Hooded sweater $ 40.00
Jeans 45.00
Skirt 35.00
Raincoat 115.00
Digital watch 39.00
Slip-on loafers 36.00
Prescription glasses 58.00
Long-sleeved shirt 25.00
Running shoes 138.00
Perfume 15.00
Leather jacket 159.00
Book bag 40.00
Printer paper 5.00
Juice boxes 4.50
Calculator 10.00
Ballpoint pens 1.80
Subtotal
Tax
Total
Juanita’s School Purchases
Free Enterprise Activities 14, 15
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G OVERNMENT SPENDING
GROUP PROJECT
Our government provides numerous services the citizenry deems necessary for the publicgood. Each year the government must go through a complicated process to decide whatshould be funded and how much should be spent on each program. In the following activity, your group will examine the federal budget approval process and develop a new budget for the upcoming fiscal year.
▼MATERIALS:
Your textbook, chart or graph paper
1. Group Work Stage 1: Students work in groups of six or more. Decide what major government services (such as Health, Transportation, orEducation) the federal government should spend its revenues on in the coming fiscal year. Your groupmay use the categories discussed in your textbookor create new ones you believe are necessary.Assign each member to one or more programs.
2. Paired Work Stage 2: Students work in pairs.Write a paragraph explaining why your assignedprogram(s) is essential to the federal government.Estimate the percentage of the federal budget thatyou think this program should receive.
3. Group Work Stage 3: Students work in groups ofthree. Create a flow chart illustrating the processthe budget should go through to be approved. Youmay use the diagram in your textbook as a guide.Revise the process as you feel necessary to make itas efficient as possible.
4. Group Work/Analysis Stage 4: Students return tothe original groups from Stage 1. As a group, decidehow the federal budget should be divided amongthe programs you selected in Stage 1. Each membershould present their argument for the amount theirprogram should receive. Then members shouldassign a percentage to each program, recordingtheir decisions in the table above. Create a circle graph that illustrates your final budget.
Group Process QuestionsDid the group agree on the assignment of tasks?
Did members work well together?
Was the group decision-process easy or difficult?
What was the most important thing you learned?
COOPERATIVE GROUP PROCESS:
Name Date Class
15
Federal Program Percentage of Federal Budget
Cooperative Learning Simulations and Problems 14, 15
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T AXES
GROUP PROJECT
The federal, state, and local governments need an enormous amount of money to provide theservices they do. Governments tap many sources, but taxes on income, sales, and propertyare the single most important way by which they raise revenue. In your group, select one ofthe methods of increasing tax revenues described in your textbook. Create posters and compose brief speeches advocating your preferred method of taxation if you must be taxed.
▼MATERIALS:
Posterboard, art materials
Sources of Government Revenue
1. Group Work Stage 1: Form small groups of five to eight students. Discuss why taxes are collected,how governments use taxes, and what you feel tobe the positive and negative effects that taxes haveon individuals and the economy. Select one groupmember to be the recorder who will enter informa-tion in a chart like the one above.
2. Group Work Stage 2: Review the information in your textbook about sources of government revenue. Use this data to complete the chart. Cometo a consensus about which of the methods of raising tax revenues is preferable.
3. Individual Work Stage 3: Prepare a poster advertising the group’s preferred tax and a briefspeech (one to two minutes) to be delivered at a tax demonstration.
4. Group Sharing Stage 4: Members share theirposters and give their speeches to the group. If your group agrees that further strategies need to be developed to promote your point of view at thedemonstration, discuss what they should be andhow to implement them.
5. Group Application Stage 5: As a class, stage atax demonstration at which members of all groupshave a chance to display their posters and delivertheir speeches. Members may also respond to others’ speeches.
Group Process QuestionsWere the goals of this assignment clear?
Did members work well together?
Did each member contribute ideas and information?
What would you do to improve the group work?
COOPERATIVE GROUP PROCESS
Name Date Class
14
Tax Who Is Taxed? Pros/Cons
Individual income
Sales
Property
Corporate income
User fees
VAT
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B IAS AND GOVERNMENT SPENDINGIn the town of Lakeside, a large parcel of land on Raccoon Lake is for sale. One group of citizens wants the town government to buy the land and turn it into a nature preserve.Another group wants to make the land available for houses. The following two letters, eachadvocating a different point of view, were sent to the Lakeside Weekly News.
Directions: Read the letters and look for signs of bias, and then answer the questions that follow.
Letter 1
To the Editor: The population of Lakeside is growing. Young families are desperate for housing. Depending on how itis subdivided, this land could provide homes for ten to fifteen families. People have a right to have houses on thelake, so that they can enjoy the wholesome sports of swimming and boating. Only tree huggers and nature extremistsobject to building houses here. And if the town buys the land, our taxes will go up outrageously.
Letter 2
To the Editor: We, as a community, need to preserve this place of natural beauty for future generations. The land alongRaccoon Lake is home to many wildflowers and animals. Every year, hundreds of hikers, birdwatchers, and other peopleuse this land for recreation. If houses are built on that land, it will become ugly and barren. Turning this natural paradiseinto a housing development would be a tragic loss for Lakeside.
1. Identify the statements of fact in each letter.
2. Writers often show their bias by using emotional language. Identify examples of emotional language in each letter.
3. A person’s bias is affected by his or her background, including such things as occupation, family and financial situation, and hobbies. What are some specific factors that might affect the point of view of each of the letterwriters?
4. On a separate sheet of paper, list questions that you might ask each letter writer to help yourself evaluate his orher point of view.
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S YNTHESIZING FIGURES FOR CHANGE IN GOVERNMENT REVENUES
Synthesizing information involves integrating facts.
Directions: Use the information in the table below to help understand how the government’s source ofincome changed between 1995 and 1998.
1. Calculate the percentage of change for each revenue source. Use your answers to complete the above table. (To find the percentage of change between 1995 and 1998, divide the difference by the amount for 1995.)
2. The amount of which source of revenue changed least between 1995 and 1998?
3. What were the federal government’s net budget receipts in 1995? 1998?
4. What is the percentage of change in total revenues between 1995 and 1998?
5. What two sources of revenue increased more than the average from 1995 to 1998?
6. Based on the new information you have calculated, what is one conclusion that you can draw?
1414
Sources 1995 1998 % of Change
U.S. Budget Receipts
(in millions of Dollars)
Net Budget Receipts
All other receipts
Estate and gift taxes
47,527 50,567
14,763
57,484
484,474
157,004 188,677
571,835
57,669
24,076
$590,243
Excise taxes
Social insurance taxes
Corporation income taxes
Individual income taxes $828,597
Critical Thinking Activities 14, 15
Spanish Economic Concepts Transparency 19
Spanish Vocabulary Activity 16
Spanish Reteaching Activity 16
Spanish Section Quizzes for Chapter 16
Spanish Chapter 16 Audio Program, Activity, and Test
Spanish ResourcesReading for the Student
Clayton, Gary E., et al. A Guide to Everyday EconomicStatistics. Columbus, OH: McGraw-Hill, 1997. Explains thestatistics used to measure the economy.
Reading for the TeacherMorgan, Iwan W. Deficit Government: Taxing and
Spending in Modern America. Chicago: Ivan R. Dee, 1998.Analysis of budget policy trends since the 1930s.
Additional Resources
Vocabulary PuzzleMaker CD-ROM
Interactive Tutor Self-Assessment Software
ExamView® Pro Testmaker
NBR Economics & You Video Program (English/Spanish)
Presentation Plus!
Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2
TeacherWorks CD-ROM
MindJogger Videoquiz
Interactive Economics! CD-ROM
Audio Program (English or Spanish)
Technology and MultimediaYou and your students can visit ett.glencoe.com—
the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:
• Chapter Overviews • Student Web Activities
• Self-Check Quizzes • Textbook Updates
Answers are provided for you in the Web ActivityLesson Plan. Additional Web resources and InteractivePuzzles are also available.
Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.
ECONOMICS
Assessment and Evaluation
ExamView® Pro Testmaker
PROCEDURE
1. On the chalkboard, copy the following table showing expenditures by a state government.
State Expenditures Millions of Dollars Percent of Total
General Government 1,238 3.5
Education 13,416 38.3
Employee Benefits 1,618 4.6
Health and Human Services 12,005 34.3
Public Safety and Corrections 1,938 5.5
Transportation 2,726 7.8
Natural Resources and Recreational Services 589 0.7
Regulatory Agencies 169 0.5
Debt Service 348 1.0
Agricultural Development 999 2.8
Total Expenditures 35,046 100
2. Organize the class into small groups. They are responsible for creating a state budget for next year. The statetotal budget and expenditures is $35,046,000,000. Distribute the following scenarios to each group:
• The state has promised to put a computer in every classroom, at a cost of $50 million.• The state oil industry goes into a slump, and the state loses $130 million in state revenues.• Activists pressure the state to buy and protect four million acres of private forestland at a cost of $500 million.• State employees demand a 30% increase in benefits ($485 million more) to cover the rise in the cost of living.• Human Services has asked for $200 million more for the state’s 1.1 million children living in poverty.
3. Tell groups to assume that state revenues are the same unless otherwise indicated in the scenario.
4. Ask each group to make a poster-sized circle graph showing the state’s budget for next year.
Assessment
1. Have each group appoint a speaker to explain the budget changes to the rest of the class.
2. Ask each student to draw a political cartoon commenting on one of the budget changes.
▼ BACKGROUND
Considerable debate and compromise are necessary to prepare an annual governmentalbudget. Because all resources are scarce, anincrease in spending in one area will eitherincrease debt or decrease spending in anotherarea.
▼ MATERIALS
▼ OBJECTIVES
After completing this activity, students will beable to• Understand the need for compromise when
creating a government budget.• Adjust a budget to accommodate changes
in people’s needs.
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G OVERNMENTAL BUDGETS
Name Date Class
RUBRICSgraph, oral presenta-tion, cartoon
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Compasses, protractors, markers, calculators, and poster board
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16, A
13. A federal program that provides monthly payments to people who are retired or unable to work is called
a. Medicare. b. Senior Citizen’s program.c. Social Security. d. worker’s compensation.
14. Since the end of World War II, the size of the U.S. government
a. has remained about the same. b. has grown proportionally to the increase in the population.c. has grown much faster than the population.d. has not kept up with the increase in the population.
15. Single parents in need of aid to raise their young children may qualify for
a. public goods. b. Medicaid.c. Social Security. d. Temporary Assistance to Needy Families.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Identifying Central Issues What has happened to government spending over the past 50 years? Whataccounts for this change?
17. Distinguishing Fact from Opinion What are some reasons given by people who oppose government pro-grams that help people in need?
APPLYING SKILLS
Using Graphs Study the chart and answer the questions below.
18. How much did the federal government spend on Medicare and health spending in 1975?
19. By how many dollars did spending rise between 1975 and 1990?
20. By what percentage did spending increase between 1990 and 1995?
Billi
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19801975 1985 1990 1995
Federal Medicare and Health Spending,1975–1995 (in billions of dollars)
Year
$320
$280
$240
$200
$160
$120
$80
$40
$0
Source: Statistical Abstract of the United States, 1997
Chapter 16 Test Form A
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SCORE
16, A
G OVERNMENT SPENDS, COLLECTS,AND OWES
RECALLING FACTS AND IDEAS
Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.
11. John Maynard Keynes believed that
a. government should adopt a laissez-faire policy.b. government should increase employment by adopting an expansionary monetary policy.c. government should leave management of the economy to the private sector, except in time of war.d. government could increase employment by raising spending.
12. Programs aimed only at people who are poor or disabled are known as
a. social insurance programs. b. government programs.c. federally funded programs. d. public assistance programs.
A1. proportional tax
2. Supplemental Security Income
3. Medicaid
4. budget deficit
5. externalities
6. public-works projects
7. social insurance programs
8. national debt
9. Medicare
10. regressive tax
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.
Ba. total amount of debt owed by the federal government
b. tax that takes a higher percentage of lower incomes thanhigher incomes
c. government program that provides health care for senior citizens
d. publicly used facilities, such as schools and highways, built bygovernments
e. tax that takes the same percentage of all incomes
f. amount by which the government’s spending exceeds its revenues
g. federal program that includes food stamps, veterans’ benefits,and payments to senior citizens, the blind, and the disabled
h. state and federal public-assistance program that provides freehealth care for low-income and disabled persons
i. economic side effects or byproducts that affect uninvolvedthird parties
j. government programs that pay benefits to retired and disabled workers, their families, and the unemployed
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Name Date Class
16, B
13. Which is the public good provided by only the federal government?
a. parks b. museumsc. Medicare d. national defense
14. Negative or positive side effects of the production process are also called
a. fluctuations. b. extensions.c. externalities. d. compensations.
15. John Maynard Keynes believed that
a. government should not interfere in the economy by adjusting the money supply.b. government should adopt a laissez-faire policy, except in time of war.c. government spending and taxing can be used to help the economy.d. private sector should handle most functions in the economy.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Making Predictions How do you think the aging of the baby boom generation will affect the government’sbudget?
17. Finding the Main Idea How does the government pay for the goods and services it uses when its expendi-tures exceed its revenues?
APPLYING SKILLS
Using Graphs Study the chart and answer the questions below.
18. What was the level of federal Medicare and health spending in 1990?
19. How did spending on Medicare and health care change between 1975 and 1995?
20. In which year was the highest rate of federal Medicare and health spending?
Billi
ons
19801975 1985 1990 1995
Federal Medicare and Health Spending,1975–1995 (in billions of dollars)
Year
$320
$280
$240
$200
$160
$120
$80
$40
$0
Source: Statistical Abstract of the United States, 1997
Chapter 16 Test Form B
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SCORE
16, B
G OVERNMENT SPENDS, COLLECTS,AND OWES
RECALLING FACTS AND IDEAS
Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.
11. An excise tax is a tax paid on
a. earned income. b. dividends and interest.c. manufacture, use, and consumption of d. assets of someone who has died.
certain goods.
12. Some people oppose government assistance because they believe it
a. discourages personal responsibility. b. should be handled by large companies.c. increases tax revenues. d. shields citizens from the harmful effects of
unemployment.
A1. public-works projects
2. workers’ compensation
3. Social Security
4. income redistribution
5. fiscal year
6. progressive tax
7. benefits-received principle
8. Medicare
9. budget deficit
10. public goods
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.
Ba. government program that provides health care for senior
citizens
b. goods or services that government supplies its citizens
c. government activity that takes income from some peoplethrough taxation and uses it to help citizens in need
d. year by which accounts are kept
e. tax that takes a larger percentage of higher incomes thanlower incomes
f. federal program that provides monthly payments to peoplewho are retired or unable to work
g. government program that extends payments for medical careto workers injured on the job
h. system of taxation in which those who use a particular gov-ernment service support it with taxes in proportion to thebenefit they receive
i. publicly used facilities, such as schools and highways, built byfederal, state, or local governments with public money
j. amount by which government spending exceeds governmentrevenues
422B
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 16
PROCEDURE
1. Organize students into groups of three. Then further organize the groups of three into pairs, and assign eachpair a level of government to research (federal, state, local, or community). Have each pair of groups contact thetax-collection agency, such as the IRS or county tax assessor, for their level of government.
2. Have one group in each pair find the answers to the following questions:
• What types of taxes make up your sources of revenue?• What percentage of your total revenues come from each source?• How would you classify each tax—progressive, regressive, or proportional?
Have the other group in each pair find the answers to these questions:
• What are the government’s expenses?• What percentage of your revenues goes for each expenditure?• Are certain revenues used for specific expenditures? Specify.
3. Have each group use the information it gathers to create a circle graph. The circle graphs made by the firstgroups should show where government revenues come from. Suggest that the groups color the sections of thegraphs to indicate the kinds of taxes they represent. For example, all sections standing for regressive taxes mightbe colored blue. The graphs made by the second groups should show where government revenues go. Suggestthat they color code their sections to show which taxes pay for what.
4. Have groups meet to study the circle graphs for their levels of government. Each member should choose a taxand find reasons, based on the graphs, to explain why they think that tax is fair or unfair.
Assessment
1. Have each pair of groups use their circle graphs as visual aids and give an oral presentation explaining their findings to the class.
2. As homework, have the students redo their group’s circle graph as if government has eliminated the tax or taxesthat each student considers unfair.
▼ BACKGROUND
Government needs an enormous amount ofmoney to operate, and most of this moneycomes from taxes. Taxes may not always seemfair to everyone. However, taxes are necessaryto provide the goods and services we all needand want, but cannot afford to provide forourselves.
▼ MATERIALS
None
▼ OBJECTIVES
After completing this activity, students will beable to• Identify the types of taxes and their impact.• Evaluate taxes in terms of fairness.
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Performance Assessment Activities 14, 15
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■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 16
422C
Blackline Master
Transparency
Software
CD-ROMVideodisc
Audiocassette
Videocassette
Reading Objectives Reproducible Resources Technology/Multimedia Resources
Section 1Growth in the Size of Government• What are two measurements of
government growth?• What do some economists believe
caused the growth of government?
Section 2The Functions of Government• What are public goods?• Through what two general categories
does government redistribute income?• What are some criticisms of
government involvement in theeconomy?
Section 3The Federal Budget and the NationalDebt• What are the steps in the federal
budget-making process?• What are the five largest federal
expenditures?• What are the five largest state and
local government expenditures?• How does deficit spending increase
the national debt?
Section 4Taxation• What are the two principles of
taxation?• What effect do the three forms of
taxation have on taxpayers?
Reproducible Lesson Plan 16-1Daily Lecture Notes 16-1Guided Reading Activity 16-1Reading Essentials and Study Guide 16-1Daily Focus Activity 65Section Quiz 16-1*
Reproducible Lesson Plan 16-2Daily Lecture Notes 16-2Guided Reading Activity 16-2Reading Essentials and Study Guide 16-2Daily Focus Activity 67Section Quiz 16-2*
Reproducible Lesson Plan 16-3Daily Lecture Notes 16-3Guided Reading Activity 16-3Reading Essentials and Study Guide 16-3Daily Focus Activity 68Section Quiz 16-3*
Reproducible Lesson Plan 16-4Daily Lecture Notes 16-4Guided Reading Activity 16-4Reading Essentials and Study Guide 16-4Daily Focus Activity 66Section Quiz 16-4*Reinforcing Economic Skills 22
Daily Focus Transparency 65Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!ExamView® Pro Testmaker
Daily Focus Transparency 67
Economic Concepts Transparency 19Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz
NBR's Economics & You*Presentation Plus!ExamView® Pro Testmaker
Daily Focus Transparency 68Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz
NBR's Economics & You*Presentation Plus!ExamView® Pro Testmaker
Daily Focus Transparency 66Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!ExamView® Pro Testmaker
*Also available in Spanish
Section Resources
422D
Christopher S. ZillerTecumseh High SchoolLynnville, Indiana
YOU Make the Cut!Students are to take part in the federal budget-making
process. Each student or pairs of students should be givenone of the following agencies or departments and theamount requested (in billions of dollars) for the fiscal year.Then tell students that the total amount in the federal bud-get for discretionary spending is $500 billion. Studentsmust research their agency in order to convince the Officeof Management and Budget (OMB) to allocate funds tothem. Have students present their arguments before theclass, and then work together to balance the budget.
ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 16
Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average
studentsL3 CHALLENGING activities for above-average students
ENGLISH LANGUAGE LEARNER activitiesELL
Key to Ability Levels
• Legislative branch—$3• Judicial branch—$4• Agriculture—$15• Commerce—$5• Defense-Military—$301• Education—$35• Energy—$18• Health and Human
Services—$43• Housing and Urban
Development—$30• Interior—$9• Justice—$19• Labor—$12• State—$7• Transportation—$51
• Treasury—$13• Veterans Affairs—$19• Corps of Engineers—$4• Environmental Protection
Agency—$7• Federal Emergency
Management Agency—$2• International Assistance
Programs—$12• National Aeronautics and
Space Administration—$14• National Science
Foundation—$4• Social Security
Administration—$6
Voluntary Standards Emphasized in Chapter 16Content Standard 16 Students will understand that thereis an economic role for government to play in a market econ-omy whenever the benefits of a government policy outweighits costs.
Content Standard 20 Students will understand that fed-eral government budgetary policy and the Federal ReserveSystem’s monetary policy influence the overall levels ofemployment, output, and prices.
Resources Available from NCEE• Capstone: The Nation’s High School Economics Course• Focus: High School Economics• Civics and Government: Focus on Economics
To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org
422D
Timesaving Tools
• Interactive Teacher Edition Access your TeacherWraparound Edition and your classroom resourceswith a few easy clicks.
• Interactive Lesson Planner Planning has never been easier!Organize your week, month, semester, or year with all the lessonhelps you need to make teaching creative, timely, and relevant.
Use Glencoe’s Presentation Plus! multimediateacher tool to easily present dynamic lessonsthat visually excite your students. Using MicrosoftPowerPoint® you can customize the presenta-tions to create your own personalized lessons.
ECON: 17B-C, 21A, 23A, 23C-D, 23G, 24C-D
422
Why It’s ImportantWho owns national parks andmuseums? How are tax dollarsand your high school related? Thischapter will explain why the govern-ment collects tax dollars from you,and what it spends those funds on.
To learn moreabout the fed-eral govern-ment’s debt,
view the Economics & YouChapter 15 video lesson: HowGovernment Spends, Collects,and Owes
Chapter Overview Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.com and click on Chapter 16—Chapter Overviewsto preview chapter information.
IntroducingCHAPTER16
422
Chapter OverviewChapter 16 describes or explains
the growth of government, the waysin which government contributes tothe public good, the budget-makingprocess, the national debt, and theprinciples of taxation.
CHAPTER LAUNCH ACTIVITY
IntroducingCHAPTER16
Use MindJoggerVideoquiz to preview Chapter 16content.
Introduce students to chaptercontent and key terms by havingthem access Chapter 16—ChapterOverviews at ett.glencoe.com
Ask students to identify the ways in which government spending affects their lives.Have students pay special attention to the public goods they use—roads, parks, publictransportation, education, and so on. Note their responses on the board. Then havestudents use the information on the board to write a short paragraph titled “HowGovernment Spending Affects Everyday Life.” Call on volunteers to read and discusstheir paragraphs.
ECONOMICS & YOU
How Government Spends,Collects, and Owes
!8V`4" Chapter 15 Disc 1, Side 2
ASK: What is the differencebetween a budget deficit and abudget surplus? In a budgetdeficit, the federal governmentspends more in a year than itreceives in revenue from taxes.In a budget surplus, the govern-ment takes in more money than itspends.
Also available in VHS.
ECON: 17A-C, 23A, 23C-D, 24C-D
tx.ett.glencoe.com
423
423Government Spends, Col lects , and Owes
Terms to Know• public-works projects• Medicare
Reading Objectives1. What are two measure-
ments of governmentgrowth?
2. What do some economistsbelieve caused the growthof government?
READER’S GUIDE
A s you learned in Chapter 2, the United States is not apure market economy. In addition to the market forces ofsupply and demand, other forces affect the distribution
of resources throughout the economy. As revealed in the CoverStory above, the government is one of the most important ofthese forces. As you read this section, you’ll learn that govern-ment at every level—local, state, and federal—is involved in almostevery aspect of the United States economy.
Government GrowthGovernment has grown considerably in the last 70 years or so.
In 1929, just before the Great Depression began, government at
1
THE NEW YORK TIMES, APRIL 14, 1999
The [White House] is expected to announce as earlyas next week requirements for cleaner gasoline andtougher pollution standards for the nation’s automo-biles. The expected regulations would also force sport
utility vehicles and pickup trucks to meet the stricterstandards for passenger cars for the first time.
Environmentalists are pleased, but the oiland auto industries say gasoline prices for alldrivers and the costs of sport utility vehicles and pickup trucks would be increased.
CHAPTER 16SECTION 1, Pages 423–427
CHAPTER 16SECTION 1, Pages 423–427
Reproducible MastersReproducible Lesson Plan 16–1Reading Essentials and Study Guide 16–1Guided Reading Activity 16–1Section Quiz 16–1Daily Focus Activity 65Daily Lecture Notes 16–1
MultimediaDaily Focus Transparency 65Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker
MindJogger VideoquizPresentation Plus!
SECTION 1 RESOURCE MANAGER
OverviewSection 1 describes the measure-
ments of government growth andexplains why government hasgrown considerably since the GreatDepression.
Answers to the Reading Objectivesquestions are on page 427.
Preteaching VocabularyVocabulary PuzzleMaker
READER’S GUIDE
Project Daily FocusTransparency 65 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
T HE CIRCULAR FLOW OF INCOME AND SPENDING
1. What are the three main components in the circular flow ofincome and spending?
2. How does the government take income out of the circular flow?
The Circular Flow of Income and Spending
Spending
Income
GOVERNMENT
HOUSEHOLDSBUSINESSESTax
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BELLRINGERMotivational Activity
Daily Focus Transparency 65
Page 423: 3B, 15A-B, 21A, 23A,24A
Student Edition TEKS
CHAPTER 16SECTION 1, Pages 423–427
CHAPTER 16SECTION 1, Pages 423–427
all levels employed slightly more than 3 million civilian workers.During the Depression, however, there was a demand for moregovernment services.
Today, about 2.8 million people work for the federal govern-ment alone. If you add local and state employees, the governmentemploys about 20 million civilian workers. This figure representsmore than a sixfold increase during a period in which the popu-lation only doubled.
The number of government workers has increased becausethe number of government functions has risen. Figure 16.1shows one way of looking at the government activities thataffect our lives.
Figure 16.2 on page 426 shows another way of looking at theeconomy. As you can see from the graph, the different levels of gov-ernment have grown at different rates. During the late 1960s, stateand local governments spent less than the federal government. The federal government paid for national defense; the salaries of
Government Involvement in the Economy Government plays a major rolein most aspects of our lives. Some individuals believe that government has grown toolarge and that the private sector should provide goods and services without governmentintervention. Others argue that government should be even larger.
16.116.1
B EducationYour school probably receivessome form of aid from the local,state, or federal government.
A TransportationWhen you travel on a highway, youare using a resource financed byfederal and state moneys.
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424
L ECTURE LAUNCHERIn 1956, the Federal Aid Highway Act and the Highway Revenue Act gave the governmentauthority to raise funds for the development of the U.S. Interstate Highway System. To raisethis revenue, the government instituted a federal gasoline tax and road tolls. How predomi-nant is the government in the United States economic system? What are the three levels ofgovernment and how can they impact the economic choices in a market economy?
I. Government Growth
A. The number of government workers and functions has increased dramatically.
B. Public-works projects are public facilities that are built and paid for with tax dollars.
• Discussion Question
Name some public-works projects that you use and consider important. (Answers mayvary. Students may mention their school, a community center, a town pool, the highways, bussystem, etc.)
I. Why Has Government Grown?
A. During the depression, more government services were needed.
B. Financing World War II caused more government growth
16-1
PAGES 423–425
PAGES 425–427
Daily Lecture Notes 16–1
Reading Disability Students with various reading and organizational problems may havetrouble understanding graphs that contain multiple lines of information. They may also havetrouble connecting information from two or more graphs. Before students read Section 1,ask them to study Figures 16.2 and 16.3 on page 426. Have them note what informationeach line on the graph in Figure 16.2 provides. Then have them consider how the informa-tion provided in Figure 16.3 adds to what they learned from Figure 16.2. Finally, ask stu-dents to read the section and discuss how the graphs illustrate the information in the text.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities.
Meeting Special Needs
Guided PracticeL1 Understanding Ideas Afterreviewing the section with students,draw on the board a graphic orga-nizer similar to the one below.
Call on volunteers to suggestinformation that might be added tothe graphic organizer. Enter theirresponses in the appropriate sec-tion of the organizer.
How Government Has Grown
Why Government Has Grown
ECON: 15A, 23A, 23F
ECON: 17B, 23A, 23F
425
public-works projects: publiclyused facilities, such as schoolsand highways, built by federal,state, or local governments withpublic money
members of Congress, federal judges, and the employees of execu-tive departments such as the State Department; and public-worksprojects. Public-works projects are publicly used facilities such asschools and highways that are built and paid for with tax dollars.
This situation continued until about 1970. At that time, federalfunds diminished, while state and local government spending forsuch items as sewers, roads, and schools increased rapidly.
Why Has Government Grown?Economists have often tried to explain the huge growth in gov-
ernment spending. During the Great Depression, there appearedto be a need for more government services. In the 1940s, the gov-ernment spent billions of dollars to pay for World War II. Whyhas the government continued to grow since then?
One theory is that as the nation became richer, especially inthe late 1960s and early 1970s, people demanded more govern-ment services to even out certain income inequities. Today, totalgovernment purchases represent over 20 percent of GDP. This fig-ure does not include such items as interest payments on thenational debt and transfer payments such as welfare programs. Ifyou add these items, total government outlays easily exceed one-third of GDP. See Figure 16.3 on page 426.
D Worker SafetyIf you have a job, govern-ment safety and other reg-ulations often determineyour working conditions.
E TaxationIf you own property, buygoods, or earn moneyincome, you probably pay taxes that help pay for many government activities.
C Product SafetyMany goods thatyou buy are pro-duced in accor-dance with local,state, and federal regulations.
425
CHAPTER 16SECTION 1, Pages 423–427
CHAPTER 16SECTION 1, Pages 423–427
Name Date Class
For use with the textbook pages 423–427
G ROWTH IN THE SIZE OF GOVERNMENT
RECALLING THE FACTS
Directions: Use the information in your textbook to answer the questions.
1. At what levels is the government involved in the economy?
2. Why has the number of government workers grown so much over the years?
3. What are some areas of the economy on which the government has an affect?
4. What are public-works projects?
5. Why has the government continued to grow since World War II?
6. How can one figure total government outlays?
7 What is Medicare?
16-1
Guided Reading Activity 16–1
Governmental SystemsThe United States and several
other nations—Australia, Austria,India, and Mexico, for example—have a federal system of govern-ment, in which power is sharedbetween states or provinces andthe central government. However,some nations—France and Italy,for example—have a unitary sys-tem, where power and responsibil-ity rest mainly with the centralgovernment.
Organize students into groups to research and develop a plan for a public-works projectthat would bring a new facility or a needed benefit to the community. Possible projectsinclude a new freeway to ease traffic congestion, a social center for seniors, an ice rink tomeet growing interest in hockey and figure skating, or a beautification program for localparks. Have each group write a justification for its selected program—why the facility isneeded, how it will benefit the community, and so on. Have groups draw up their plans,considering such factors as cost, funding, availability of labor, societal values, and so forth.Call on group representatives to present and discuss their plans. BLOCK SCHEDULING
Cooperative Learning
IndependentPracticeL3 Research Reports Have stu-dents work individually or in smallgroups to research the changing roleof government in the economy sincethe Great Depression. Suggest thatthey use library resources to findeconomic history texts covering thistime period. Have them present theirfindings in an illustrated report suit-able for displaying on the bulletinboard. BLOCK SCHEDULINGELL
Page 424: 15A, 17BPage 425: 15A-B, 17A-B, 24A
Student Edition TEKS
ECON: 17A, 21A, 23A, 23C-D, 24D
ECON: 15A, 21A, 23A, 23C, 24D
ECON: 23A
CHAPTER 16SECTION 1, Pages 423–427
CHAPTER 16SECTION 1, Pages 423–427
1965 ’70 ’75 ’80 ’85 ’90 ’95 2000*
Bil
lio
ns
of
Ch
ain
ed
(1
99
6)
Do
llars
1400
1200
1000
800
600
400
200
0
Years
Government Purchases
Total
State and Local
Federal
Source: Standard & Poor’s *Author’s estimates
Medicare: government programthat provides health care for theaged
The True Size of Government The size of government can-not be measured merely by the cost of government spending. Anydiscussion of the government’s size must include where govern-ment spends this money.
When the government taxes you to provide you with a particularservice, such as Medicare (health care for the aged), this cost ofgovernment is included in government spending. What if the
Government ConsumptionExpenditures and GrossInvestment Government purchasesof goods and services (excluding SocialSecurity and other welfare paymentsand interest) corrected for inflationshow an increase in all levels of govern-ment spending.
FIGURE 16.2FIGURE 16.2
For an online update of this graph, visit tx.ett.glencoe.com and click on Textbook Updates—Chapter 16.
426 CHAPTER 16
Government Spending as aPercentage of GDP Total govern-ment expenditures—including SocialSecurity and other welfare payments, aswell as interest payments—expressed asa percentage of GDP have grown from1965 to the present.
1965 ’70 ’75 ’80 ’85 ’90 ’95 2000
Perc
en
tag
e o
f G
DP
40
30
20
10
0
Years
Government Spending as aPercentage of GDP
Source: Economic Report of the President, 2001
FIGURE 16.3FIGURE 16.3
426
Have students studyFigures 16.2 and 16.3. Thendirect them to make freehandcopies of the two graphs in theirnotebooks. Have them extend thelines on the graphs to show atwhat level they think governmentspending will be in the years2005, 2010, and 2015. Call onvolunteers to display and explaintheir predictions.
G ROWTH IN THE SIZE OF GOVERNMENT
Multiple Choice: In the blank at the left, write the letter of the choice that bestcompletes the statement or answers the question. (10 points each)
6. In the past 50 years, government has
a. become less important to the economy. b. grown considerably.c. decreased in size. d. played a smaller role in people’s lives.
7. Since 1929, the number of civilian workers employed by the government has
a. doubled. b. increased about sixfold.c. decreased. d. remained about the same.
8 As federal funds diminished in the 1970s state and local governments increased spending for
SCORE
A1. public-works projects
2. Medicare
3. civilian workers
4. private sector
5. taxation
Ba. part of a nation’s economy that is privately owned
b. government employees who are not part of the military
c. government program that provides health care forthe aged
d. collection of money by the government to pay forpublic services
e. publicly used facilities built by a government withpublic money
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Name Date Class
16, 1
Section Quiz 16–1
Graphs Draw on the board two diagramssimilar to the one below.
Label one diagram “GovernmentWorkers” and the other “Govern-ment Spending.” Then ask stu-dents to copy the diagrams intotheir notebooks and to add infor-
mation from Section 1 that shows how govern-
ment has grown over the years. For example, onthe “Government Workers” diagram, studentsmight place on the horizontal axis the label“1929” to the left and the label “Today” to theright. On the vertical axis, they might place thelabel “3 Million Workers” at the bottom and thelabel “20 Million Workers” at the top. Call on vol-unteers to display and discuss their diagrams.
Meeting LessonObjectives
Assign Section 1 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 1.
ECON: 15A, 17B,23A, 23D, 23F-G, 24D
ECON: 15A, 17B, 23A, 23F-G, 24D
427427
427Government Spends, Col lects , and Owes
Understanding Key Terms1. Define public-works projects, Medicare.
Reviewing Objectives2. What are two measurements of government
growth?
3. Graphic Organizer Create a diagram like theone shown in the next column to explain whathas caused the growth of government since the1930s.
Applying Economic Concepts4. The Role of Government Do you think it is
easier to increase or decrease governmentspending? Why?
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
1
government also requires that your employer pro-vide that same service? State governments aredoing just that. In Massachusetts, for example,employers with five or more employees must pro-vide medical insurance for each employee. So, thefederal government taxes employees to pay forgovernment-provided health insurance, and astate government requires that employers providehealth insurance directly. The true size of govern-ment, then, may be even greater than governmentestimates show because some “private sector”spending is required by law.
The Growth of Government—Good orBad? We know that government in the UnitedStates grew throughout the 1900s. Can we saywhether this is good or bad for society?Although no one can know how much govern-ment is good for society, a general rule toremember is that government taxing and spend-ing has opportunity costs. Government activitydisplaces private economic decision makingalong the production possibilities curve, whichyou learned about in Chapter 1. This private decision makinginvolved in buying and selling is at the core of wealth creation and a rising standard of living for all citizens.
Job Description■ Elected to
enforce laws,oversee bud-gets, andensure that programs arecarried out
■ Encouragesbusinessinvestment andeconomicdevelopment
Qualifications■ Master’s
degreein public administrationrecommended
■ Courses inplanning, bud-geting, and civilengineering
Median Salary: $70,000
Job Outlook: Below average
CAREERSCity Manager
—Occupational Outlook Handbook, 2000–01
5. Synthesizing Information According toFigure 16.2, by how much did governmentspending at all levels increase since 1970?
Critical Thinking Activity
(1930s) Gove
rnm
ent
Gro
ws(1940s)
(1960s)
CHAPTER 16SECTION 1, Pages 423–427
CHAPTER 16SECTION 1, Pages 423–427
ReteachProvide each student with 10
index cards. Have students writequestions—one question per card—from information found inSection 1. Pair students, and havepartners quiz each other on sectioncontent using their question cards.
1. All definitions can be found in the Glossary.2. the size of the government workforce and gov-
ernment spending3. 1930s—social needs during the Great
Depression; 1940s—expenditures for WorldWar II; 1960s—welfare payments to even outcertain income inequities
4. Students should point out that people generallyoppose cuts in programs that affect themdirectly. Cutting programs that are consideredwasteful is popular, however.
5. increased by about $500 billion
Have students use information in the section to write a brief essay arguing whether governmentservices should be expanded orreduced. Call on volunteers to readtheir essays, and use the readingsas the starting point for a debate onthis issue.
Name Date Class
16, 1
public-works projects A facility used by the public, such as schools and highways, built by federal, state,or local governments with public money (page 425)
Medicare A government program providing health care for the aged (page 426)
For use with textbook pages 423–427
G ROWTH IN THE SIZE OF GOVERNMENT
DRAWING FROM EXPERIENCE
Think about your trip to school. Are there any rules that you need to follow while driving, walking, orriding to school? Who makes these rules? How are they enforced? Who maintains the roads you rideon or the sidewalks that you walk on?
In this section, you will learn that government at every level is involved in almost every aspect ofthe U.S. economy.
ORGANIZING YOUR THOUGHTS
Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout how government growth is measured.
How To Measure Government Growth
KEY TERMS
Reading Essentials and Study Guide 16–1
Page 426: 15A, 16B, 17A-B, 21A,23A, 23F-G, 24A
Page 427: 5B, 10A, 15A, 17A-C,23A, 23D, 23F-G, 24A
Student Edition TEKS
■ Educated and latertaught at CambridgeUniversity
■ Served as adviser tothe British govern-ment in the 1930sand 1940s
■ Keynesian econom-ics named after him
■ Most influential publication was The General Theoryof Employment,Interest, and Money(1936)
John Maynard Keynes origi-nated the school of economic
thought referred to as Keynesianeconomics, which supports theuse of government spending andtaxing to help the economy.Keynes believed that there was aneed for government interven-tion, in part because an economymay reach an equilibrium level ofemployment that is below fullemployment.
Keynes added that the equilib-rium level of employmentdepends on the level of invest-ment. If the level of investment islow, full employment cannot beachieved:
“Thus, to justify any givenamount of employment there mustbe an amount of current invest-ment sufficient to absorb the excessof output over what the communitychooses to consume when employ-ment is at a given level. . . . It fol-lows, that . . . the equilibrium levelof employment, [that is] the level atwhich there is no inducement to
employers as a whole either toexpand or contract employment,will depend on the amount of cur-rent investment.”
Keynes believed that his the-ory explained why large pocketsof poverty exist in otherwise richcommunities or nations:
“. . . This analysis supplies uswith an explanation of the paradoxof poverty in the midst of plenty.
. . . Moreover the richer the com-munity, the wider will tend to be thegap between its actual and its poten-tial production; and therefore themore obvious and outrageous thedefects of the economic system.”Checking for Understanding
1. According to Keynes, what is therelationship between employmentand current investment?
2. According to Keynes, what is theequilibrium level of employment?
John Maynard KeynesECONOMIST (1883–1946)
428
428
BackgroundPoint out that Keynes had many
talents. In addition to his work asan economist, he was a journalist ofsome skill and an influential govern-ment official. He also made a smallfortune investing in stocks and for-eign currencies, and he was arenowned art collector.
Answers to Checking for Understanding1. The rate of current investment determines the rate of employment.2. It is the level at which there is no inducement to employers as a whole either to
expand or contract employment.
Mention that these excerpts aretaken from Keynes’s book TheGeneral Theory of Employment,Interest, and Money. In this study,Keynes hypothesized that increasedgovernment spending could haveoffset the collapse of businessspending that brought on the eco-nomic instability of the GreatDepression. Then point out thatany government taxing or spendingpolicies designed to stimulate theprivate sector of the economy areusually referred to as Keynesianeconomics. ECON: 15A, 17B-C, 19A
ECON: 19A
429
429Government Spends, Col lects , and Owes
Terms to Know• public goods• income redistribution• social insurance programs• Social Security• workers’ compensation• public-assistance programs• welfare• Supplemental Security
Income• Temporary Assistance to
Needy Families• Medicaid• externalities
Reading Objectives1. What are public goods?
2. Through what two generalcategories does govern-ment redistribute income?
3. What are some criticisms ofgovernment involvement inthe economy?
READER’S GUIDE
T he general purpose of government in the United States isto protect individual rights, to promote a stable legal envi-ronment for economic activity, and to promote policies
that support the general well-being of all citizens. In this section,you’ll learn that government tries to accomplish this purpose infour ways: (1) providing public goods, (2) redistributing income,(3) regulating economic activity, and (4) ensuring economic stability.
2
BUSINESS WEEK, NOVEMBER 30, 1998
Dorsey Ruley is that rare ChicagoBulls fan who has never leaped
from his seat at a Michael Jordanmoment. Emotional control has
nothing to do with it. Ruley is a quadriplegic, bound to a
wheelchair. During everygame, all he saw was asea of standing, clapping,
stomping fans at Chicago’sUnited Center.
Help may be on the way. A series of court judg-ments and settlements around the nation in recent
months could force arena owners to improve seatingfor the disabled.
CHAPTER 16SECTION 2, Pages 429–433
CHAPTER 16SECTION 2, Pages 429–433
Reproducible MastersReproducible Lesson Plan 16–2Reading Essentials and Study Guide 16–2Guided Reading Activity 16–2Section Quiz 16–2Daily Focus Activity 67Daily Lecture Notes 16–2
MultimediaDaily Focus Transparency 67Economic Concepts Transparency 19Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker
MindJogger VideoquizNBR’s Economics & You
Presentation Plus!
SECTION 2 RESOURCE MANAGER
OverviewSection 2 describes or explains
public goods, the redistribution ofincome, and the ways in which gov-ernment regulates economic activityand promotes economic stability.
Answers to the Reading Objectivesquestions are on page 433.
Preteaching VocabularyVocabulary PuzzleMaker
READER’S GUIDE
Project Daily FocusTransparency 67 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
F INANCING STATE AND LOCAL PUBLIC WORKS
1. In this photograph, what public works have been damaged bynatural disaster?
2. What effect might this damage have on a community and itsfinances?
6767
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BELLRINGERMotivational Activity
Daily Focus Transparency 67
Page 428: 4B, 17B-C, 19A, 23APage 429: 15A-B, 16A-B, 17B, 21A,
23A, 24A
Student Edition TEKS
CHAPTER 16SECTION 2, Pages 429–433
CHAPTER 16SECTION 2, Pages 429–433
430 CHAPTER 16
public goods: goods or servicesthat government supplies to itscitizens; can be used by manyindividuals at the same time with-out reducing the benefit each person receives
Providing Public GoodsPublic goods are a special type of goods or services that gov-
ernment tries to supply to its citizens. Many people can use pub-lic goods—such as streetlights—at the same time, without reducingthe benefit each person receives.
National defense is one of the few public goods only the federalgovernment provides. Usually, the different levels of governmentshare responsibility for other types of public goods—the legal system, for example. Federal, state, and some local governmentsmaintain separate systems of courts, correctional institutions, andlaw-enforcement agencies.
The most important public good that only government can pro-vide is a sound system of property rights. In such a system, individ-uals have the right to own factors of production, to risk investment,and to discover new ways of production.
Merit Goods In any society, certain goods and services are considered to have special merit. A meritgood is one that is deemed socially desirable by government leaders—museums, ballets, and classicalmusic concerts, for example. The government maysubsidize such goods by requiring all taxpayers to support them. This allows everyone to enjoy such goods for less than the full market price. SeeFigure 16.4.
Demerit Goods The opposite of merit goods aredemerit goods. These are goods that elected governmentofficials have deemed socially undesirable, such as
gambling and injurious drugs. The govern-ment exercises its role in the area of demerit
goods by taxing, regulating, or prohibitingthe manufacture, sale, and use of such
Merit Goods The establishmentand maintenance of museums andparks fall under the governmentfunction of providing merit goods.
16.416.4
430
L ECTURE LAUNCHERThe earliest public parks were built for Persian kings who used them for hunting. Later theseparks became riding paths. Some early parks were designed from the public squares ofancient Greece, where people exercised, had social discourse, and enjoyed art galleries withsculptures. Why are parks an example of a public good? Besides providing public goods, inwhat other three ways do governments support the well being of all citizens?
I. Providing Public Goods
A. Public goods are special goods or services provided by the government.
B. National defense is one of the few public goods only provided by the national government.
C. The most important public good provided only by the government is a sound system of property rights.
D. Merit goods are those considered socially desirable by government leaders.
E. Sometimes the government will subsidize merit goods so that all citizens can enjoythem.
F. Demerit goods are those considered socially undesirable, and are often taxed, regulated, or prohibited.
• Discussion Question
Why do you think that people allow the government to institute usage penalties on
16-2
PAGES 430–431
Daily Lecture Notes 16–2
Hearing Disability Students whose hearing is impaired may have difficulty contributing inrole-playing and discussion activities. When assigning such activities, direct students toinclude letters or memos that can be shared with the class as part of spoken presentations.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities for students with different learning styles.
Meeting Special Needs
For use with the textbook pages 429–433
T HE FUNCTIONS OF GOVERNMENT
FILLING IN THE BLANKS
Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.
merit goods market solutions social insurance programsincome redistribution public goods welfareSupplemental Security Income demerit goods goods and servicesworker’s compensation Temporary Assistance to Needy Families social securityexternalities Medicaid recessionsunemployment redistribution
Introduction/Providing Public Goods1 __________________________ , such as national defense and state parks, are a special type of goods or services that
government tries to supply to its citizens. 2 __________________________ are those that are deemed socially desirable
by government leaders. However, things such as gambling are considered 3 __________________________.
Redistributing IncomeThe task of making certain that everyone in the nation has a minimum level of income or health-care support is
called 4 __________________________. Some money we earn goes to 5 __________________________ —programs
that pay benefits to retired and disabled workers, their families, and the unemployed. For example,
6 provides monthly payments to people who are retired or unable to work
Name Date Class
16-2
Guided Reading Activity 16–2
Guided PracticeL1 Identify Understanding Writeat least 25 questions about sectioncontent. (Examples: What is the defi-nition of public goods? Define andgive an example of a demerit good.)Then organize the class into teams,and ask each team a question in turn,allowing teams about 10 seconds toanswer. Give a point for each correctanswer. Tally scores and award extracredit to the winning team.
ECON: 23A, 24D
ECON: 23A, 24A
431
431Government Spends, Col lects , and Owes
income redistribution: govern-ment activity that takes incomefrom some people through taxa-tion and uses it to help citizens inneed
social insurance programs:government programs that paybenefits to retired and disabledworkers, their families, and theunemployed
Social Security: federal programthat provides monthly paymentsto people who are retired orunable to work
workers’ compensation: gov-ernment program that extendspayments for medical care toworkers injured on the job
public-assistance programs/welfare: government programsthat make payments to citizensbased on need
Supplemental Security Income:federal programs that includefood stamps, veterans’ benefits,and payments to the disabled
Temporary Assistance to NeedyFamilies: state-run program thatprovides money to needy singleparents
Medicaid: state and federal public-assistance program thatprovides free health care for low-income and disabled persons
goods. For example, governments justify very high taxes on alcoholand tobacco products because they are demerit goods.
Redistributing IncomeAnother function of government is to provide for the public
well-being by assisting specific groups such as the aged, the ill, andthe poor. Through their elected representatives, Americans havechosen to see that almost everyone in the nation is provided with acertain minimum level of income and health-care support. Thistask is accomplished primarily through income redistribution, orusing tax receipts to assist citizens in need. Tax dollars are used tosubsidize two general categories of assistance: social insurance pro-grams and public-assistance programs.
Social Insurance Programs When you receive a paycheck,you will notice that a portion of your pay has been withheld byvarious levels of government. Some of this money is earmarkedfor social insurance programs—programs that pay benefits toretired and disabled workers, their families, and the unemployed.These benefits are financed by taxes that you, other workers, andemployers pay into the programs. Examples of social insuranceprograms include Social Security, a federal program that pro-vides monthly payments to people who are retired or unable towork. Upon retirement, you are also eligible for Medicare, a fed-eral program that provides low-cost health care for the aged.
Another social insurance program is workers’ compensation,a state program that provides payments for medical care to work-ers injured on the job. People who have lost jobs altogether canreceive payments through unemployment insurance.
Public-Assistance Programs Public-assistance programs,often called welfare, are different from social insurance programs.Public-assistance programs make payments to individuals based on need, regardless of whether a person has paid taxes into the program.
Included in this category are Supplemental Security Income,a federally financed and administered program that makes pay-ments to the aged, blind, and disabled; and TemporaryAssistance to Needy Families, a state-run program that pro-vides money to needy single parents raising young children.Medicaid, a state and federal program that provides free healthcare for low-income and disabled persons, is another public-assistance program.
CHAPTER 16SECTION 2, Pages 429–433
CHAPTER 16SECTION 2, Pages 429–433
ECONOMICS & YOU
Government Spending
!8`j6" Chapter 16 Disc 1, Side 2
ASK: What are transfer pay-ments? Transfer payments arepayments, such as SocialSecurity and welfare, that go fromtaxpayers to people who are notproducing goods and services.
Also available in VHS.
Organize students into several groups, and tell groups that they are design teams hiredto create a brochure for the government. The brochure should inform the general public ina lively and entertaining way of the economic functions of government. Suggest that stu-dents make their brochures from one sheet of letter-size paper—folded in half to make afour-page brochure, one page for each of the four functions. Call on groups to display anddiscuss their brochures. BLOCK SCHEDULING
Cooperative Learning
Project Economic ConceptsTransparency 19 and have studentsdiscuss the accompanying questions.
IndependentPracticeL3 Applying Ideas Have studentsstudy the major functions of govern-ment regulation listed in Figure16.5. Tell students that differentinterest groups—business associa-tions, labor unions, environmentalgroups, and consumer groups, forexample—strive to influence govern-ment regulation of the economy.Have students identify a good orservice and then evaluate how differ-ent interest groups might press forgovernment regulation of the pro-duction, distribution, or consump-tion of that good or service.Encourage students to present theirfindings to the class in oral reports.
Page 430: 3B, 4A-B, 10A, 15A-B,17B, 24A
Page 431: 15A, 17A-B, 21A-B,24A
Student Edition TEKS
ECON: 15A-B, 23A, 23C, 24D
ECON: 3B, 15A-B, 24D
CHAPTER 16SECTION 2, Pages 429–433
CHAPTER 16SECTION 2, Pages 429–433
432 CHAPTER 16
externalities: economic sideeffects or by-products that affectan uninvolved third party; can benegative or positive
Regulating Economic ActivityFigure 16.5 illustrates four ways in which the government
intervenes in economic activity. One of the most important regu-latory functions concerns the side effects of the productionprocess—also called externalities. When a steel mill producessteel, for example, the resulting pollution from the smokestacksmay cause health problems in the surrounding area. In theabsence of legal rules that limit such pollution, the steel mill doesnot have to correct these negative externalities. Government hasoften stepped in to require plants to install equipment that willreduce pollution.
Ensuring Economic StabilityEnsuring economic stability has meant smoothing the ups and
downs in the nation’s overall business activity. Such interventionhas been sought to shield citizens from the harmful effects of busi-ness fluctuations, including unemployment, high inflation, reces-sions, and even depressions. In Chapter 17, you’ll learn more aboutthe government’s attempt to stabilize the economy.
Regulatory Functionsof
Government
Supervising Labor andManagement Relations
ProtectingConsumers
PromotingCompetition
Regulating Negative By-Productsof the Production Process
FIGURE 16.5FIGURE 16.5 Government Regulations Government under the American free enterprisesystem regulates certain aspects of the economy.
432
Meeting LessonObjectives
Assign Section 2 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 2.
Have students review the infor-mation in Figure 16.5. Then callon volunteers to evaluate anexample of a government restric-tion on a business or individual.Examples may vary but mightinclude: Protecting Consumers—set-ting safety standards for products;Promoting Competition—reviewingmergers of companies; SupervisingLabor and Management—arbitra-tion of labor-management disagree-ments; Regulating NegativeBy-Products of Production Process—setting pollution-control standards.
Pollution Permits The United States Environmental Protection Agency (EPA) and stateenvironment departments have developed an interesting way of dealing with the negativeexternality of pollution. The EPA and the states sell permits to industries that allow therelease of set amounts of pollutants. The money made from these sales is used for envi-ronmental cleanup and protection programs. Over time, the number of permits issued willbe reduced, and industries will have to install antipollution devices or face stiff fines for vio-lating pollution standards.
Extending the Content
Name Date Class
16, 2
T HE FUNCTIONS OF GOVERNMENT
Multiple Choice: In the blank at the left, write the letter of the choice that bestcompletes the statement or answers the question. (10 points each)
6. One of the public goods that only the federal government provides is
a. education. b. national defense.c. roads. d. law-enforcement agencies.
7. Museums, ballets, and classical music concerts are examples of
a. merit goods. b. demerit goods.li i d lf
SCORE
A1. public goods
2. Income redistribution
3. Social Security
4. Medicaid
5. externalities
Ba. federal program that provides monthly payments to
people who are retired or unable to work
b. economic by-products that affect an uninvolvedthird party
c. goods or services that the government supplies toits citizens
d. public-assistance program that provides free healthcare for low-income and disabled persons
e. government activity that takes income from somepeople through taxation and uses it to help citizensin need
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Section Quiz 16–2
ECON: 3B, 15A, 23A, 23F
ECON: 3B, 15A-B, 21A-B
433433
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
433Government Spends, Col lects , and Owes
Critics of GovernmentInvolvement
There are many critics of governmentinvolvement in the economy. They point outthat merit goods, for example, should be pro-vided by private organizations. If people payfewer taxes, they have more disposableincome and can choose to fund symphoniesor other merit goods if they really want suchservices.
Opponents of redistribution programsthink that most government assistance dis-courages personal initiative, affects incen-tives, and harms self-development. Critics of government regulations argue that mostregulations raise the prices of goods andservices. A better approach, these critics say,would be to encourage market solutions tosuch problems as pollution.
Understanding Key Terms1. Define public goods, income redistribution,
social insurance programs, Social Security,workers’ compensation, public-assistance pro-grams, welfare, Supplemental Security Income,Temporary Assistance to Needy Families,Medicaid, externalities.
Reviewing Objectives2. What are public goods?
3. Graphic Organizer Create a chart like theone below to list the programs through whichgovernment redistributes income.
4. What are some criticisms of governmentinvolvement in the economy?
Applying Economic Concepts5. The Role of Government List five ways
that local, state, and federal government areinvolved in your daily life. Provide specificexamples in your list.
6. Summarizing Information In a para-graph, list at least three activities or “goods”that you think should be considered meritgoods, or goods that are deemed sociallydesirable by government leaders. Thendescribe why you think the governmentshould or should not be involved in providingmerit goods to society.
Critical Thinking Activity
2
Working in BritainIn the mid-1940s, the British government estab-
lished a welfare system designed to provide its citizenswith economic security “from cradle to grave.” Overthe years, the system grew and now accounts for morethan 30 percent of the government’s annual budget.Almost half of all Britons receive some form of assis-tance—from retirement pensions to housing benefits.
In 1999 Prime Minister Tony Blair called for anoverhaul of the system. “If you can work,” he stated,“you should work.” He suggested that people whoreceive welfare assistance would have to actively seekemployment or risk losing their benefits: “The days ofan automatic right to benefit will go.” ■
Social Insurance Programs Public-Assistance Programs
CHAPTER 16SECTION 2, Pages 429–433
CHAPTER 16SECTION 2, Pages 429–433
ReteachHave students use headings,
Terms to Know, and caption infor-mation to create an outline for abrief essay on the economic func-tions of government.
1. All definitions can be found in the Glossary.2. Public goods are goods and services govern-
ment supplies to its citizens.3. Social Insurance Programs: Social Security,
Medicare, workers’ compensation; Public-Assistance Programs: Supplemental SecurityIncome, Temporary Assistance to NeedyFamilies, Medicaid
4. Critics feel that public goods should be pro-vided by private organizations and that govern-
ment assistance discourages personal initiativeand reduces incentives as well as raises theprices of goods and services.
5. Answers may include providing schools, roads,water, sanitation; regulating food products,medicines, working conditions; taxing; con-sumer protection.
6. Answers will vary. Ensure that students explainwhy their selected goods and services shouldbe considered socially desirable.
Discuss with students how peo-ple at different ages benefit fromthe four functions of government.
Name Date Class
16, 2
public goods These are goods or services that government provides to its citizens. They can be used bymany individuals at the same time without reducing the benefit each person receives (page 430)
income redistribution A government activity designed to help citizens in need by taking money fromsome people through taxation (page 431)
social insurance programs Government programs financed by taxes paid into programs by workers andemployers. These programs provide benefits to retired and disabled workers, their families, and the unem-ployed (page 431)
Social Security A federal government program that provides monthly payments to people who are retiredor unable to work (page 431)
workers’ compensation A government program that provides medical payments to workers injured onthe job (page 431)
public-assistance programs Government programs that make payments to citizens based on need (page 431)
welfare Same as public-assistance programs (page 431)
Supplemental Security Income Federal programs including food stamps and veteran’s benefits, and pay-ments to the aged, blind, and disabled (page 431)
Temporary Assistance to Needy Families State-run public-assistance program that provides money toneedy single parents raising young children (page 431)
Medicaid State and federal public-assistance program that provides free health care for low-income anddisabled persons (page 431)
externalities Negative or positive economic side effects or by-products that impact on an uninvolved thirdparty (page 432)
For use with textbook pages 429–433
T HE FUNCTION OF GOVERNMENT
KEY TERMS
Reading Essentials and Study Guide 16–2
Welfare System ChangesOne change to the system that
Prime Minister Blair proposed wasthat unemployment benefits foryoung people should be limited tosix months. After that, they wouldhave to find work or enter a job-training program.
Page 432: 2D, 3B, 15A-B, 16A,21A-B, 23A, 23F, 24A
Page 433: 10A, 15A, 17A-B, 21A-B,23A, 23D, 23F, 24A
Student Edition TEKS
ECON: 10B, 21A,23A
ECON: 15A, 23A, 24A, 24D
ECON: 15A-B, 16A, 21A-B
SPOTLIGHT
434 CHAPTER 16
SPOTLIGHT ON THE ECONOMY
One result of the current Social Securitydebate has been to concentrate the pub-
lic’s mind on the true economic condition ofthe elderly—and to give the lie to those
who describe them as “greedy geezers.”While the top 20% of seniors are
relatively affluent, reports theCenter on Budget & PolicyPriorities, almost all of therest are highly dependenton Social Security.
In 1997, the averageSocial Security retirement
benefit was just $765 a month,and the average check to 65-year-olds was $819a month—a tidy sum, but hardly a bonanza. Yet,according to the center’s analysis, the programprovided at least half of the total income ofmore than 55% of senior citizens and at least75% of the total income of more than a third.
Social Security’s impact on poverty amongolder Americans is equally revealing. Based on1997 Census Bureau data, the center findsthat the retirement program lifted 11.4 millionseniors—or nearly half of the 65-and-older
population—out of poverty, cutting the elderly’spoverty rate from 47.6% to 11.9%. Means-testedprograms, such as Supplemental SecurityIncome, lowered the rate still further to 10.5%—bringing it close to that of other adult Americans.—Reprinted from May 10, 1999 issue of Business Week by special
permission, copyright © 1999 by The McGraw-Hill Companies, Inc.
Think About It1. What percentage of senior citizens rely on
Social Security to provide half of their income?
2. How many seniors were lifted out of poverty bySocial Security payments?
Check It Out! In this chapter you learned that one func-tion of government is to provide for the public well-being. In this article, read to learn how distributingincome through Social Security can increase the well-being of the elderly.
Social Security Is Aptly NamedSocial Security Is Aptly Named
434
Point out that many Americansare concerned over the future of theSocial Security system. They fearthat as the American populationages, more money will be with-drawn from the system than will bepaid into it by workers. Encouragestudents to research the ideas putforward to secure the future ofSocial Security. Suggest that a goodstarting point for research is theSocial Security Administration’sWeb site at www.ssa.gov. Call onvolunteers to share their findingswith the class.
Answers to Think About It
You do not have to be a seniorcitizen to receive Social Security.You may be eligible for SocialSecurity if you have a parent whois retired, disabled, or who hasdied. In 2000, almost 4 millionchildren under age 18 receivedmonthly Social Security checks.
1. more than 55 percent2. 11.4 million senior citizens
To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com
ECON: 17A-B, 23A, 27A
435
435Government Spends, Col lects , and Owes
Terms to Know• fiscal year• budget deficit• deficit financing• national debt• budget surplus
Reading Objectives1. What are the steps in the
federal budget-makingprocess?
2. What are the five largestfederal expenditures?
3. What are the five largeststate and local governmentexpenditures?
4. How does deficit spendingincrease the national debt?
READER’S GUIDE
To carry out all of its functions, government must spendhuge sums of money. As a result, the federal budget ishuge and has numerous categories. Because all resources
are scarce, an increase in spending in one area will cause adecrease in spending in some other area. Parts A and B of Figure16.6 on page 436 show the major areas in which the federal andstate and local governments spend their money. As you read thissection, you’ll learn how the government prepares its budget anddecides where to spend its funds.
3
THE NEW YORK TIMES, JANUARY 31, 1999
The federal budget deficit is gone, transformed by astrong economy into a string of projected surpluses thatshould grow larger for years to come. . . .
Eliminating the deficit is hardly the end of the govern-ment’s financial troubles, however. . . . [T]he national
debt was built up over decades of deficit spending—the federal government has not run steady
surpluses since the 1920s—and itremains an economic mill-
stone of consider-able proportions.
CHAPTER 16SECTION 3, Pages 435–439
CHAPTER 16SECTION 3, Pages 435–439
Reproducible MastersReproducible Lesson Plan 16–3Reading Essentials and Study Guide 16–3Guided Reading Activity 16–3Section Quiz 16–3Daily Focus Activity 68Daily Lecture Notes 16–3
MultimediaDaily Focus Transparency 68Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker
MindJogger VideoquizNBR’s Economics & You
Presentation Plus!
SECTION 3 RESOURCE MANAGER
OverviewSection 3 explains the steps in
the federal budget-making processand how deficit spending increasesthe nation’s public debt.
Answers to the Reading Objectivesquestions are on page 439.
Preteaching VocabularyVocabulary PuzzleMaker
READER’S GUIDE
Project Daily FocusTransparency 68 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
T HE NATIONAL DEBT
1. Write a one-sentence summary of the table.
2. Which decade had the greatest increase in interest paid on thenational debt in both dollar terms and as a percentage of federalexpenditures?
Interest Paid on the National Debt1940–2000
Interest Paid on National Debt
(billions)
Year
1940 $1
1960 $9.2
1970 $19.3
1980 $74.9
1990 $264.8
2000* $370
1950 $5.7
Percent of FederalExpenditures
11.0
10.0
9.9
12.7
21.8
22.5
13.4
6868
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Ans
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Poss
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ans
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:Bet
wee
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40 a
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inte
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pai
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the
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and
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s.2.
the
1980
s
*estimated Source: Statistical Abstract of the United States
BELLRINGERMotivational Activity
Daily Focus Transparency 68
Page 434: 17B, 21A, 23A, 23GPage 435: 17A-C, 23A, 24A
Student Edition TEKS
CHAPTER 16SECTION 3, Pages 435–439
CHAPTER 16SECTION 3, Pages 435–439
Part A FederalSpending The federalbudget is based on a fiscal year, rather than thecalendar year. Spending iscalculated from the begin-ning of the budget yearon October 1 of one yearto September 30 of thenext year.
A Spending by the Federal Government (in billions of dollars)
Total Spending$1,703.0
Source: Standard & Poor’s
48.0%Income Security,Social Security,and Medicare
$818.0
3.3%Education, Training,Employment, and
Social Services$56.0
2.5%Veterans
$43.0
2.6%Transportation
$43.0
5.7%Other$97.0
16.1%NationalDefense$275.0
13.5%Interest$230.0
8.3%Health$141.0
For online updates of these graphs, visit tx.ett.glencoe.com and click on Textbook Updates—Chapter 16.
Part B State and LocalGovernment SpendingState and local govern-ment expenditures haveincreased in recent years,as these governmentscover the rising costs ofsocial welfare programs.
B Spending by State and Local Governments (in billions of dollars)
Source: Standard & Poor’s
7.8%Health &Hospitals
$114.0
7.4%Insurance
Trust$108.4
1.7%Housing &
Community Development
$24.7
11.4%Other$165.6
8.3%Public Safety
$121.3 30.8%
Education$450.4
14.0%Public Welfare
$204.6
6.9%Transportation
$101.6
6.8%Utilities$99.5
4.9%Government Administration
$70.7
FIGURE 16.6FIGURE 16.6
436 CHAPTER 16
436
L ECTURE LAUNCHERLSocial Security first began in 1935 during the Great Depression. By about 2012 more moneywill go out in benefits than will come in as revenue. This deficit will be covered by the surplusin Social Security, but only until about 2032, when the trust will be bankrupt. How might anincrease in spending on Social Security affect the federal budget? What kinds of budgetarydecisions will the government have to make between now and 2032?
I. The Budget Making Process
A. The Federal Budget is prepared about 18 months before the fiscal year.
B. The President, the Office of Management and Budget (OMB) work together to outlinea budget plan.
C. The President approves budget and then submits it to Congress.
D. Congress then examines and discusses the budget, and should pass it before the coming fiscal year.
E. Often the budget is not passed until after the fiscal year has already begun.
F. The largest category in state and local budgets is education.
G. Other large categories include public assistance, hospitals, health maintenance, andhighways.
• Discussion Question
16-3
PAGES 437–438
Daily Lecture Notes 16–3
Organization Problems Some students may have trouble differentiating the steps in thebudget-making process. Have these students read the paragraph under the heading “TheFederal Budget” on pages 437–438. Then ask students to restate the paragraphs by num-bering the budgeting steps in their correct order or by drawing graphics for each step.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.
Meeting Special Needs
Guided PracticeL2 Analyzing Ideas Review theconstitutional principle of checksand balances with students. Thenwork through the flowchart of thefederal budget-making process inFigure 16.7 on page 437. Ask stu-dents to write a few sentencesexplaining how the making of thefederal budget demonstrates theprinciple of checks and balances.
Have students study the infor-mation in Figure 16.6. ASK:What categories of spending doyou find surprising? Why? Thenhave students compare the infor-mation in Part A with that in PartB. Ask students to combine thedata and draw bar graphs show-ing the total spending for federal,state, and local governments.
ECON: 17B-C, 23A, 23D, 23F
ECON: 17B, 23A, 23D, 23F-G
ECON: 23A, 23F
437
Steps in the Budget Process
The President and OMB review the requests and make the fiscal decisions on what goesin the budget. The budget is printed and formally sent to Congress.
The House and Senate Budget Committeesreview the President’s proposed budget. ByApril 15, these committees prepare an initialresolution for the budget that goes to theentire Congress for debate. By September 25,the congressional budget should be finalizedand passed by the House of Representatives,which approves spending and revenue bills.
October 1, 2004The fiscal year begins.
October 1, 2004–September 30, 2005Agency program managers implementthe budget and disperse funds.
Data on actual spending and receiptsfor the completed fiscal year becomeavailable, and the General AccountingOffice audits the fiscal-year outlays.
October 2004October 2004S
714
21
815
22
916
23
1017
2428 29 30 31
111825
5121926
61 2 3 4132027
SFTWTM
September–December 2003
February–September 2003
January–September 2004
October–November 2005
Executive branch agencies developrequests for funds and submit themto the Office of Managementand Budget (OMB).
February–September 2003
437Government Spends, Col lects , and Owes
Part B of Figure 16.6 showshow state and local governmentsspend the tax revenues they col-lect. The largest single category by far in state and local expendi-tures is education. The “other”expenditure includes expendituresfor such things as state parks andstate courts.
The Budget-Making Process
Considerable debate and com-promise are necessary in preparingan annual budget. A complicatedbudget-making process goes onevery year, not just in Washington,D.C., but in every state and localgovernment unit as well.
The Federal Budget About 18 months before the fiscal yearbegins on October 1, the executivebranch of the government begins toprepare a budget, as Figure 16.7shows. Working with the President,the Office of Management andBudget (OMB) makes an outline ofa tentative budget for the next fiscalyear. The various departments andagencies receive this outline andusually start bargaining with theOMB for a larger allocation offederal funds.
The Federal Budget-MakingProcess The Office of Management andBudget (OMB) starts the budget process,with the advice of the Council of EconomicAdvisers and the Treasury Department.
16.716.7
fiscal year: year by whichaccounts are kept; for the federalgovernment, October 1 toSeptember 30 of the next year
CHAPTER 16SECTION 3, Pages 435–439
CHAPTER 16SECTION 3, Pages 435–439
IndependentPracticeL3 Research Have studentsresearch and analyze the federalbudget and their state’s budget rev-enues and expenditures for the pres-ent year. Ask them to present theirfindings in an illustrated report.
Name Date Class
For use with the textbook pages 435–439
T HE FEDERAL BUDGET AND THE NATIONAL DEBT
OUTLINING
Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.
I. The Budget Making Process
A. Introduction—Where does the budget-making process happen?
B. The Federal Budget
1. Who prepares the tentative budget for each fiscal year?
2. How does the budget flow through Congress?
3. How does the government operate if the budget is not passed on time?
II. Deficit Spending and the National Debt
A. Introduction
16-3
Guided Reading Activity 16–3
ECONOMICS & YOU
Government Spending
!8`j6" Chapter 16 Disc 1, Side 2
ASK: What circumstances haveled to the United States havinga national debt? In certain years,the government has spent morethan it received in taxes. It there-fore had to borrow money fromindividuals and other countries.Until the government is able topay all this money back with inter-est, we will have a national debt.
Also available in VHS.
Point out to students that in recent years there has been considerable debate on a bal-anced budget amendment to the Constitution. Organize students into groups, and havegroups use library and Internet resources to research the major arguments for and againstthis amendment. Encourage groups to use their findings to create a Web site designed toinform people about the balanced budget amendment debate. Call on groups to displayand discuss their Web site designs. BLOCK SCHEDULING
Cooperative Learning
Page 436: 17B-C, 21A, 23A, 23F-GPage 437: 15A, 17A-C, 21A, 23A,
23F, 24A
Student Edition TEKS
ECON: 17A-B, 23A, 23C, 24D
ECON: 17C, 20B, 23A, 23C, 24C-D, 27A
CHAPTER 16SECTION 3, Pages 435–439
CHAPTER 16SECTION 3, Pages 435–439
438 CHAPTER 16
budget deficit: situation whenthe amount of government spend-ing exceeds its receipts duringthe fiscal year
The President reviews and approves the budget plan. Thebudget is printed, and the President submits the budget toCongress by January. Then various committees and subcommit-tees of Congress examine the budget’s proposals, while theCongressional Budget Office (CBO) advises the committees aboutdifferent aspects of the budget. Throughout the year, each com-mittee holds a series of discussions.
Congress is supposed to pass two budget resolutions that setbinding limits on spending and taxes for the upcoming fiscalyear. In practice, however, the required budget resolutions oftendo not get passed on time. Moreover, when they are passed, theresolutions are not always treated as binding. As a result, the fis-cal year sometimes starts without a budget, and the governmentmust operate on the basis of a continuing congressional resolu-tion. Agencies that allocate funds can continue spending as theyspent the year before until the new budget resolution is passed.
Deficit Spending and the National Debt
In spite of the budget process outlined above, federal govern-ment revenues have not always been equal to government expen-ditures. Most years, the federal government spent more than itcollected in taxes, causing a budget deficit. When a budgetdeficit occurs, the government must raise the extra funds through
Net National Debt Thenet national debt of the UnitedStates increased almost 26 per-cent between 1992 and 1997.The net national debt started todecline from 1998 on.
FIGURE 16.8FIGURE 16.8
For an online update of this graph, visit tx.ett.glencoe.com and click on Textbook Updates—Chapter 16.
1992 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01*
Bil
lio
ns
of
Do
llars
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
Year
Source: Standard & Poor’s
*Author’s estimates
United States Net National Debt
438
As students review Figure 16.8,mention that the national debtgrew steadily in the second half ofthe twentieth century because thefederal government ran a deficitin all but 6 of the 62 yearsbetween 1940 and 2001.
T HE FEDERAL BUDGET AND THE NATIONAL DEBT
Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)
6. Who submits the federal budget to Congress?
a. the President b. the Office of Management and Budgetc. the Treasury Department d. state and local governments
7. For the federal government, the fiscal year extends from
a. January 1 to December 31 of the same year. b. April 1 to March 31 of the next year.c J l 1 t J 30 f th t d O t b 1 t S t b 30 f th t
SCORE
A1. fiscal year
2. budget deficit
3. deficit financing
4. national debt
5. budget surplus
Ba. when the amount of government receipts is larger
than its expenditures
b. total amount of outstanding debt for the federalgovernment
c. year by which accounts are kept
d. when the amount of government spending exceedsits receipts
e. government policy of spending more money than itis able to bring in through revenues
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Name Date Class
16, 3
Section Quiz 16–3
On average, the federal govern-ment spends about $3.4 millionevery minute.
Future Government Spending Some economists feel that the government practice ofspending more than it receives will create serious problems in the future, even if there areno budget deficits today. Most of these problems are related to the so-called baby boomgeneration—Americans born between 1946 and 1964. In the years from 2011 to 2029,some 78 million baby boomers will turn 65. They will collect Social Security benefits andwill need medical care, the cost of which—for the most part—will be covered by the fed-eral Medicare program. Currently, Medicare expenses equal about 2.5 percent of GDP.Some economists estimate that by 2030 this figure will rise to about 14 percent.
Relevant Issues in Economics
Meeting LessonObjectives
Assign Section 3 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 3.
ECON: 17C, 21A, 23F
ECON: 17C, 23G
ECON: 17B, 23A, 23G
439439
deficit financing: governmentpolicy of spending more moneythan it is able to bring in throughrevenues
national debt: total amount ofoutstanding debt for the federalgovernment
budget surplus: situation whenthe amount of governmentreceipts is larger than its expendi-tures during the fiscal year
439Government Spends, Col lects , and Owes
Understanding Key Terms1. Define fiscal year, budget deficit, deficit financ-
ing, national debt, budget surplus.
Reviewing Objectives2. Graphic Organizer Create a diagram like the
one below to describe the steps in the federalbudget-making process.
3. What are the five largest federal expenses?
4. What are the five largest state and localexpenses?
5. How does deficit spending increase the size ofthe national debt?
Applying Economic Concepts6. Trade-Offs If you had to reduce spending at the
state and local levels, which categories shown inPart B of Figure 16.6 would you reduce? Why?
7. Categorizing Information What is yourshare of the national debt today? Search theInternet under national debt for the debt total,then divide that number by an estimate of thecurrent population.
Critical Thinking Activity
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
3
borrowing. This borrowing is similar to an individual overspend-ing his or her income and using credit. The government’s over-spending is called deficit financing.
Government Borrowing Government borrows money to coverthe deficit by selling securities to individuals and businesses.Federal securities include Treasury bonds, notes, and bills. Whenyou buy United States savings bonds, you are also lending funds tothe federal government. In addition, individual agencies of the fed-eral government, such as the Tennessee Valley Authority, areauthorized to sell bonds. State and local governments can borrowby selling bonds to finance some of their activities.
Each year the federal government creates new debt by issuingnew securities. At the same time, it retires old debt by paying offbonds, notes, and bills as they come due. The total amount of out-standing debt for the federal government is called the nationaldebt, or public debt.
As you can see from Figure 16.8, from 1992 until 1997, theamount of the net national debt grew. The government has run abudget surplus—government revenues exceeded governmentexpenditures during the fiscal year—since 1998. The planned sur-pluses of 2001 and later years were unlikely to occur after terrorismstruck the United States in September 2001. The federal governmenthad to spend more to fight terrorism.
CHAPTER 16SECTION 3, Pages 435–439
CHAPTER 16SECTION 3, Pages 435–439
ReteachDirect each student to write
three questions about the federalbudget-making process on indexcards. Collect and shuffle the cards.Then work through the cards,selecting students at random toanswer questions.
1. All definitions can be found in the Glossary.2. Graphic organizers should resemble
Figure 16.7 on page 437.3. income security, Social Security, and Medicare;
national defense; interest on the debt; health;and other
4. education; other; public welfare; police and fire;health and hospitals
5. When the government uses deficit spending, itmust borrow to make up the shortfall. The
money that the government has yet to payback is the national debt. Continued deficitspending will add to the debt.
6. Ensure that students fully explain their choices.7. Answers will vary but will be in the range of
$20,000. Suggest that students visit theBureau of Public Debt’s Web site atwww.publicdebt.treas.gov. Population esti-mates may be found on the Bureau of theCensus Web site at www.census.gov.
Lead students in a discussion ofthe following: Should the federalgovernment be limited to spendingonly what it collects in taxes? Whyor why not?
Name Date Class
16, 3
fiscal year A year by which accounts are kept. For the federal government, the fiscal year is October 1 toSeptember 30 of the next year (page 437)
budget deficit Occurs when government spending exceeds the amount of tax receipts for a fiscal year(page 438)
deficit financing A government policy of spending more money than it is able to bring in through rev-enues (page 439)
national debt The federal government’s total outstanding debt (page 439)
budget surplus Occurs when government revenues are larger than its expenditures during the fiscal year(page 439)
For use with textbook pages 435–439
T HE FEDERAL BUDGET AND THE NATIONAL DEBT
DRAWING FROM EXPERIENCE
How do you or family members spend your income? What do you purchase? Who decides whatto purchase? What happens when you need to buy something immediately but you do not havethe cash to purchase it right now?
As you read this section, you will learn how the government prepares its budget and decideswhere to spend its funds.
ORGANIZING YOUR THOUGHTS
KEY TERMS
Reading Essentials and Study Guide 16–3
Page 438: 17B-C, 23A, 23F-G, 24APage 439: 11B-C, 17A-B, 23A, 23D,
23F-G, 24A, 27A
Student Edition TEKS
ECON: 17B, 23A
ECON: 15A, 17A-B, 23D
CHAPTER 16SECTION 4, Pages 440–443
CHAPTER 16SECTION 4, Pages 440–443
Reproducible MastersReproducible Lesson Plan 16–4Reading Essentials and Study Guide 16–4Guided Reading Activity 16–4Section Quiz 16–4Daily Focus Activity 66Daily Lecture Notes 16–4
MultimediaDaily Focus Transparency 66Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker
MindJogger VideoquizPresentation Plus!
SECTION 4 RESOURCE MANAGER
440 CHAPTER 16
Terms to Know• benefits-received principle• ability-to-pay principle• proportional tax• progressive tax• regressive tax
Reading Objectives1. What are the two principles
of taxation?
2. What effect do the threeforms of taxation have ontaxpayers?
READER’S GUIDE
THE WASHINGTON POST, APRIL 12, 1999
“We’ll cut your taxes” is the most repeated campaignpromise in the history of American politics. Yet some-how it is still considered visionary, worth afight. Worth, indeed, a crusade.
Why? It’s in our blood. Historically,Americans have hated taxes, and notmerely because we had to pay them.We’ve hated taxes because we’ve perceived them to be an infringementon our liberty—and the source of big, powerful, and mischievous government.This was true from the beginning. It wasn’t just “taxation without repre-sentation” that bothered us so much. It was taxation. Period.
4
benefits-received principle:system of taxation in which thosewho use a particular governmentservice support it with taxes inproportion to the benefit theyreceive; those who do not use aservice do not pay taxes for it
You, the American taxpayer, are the source of most of themoney the government spends. Almost all federal, state, andlocal government revenue comes from taxes. In this section,
you’ll learn about the major kinds of taxes paid in this country.
Principles of TaxationFigure 16.9 lists the major taxes that the various levels of
government use to raise revenue. Taxes are usually justified accord-ing to one of two major principles. Under the benefits-receivedprinciple, those who use a particular government service shouldsupport it with taxes in proportion to the benefit they receive.Those who do not use a service do not pay taxes for it. A gasoline
440
OverviewSection 4 describes or explains
the principles of taxation and thetypes of taxes collected in theUnited States.
Answers to the Reading Objectivesquestions are on page 443.
Preteaching VocabularyHave students demonstrate
their understanding of the Termsto Know by writing a sentenceshowing the difference betweenthe benefits-received principle andthe ability-to-pay principle.
Vocabulary PuzzleMaker
READER’S GUIDE
Project Daily FocusTransparency 66 and have students answer the questions.
Available as blackline master.
Daily Focus Transparencies
T AXES—A CONTINUING CONTROVERSY
1. In the cartoon above, what are the people doing outside the doorof the Internal Revenue Service?
2. What is the cartoonist saying about how much money the InternalRevenue Service takes away from people in taxes?
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BELLRINGERMotivational Activity
Daily Focus Transparency 66
ECON: 17A, 24A-B
441
441Government Spends, Col lects , and Owes
Major Taxes
Description
Tax is a percentage of income and amajor source of federal revenue; manystate governments also levy
Taxes covered by the Federal InsuranceContributions Act (FICA); second-largestsource of federal revenue
Federal tax as a percentage of corporateprofits; some states also levy
Tax paid by the consumer on the manu-facture, use, and consumption of certaingoods; major federal taxes are on alco-hol, tobacco, and gasoline; some statesalso levy
Federal tax on the property of someonewho has died; some states also levy
State tax paid by those who inheritproperty
Federal tax paid by the person who givesa large gift
Tax paid on purchases; almost all statesas well as many local governments levy;rate varies from state to state and withinstates; items taxed also vary
State and local taxation of the value ofproperty; both real property (such asbuildings and land) and personal prop-erty (such as stocks, bonds, and homefurnishings) may be taxed
Tax on imports; paid by the importer
Type
Progressive at the federallevel, but is sometimes pro-portional at the state level
Proportional up to $80,400 in2001, regressive above that (asestimated by the Social SecurityAdministration)
At the federal level, progressive upto $18.3 million, proportionalabove that
Regressive if people withhigher incomesspend a lower proportion of incomeon taxed items
Progressive; rate increases with the valueof the estate
Varies by state
Progressive; rate increases with the valueof the gift
Regressive if people with higher incomesspend a lower proportion of income ontaxed items
Proportional; rate is set by state and local governments
Proportional
Tax
Personalincome
Socialinsurance
Corporateincome
Excise
Estate
Inheritance
Gift
Sales
Property
Customsduties
FIGURE 16.9FIGURE 16.9
CHAPTER 16SECTION 4, Pages 440–443
CHAPTER 16SECTION 4, Pages 440–443
ASK: What are the three gen-eral classifications of taxes? pro-gressive, proportional, regressive
L ECTURE LAUNCHERLThe state of Alaska has the lowest tax rate and the state of New York has the highest. In1996, a typical family of four paid $2,982 in Alaska compared to $14,005 in New York. Whatare the principles of taxation? How can taxes be used to direct economic activity?
I. Principles of Taxation
A. Benefits-received principle states that people who use a service should support it withtaxes in proportion to the benefit they receive.
B. Ability-to-pay principle states that people support programs based on their incomes,not their usage of the programs.
• Discussion Question
How might things be different if school taxes were charged on the benefits-receivedprinciple? (Schools would probably have much lower revenues and resources. People wouldpay based on the number of children in the schools. This could be very costly for large fami-lies. The people in the community without children would pay nothing.)
II. Forms of Taxation
A. Actual taxes are classified according to the effect they have on those who are taxed.
16-4
PAGES 440–442
PAGES 442–443
Daily Lecture Notes 16–4
Language Comprehension Disability Students who have difficulty with comprehensionor who have limited English proficiency may benefit by reading information and thenrestating it. Direct students to read sentences from Section 4 and then restate each one intheir own words. Listen carefully to students to ensure that they are not simply repeatingphrases directly from the book.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.
Meeting Special Needs
Guided PracticeL2 Applying Ideas Direct studentsto review the discussion of the prin-ciples of taxation on pages 440 and442. Then randomly assign eitherthe benefits-received principle or theability-to-pay principle to each stu-dent. Have students study the typesof taxes listed in Figure 16.9 on page441, and have them identify whichtax fits their assigned principle.
Page 440: 15A, 17A, 20A-B, 23A,24A
Page 441: 15A, 17A, 20A-B, 23A,23F
Student Edition TEKS
L2 Have students make a list of thetypes of taxes at the local, state, andnational level. Then have studentsidentify the economic importance ofeach type of tax. ECON: 17A
ECON: 17A
ECON: 23A, 24A
ECON: 15A, 17A, 20A-B, 23A
CHAPTER 16SECTION 4, Pages 440–443
CHAPTER 16SECTION 4, Pages 440–443
ability-to-pay principle: princi-ple of taxation in which those withhigher incomes pay more taxesthan those with lower incomes,regardless of the number of gov-ernment services they use
tax to pay for highway construction and repair is based on the benefits-received principle. Frequent users of the highways oftenbuy more gasoline and, therefore, pay more in gasoline taxes.
A tax based on the benefits-received principle is useful in rais-ing funds to pay for a service only certain individuals use. Manygovernment services—national defense, for example—benefit every-one equally, however. Also, those who most require services, suchas the aged and poor, are the individuals least able to pay taxes.
Under the ability-to-pay principle, those with higherincomes pay more taxes than those with lower incomes, regard-less of the number of government services they use. For example,in most cities all property owners, even those without school-aged children, must pay property taxes to support the local
school system. Property taxes are calculatedas a percentage of the value of a person’shome. Thus, wealthier people with moreexpensive homes pay more property taxes.
Forms of TaxationActual taxes are classified according to
the effect they have on those who are taxed.In the United States today, these classifica-tions include proportional, progressive, andregressive taxes.
Student Web Activity Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 16—Student WebActivities to learn how the federal governmentspends your tax dollars.
E very year, the Tax Foundation an-nounces the arrival of “Tax Freedom
Day.” On this date, the average Americanhas earned enough to pay all of his or herfederal, state, and local taxes for the year.
To arrive at this date, Tax Foundationeconomists use a fairly simple formula.First, they divide per capita taxes (amountpaid for all taxes divided by the population)by per capita income (total income earned
divided by the population). This shows thepercentage of the average American’sincome that goes for taxes. They then applythis percentage to 365 to find the number ofdays it would take to “work off” this amount.
In 2001, for example, some 33.8 percentof income went for taxes. Applying this per-centage to 365 produces 123 days. Theaverage American worked to May 3 to payall taxes. ■
Economic Connection to... MathEconomic Connection to...
442 CHAPTER 16
Tax Freedom DayTax Freedom Day
442
For use with the textbook pages 440–443
T AXATION
RECALLING THE FACTS
Directions: Use the information in your textbook to answer the questions.
1. Under what two principles are taxes usually justified?
a. __________________________
b. __________________________
2. What is the benefit-received principle?
3. What is the ability-to-pay-principle?
4. What is a proportional tax?
5. How is a progressive tax calculated? What principle is it based on?
6. What is a good example of a progressive tax?
Name Date Class
16-4
Guided Reading Activity 16–4
See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.
Using Taxation To Influence Economic Decisions Government uses taxation not onlyto raise revenue, but also to influence the economic decisions of businesses and individu-als. Government can adjust taxes to encourage business. State and local governments,for example, may reduce or eliminate taxes for a company to persuade it to locate in aparticular area. Taxes also can be used to discourage activities. High taxes on cigarettesand alcohol are designed, in part, to discourage smoking and drinking. Similarly, customsduties make imports more expensive and discourage American consumers from buyingforeign goods.
Extending the Content
IndependentPracticeL2 Creating Posters Have studentswork in small groups to createposters that depict the information inSection 4. Direct groups to make twoposters—one illustrating the princi-ples of taxation, the other illustratingthe three forms of taxation. Call ongroups to display and explain theirposters. BLOCK SCHEDULINGELL
Assign Section 4 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 4.
tx.ett.glencoe.com
ECON: 15A, 17A, 20A-B, 23A, 23D, 24D
ECON: 15A, 17A-C
443443
443Government Spends, Col lects , and Owes
Proportional Tax A proportional tax is the easiest type of taxto understand. The taxes you owe are simply a proportion of themoney income you have earned. If there is a tax of 10 percent onall income and you earn $1,000, then you pay $100 in taxes. Ifyou earn $10,000, you pay $1,000 in taxes, and so on.
Progressive Tax With a progressive tax, when an individualearns a higher income, his or her taxes increase more than inproportion to the increase in money income. A good example of aprogressive tax is our federal individual income tax system. Asyou make more reported income, you pay an increasingly higherpercentage of that additional income in taxes to the federal gov-ernment. A progressive income tax has often been justified on thebasis of the ability-to-pay principle.
Regressive Tax As you might expect, a regressive tax is theopposite of a progressive tax. The percentage that you pay intaxes actually goes down as you make more money income. Someeconomists believe that a good example of a regressive tax is thesales tax on food. They point out that poorer families spend alarger proportion of their income on food. Therefore, the salestax they pay on food takes up a larger proportion of their totalincome than a wealthier family pays.
proportional tax: tax that takesthe same percentage of allincomes; as income rises, theamount of tax paid also rises
progressive tax: tax that takes a larger percentage of higherincomes than lower incomes; justified on the basis of the ability-to-pay principle
regressive tax: tax that takes a larger percentage of lowerincomes than of higher incomes
Understanding Key Terms1. Define benefits-received principle, ability-to-
pay principle, proportional tax, progressive tax,regressive tax.
Reviewing Objectives2. What are the two principles of taxation?
3. Graphic Organizer Create a chart like the one in the next column to explain the three forms of taxation and their effect on taxpayers.
Applying Economic Concepts4. Taxation List and describe the kinds of taxes
you personally pay.
5. Making Comparisons Which of the twoprinciples of taxation do you think is the moreequitable? Explain your answer.
Critical Thinking Activity
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
4
Type of Tax Effect on Taxpayer Example
CHAPTER 16SECTION 4, Pages 440–443
CHAPTER 16SECTION 4, Pages 440–443
ReteachWrite the following titles on the
board: Principles of Taxation,Forms of Taxation. Ask students towrite a brief paragraph on each ofthese topics.
1. All definitions can be found in the Glossary.2. benefits-received principle and ability-to-pay
principle3. Proportional: Taxpayers pay the same propor-
tion of income, some state income taxes;Progressive: Taxpayers with higher incomespay more than those with lower incomes, fed-
eral income tax; Regressive: Percentage tax-payers pay in tax falls as income rises, salestax on food
4. Answers may include income tax, sales tax,Social Security tax, excise tax, customs duty.
5. Ensure that students give valid reasons fortheir choice of taxation principle.
Remind students that one of thegoals of the American economy iseconomic equity. Then have themdiscuss if—and how—the principlesof taxation and the different formsof taxation meet this economicgoal.
Name Date Class
16, 4
benefits-received principle A taxation system in which those who use a government service pay for itwith taxes in proportion to the benefit they receive. People who do not use the service do not pay taxes forit (page 440)
ability-to-pay principle A taxation principle requiring people with higher incomes to pay more taxes thanindividuals with lower incomes regardless of the number of government services used (page 442)
proportional tax Taxes that take the same percentage of all incomes. As income rises, the amount of taxpaid also rises (page 443)
progressive tax A tax that takes a larger percentage of higher incomes than lower incomes. It is justifiedon the ability-to-pay principle (page 443)
regressive tax A tax that takes a larger percentage of lower incomes than higher incomes (page 443)
For use with textbook pages 440–443
T AXATION
DRAWING FROM EXPERIENCE
Have you ever looked carefully at your paycheck stub or a sales receipt? How could you tell thatyou paid taxes? Did everyone who received a paycheck or purchased something that same daypay the same amount of tax?
In the following section, you will read about the major kinds of taxes paid in the United States.
ORGANIZING YOUR THOUGHTS
KEY TERMS
Reading Essentials and Study Guide 16–4
Name Date Class
16, 4
T AXATION
Multiple Choice: In the blank at the left, write the letter of the choice that bestcompletes the statement or answers the question. (10 points each)
6. Most local, state, and federal government revenues come from
a. taxes. b. tariffs.c. selling securities. d. buying securities.
7. Paying a gasoline tax is an example of
a. tax based on the ability-to-pay principle. b. proportional tax.c. personal income tax. d. tax based on the benefits-received principle.
SCORE
A1. benefits-received principle
2. ability-to-pay principle
3. proportional tax
4. progressive tax
5. regressive tax
Ba. tax that takes a larger percentage of higher incomes
than lower incomes
b. system of taxation in which those who do not use aservice do not pay taxes for it
c. tax that takes a larger percentage of lower incomesthan higher incomes
d. principle of taxation in which those with higherincomes pay more taxes than those with lowerincomes, regardless of the services they use
e. tax that takes the same percentage of all incomes
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Section Quiz 16–4
Page 442: 15A, 17A-C, 20A-B,23A, 23G, 24A
Page 443: 15A, 17A, 20A-B, 23A,23D, 23F, 24A
Student Edition TEKS
ECON: 17A, 20A-B, 23A
ECON: 15A-B, 16A, 17A, 20A-B,23D
TechnologySkills
444
Electronic mail, or E-mail, refers to communicating at a distance through the use of a computer. A com-puter is ready to “talk” to other computers after two things are added to it: (a) a modem—a device thatallows communication through a telephone line, and (b) communications software, which lets yourcomputer prepare and send information to the modem.
Technology Skills
After you type in your message, you may send it, forward it, and evensave it to a file.
Practicing the SkillSelect a current issue concerning government taxa-
tion to research. Then browse the Internet to obtain theE-mail address of a federal official concerned with theissue. E-mail the official, sharing opinions about theissue, asking questions about the issue, and requestinginformation.
Application ActivityE-mail a classmate. Forward the information you
received from the government official concerning theissue above. Working together, write a summary of theE-mail correspondence with the official.
Using E-Mail
1. Select the “Message”function from your com-munications software.
2. Type in your message,and proofread it forerrors.
3. Type in the E-mailaddress of the recipient.and select the “Send”button.
4. The E-mail system placesthe message in thereceiver’s electronic mail-box. He or she may readthe message at any time,and send you a returnmessage.
5. When you receive E-mail,the sender’s address ison the message—add itto your electronic addressbook at that time.
Learning the SkillTo send an E-mail message, follow the steps listed
on the left.
444
Using E-MailYou might begin this skill by tak-
ing a class survey to find out whichstudents correspond regularly usingE-mail. Encourage students whohave the most experience with thisform of communication to demon-strate creating and sending a mes-sage and opening and printing areceived message. At this point, youmight mention that it is possible toattach documents or other files toE-mail messages. As an example,suggest that a student might sendan essay to a classmate without typ-ing it again as part of the message.
Answers to Practicing the Skill
Results will vary. Review students’ E-mail messages before they send them to federal officials.
Application Activity Answers may vary. Have partners share their summaries with therest of the class.
U SING E-MAILElectronic mail, or e-mail, involves communicating through the use of a computer terminal.To send or receive e-mail, you need a modem—a device that that allows communicationthrough a telephone line. You also need to subscribe to an Internet service through a serviceprovider, such as America Online, CompuServe, or an independent regional service.
To send an e-mail, type in your message and proofread it for errors. In the “To:” space, type inthe e-mail address of the recipient. In the “Subject:” space, type in the subject of your e-mail. Ifyou want to send a copy of the e-mail to someone, type in the person’s name in the “Cc:” space.
New Memo Delete Forward Reply
To:
Fr:
Who Date
Subject
Name Date Class
22
Reinforcing Economic Skills 22
ECON: 23A
445
445Government Spends, Col lects , and Owes
Growth in the Size ofGovernment
• Government at every level—local, state, and fed-eral—is involved in almost every aspect of theUnited States economy.
• All levels of government employ about 20 millioncivilian workers.
• Government finances highways, education, andother public-works projects. It also regulatesproduct and worker safety.
• Total government outlays, including actual pur-chases as well as transfer payments, exceed one-third of GDP.
The Functions ofGovernment
• One function of government is to provide publicgoods, such as national parks and nationaldefense.
• Another function of government is to provide forthe public well-being through social insuranceprograms—such as Social Security, Medicare,and workers’ compensation—and public-assistance programs—such as SupplementalSecurity Income and Medicaid.
• A third function of government is to regulate thenegative externalities of the production process.
• A fourth function—ensuring economic stability—has meant smoothing the ups and downs in thenation’s overall business activity.
The Federal Budget andthe National Debt
• The federal government’s largest expendituresinclude Social Security/Medicare/income security,national defense, interest on the national debt, andhealth.
• The executive and legislative branches prepare afederal budget for each fiscal year.
• Spending more in a fiscal year than it collects intaxes results in the government running a budgetdeficit.
• The total amount accumulated by annual budgetdeficits is the national debt.
Taxation
• Under the benefits-received principle, peoplewho use a particular government service support itwith taxes in proportion to the benefit they receive.
• Under the ability-to-pay principle, those withhigher incomes pay more taxes than those withlower incomes, regardless of the number of gov-ernment services they use.
• Major types of taxes include personal income,social insurance, corporate income, sales, andproperty taxes.
• Taxes are classified according to the effect theyhave on those who are taxed: proportional, progressive, or regressive.
C H A P T E R
SECTION 1
SECTION 2
SECTION 3
SECTION 4
Chapter Overview Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 16—Chapter Overviewsto review chapter information.
16
Use the Chapter 16 Summary topreview, review, condense, orreteach the chapter.
Preview/ReviewVocabulary PuzzleMaker
CD-ROM reinforces the key termsused in Chapter 16.
Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 16 content.
CondenseHave students listen to the
Chapter 16 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 16 Audio Pro-gram Activity and give students theChapter 16 Audio Program Test.
ReteachHave students com-
plete Reteaching Activity 16 in theTCR (Spanish Reteaching Activitiesare also available).
C H A P T E R 16
ECONOMICS & YOU
How Government Spends,Collects, and Owes
!8V`4" Chapter 15 Disc 1, Side 2
Available in VHS.
Government Involvement in the Economy Have students list all the activities they doduring a three-day period. Next to each item on the list, have students indicate what rolethe government might have in that activity. As an example, remind students that when theydrive, it is usually on a government-provided public road. Have students use this informa-tion to write a brief discussion of how government supports, regulates, or taxes them.Suggest that they conclude the discussion with a paragraph on the pros and cons of gov-ernment involvement in their lives.
Economics Journal
Page 444: 23A, 26B, 27APage 445: 3B, 15A-B, 16A, 17A-C,
20A-B, 21A-B, 23A, 24A
Student Edition TEKS
ECON: 15A-B, 17A, 20A-B, 23A, 23D, 24D
CHAPTER 16Assessment and ActivitiesCHAPTER 16
Assessment and Activities
Identifying Key TermsWrite the letter of the definition in Column Bthat correctly defines each term in Column A.
Column A1. benefits-received principle2. public goods3. ability-to-pay principle4. income redistribution5. national debt6. Medicare7. Social Security8. Medicaid
Column Ba. public-assistance program that provides
free health care to low-income personsb. taking tax dollars from some to give to
others in the form of aidc. system by which those with higher
incomes pay higher taxesd. provides monthly payments to the retirede. payment for a particular government ser-
vice by those who use the service
f. goods and services whose use by one per-son does not reduce use by another
g. provides health care for the agedh. amount of money the government owes
Recalling Facts and IdeasSection 11. In what ways has the government grown
since the Great Depression?2. What percent of GDP is accounted for by
total government purchases?
Section 23. What are government’s main functions?4. Give five examples of public goods.5. What would be a negative externality of
having an airport built near your home?What would be a positive externality?
Section 36. About how long does it take the federal
government to prepare a budget?7. What causes the nation’s public debt?
Section 48. What are the principal taxes that exist in
the United States today?9. If all income were taxed at exactly the same
rate, what type of tax would be in existence?
Thinking Critically1. Analyzing Information Look at Figure 16.2
on page 426. When did federal govern-ment purchases drop below state and localpurchases? Why do you think this situa-tion occurred?
16
Self-Check Quiz Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 16—Self-Check Quizzesto prepare for the Chapter Test.
446 CHAPTER 16
446
Identifying KeyTerms1. e2. f3. c4. b5. h6. g7. d8. a
Recalling Facts and Ideas1. Government has grown in terms
of workers employed and interms of spending.
2. over 20 percent3. provide public goods, redistrib-
ute income, regulate economicactivity, ensure economic stability
4. Examples may vary but mightinclude national defense, roads,schools, museums, parks, andthe legal system.
5. Answers may vary. Studentsmight suggest noise pollutionand increased traffic as negativeexternalities, and new airportbusinesses—restaurants, stores,and so on—in the neighborhoodas positive externalities.
6. about 18 months7. deficit spending—spending more than is
taken in and borrowing to make up theshortfall
8. personal income, social insurance, corpo-rate income, excise, estate, inheritance,gift, sales, property, customs duties
9. proportional
Thinking Critically1. around 1970; state and local governments
began paying for such things as schools,sewers, and roads
2. Answers will vary but may include: Stateand local governments may reduce oreliminate taxes for a company to persuadeit to locate in a particular area. Taxes alsocan be used to discourage activities—hightaxes on cigarettes and alcohol are
Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 16 and take the Self-Check Quiz.
MindJogger Videoquiz
Use MindJogger to reviewChapter 16 content.
tx.ett.glencoe.com
CHAPTER 16Assessment and ActivitiesCHAPTER 16
Assessment and Activities
447
447Government Spends, Col lects , and Owes
2. Drawing Conclusions Create a diagram likethe one below to explain how you thinktaxes can encourage or discourage con-sumer and business behaviors.
ApplyingEconomic ConceptsPrinciples of Taxation You learned about twoprinciples of taxation, one of which was thebenefits-received principle. Assume that youwant to use this principle to justify a pro-gressive income tax system. Write a list ofthe reasons explaining why, as a person’sincome goes up, that person receives morebenefits from the government and thereforeshould be taxed progressively.
CooperativeLearning Project
Work in groups representing at leastthree regions of the United States. Eachmember should choose one or more statesin the group’s region to research. Determinewhich states in the region have the highesttax rate. The information needed will be:
■ Highest tax rate applied to personal income■ Highest tax rate applied to corporate income■ Sales tax rate
Share your information with the rest of yourgroup, and then have the groups present theinformation to the rest of the class. Whichstate in which region has the highest taxrate? Which region in general has the highesttax rate?
Reviewing SkillsUsing E-Mail Using your communicationssoftware, type a message asking 10 registeredvoters for their opinions on the national debt.In your E-mail, ask the recipients questionssuch as the following:1. How serious do you think the national
debt is for the future of the United States?2. What measures, if any, should the federal
government take to reduce the nationaldebt?
3. If we do not reduce the national debt,what consequences do you foresee, partic-ularly for the generation currently attend-ing high school?
4. What sacrifices do you think you would bewilling to make to help reduce the debt?
TechnologyActivityDeveloping Multimedia Presentations Developa video tracing your daily routine and exam-ining each part of your life in which the gov-ernment is involved. For example, if you takea bus to school, videotape the bus and explainthat this is an example of property taxesbeing used to fund school transportation.Continue filming throughout the day as youcome in contact with other government ser-vices. Show your completed video to the class.
Compare the federal income tax rate ofthe United States to other industrializednations, including the Netherlands, Germany,Sweden, Japan, and France. Which nationhas the highest tax rate?
Effect ofTaxes
CooperativeLearning Project
Students might present theirinformation in a chart or a table.
Reviewing SkillsE-mail responses will vary.
Encourage students to share andcomment on their responses.
Technology ActivityStudents may wish to work in
teams to complete their videos.
Analyzing theGlobal Economy
Have students list the nationsthey research according to tax ratesfrom highest to lowest.
ASK: Which principle of taxa-tion is represented by a gaso-line tax to pay for highwayconstruction? Why? benefits-received principle, because driv-ers who use the highways are theones who pay the tax
Chapter BonusTest Question
designed, in part, to discourage smokingand drinking. Similarly, customs dutiesmake imports more expensive and dis-courage American consumers from buyingforeign goods.
Applying EconomicConcepts
Answers will vary, but reasons shouldreflect an understanding of progressive taxation and the benefits-received principle. Page 446: 15A-B, 16A, 17A-C,
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Focus on Free Enterprise
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Focus on Free Enterprise
The Trek BicycleCorporation
Lance Armstrong
On July 29, 2001, American Lance
Armstrong rode through the streets
of Paris, France, greeted by thousands of
wildly cheering spectators. He was on his
way to his third consecutive victory in the
Tour de France—the world’s greatest bicycle
race. Armstrong is the first American to
win the tour three times in a row. The race
lasts about three weeks and covers more
than 2,000 miles. It was an “all-American”
victory, for Armstrong was riding an
American-made bike—a Trek.
The Bike BarnTrek bikes got their start in Waterloo,
Wisconsin, more than 20 years ago.Richard Burke and his friends loved tinker-ing with bicycles, even making their ownbike frames. When other people startedadmiring their handiwork, they realizedthey had a real business opportunity.
In 1976 Burke and his friends set upTrek Bicycle Corporation in a rented barnin Waterloo. The company had just fiveworkers and made one product—hand-builtsteel bike frames. Over time, Trek Bicycleexpanded its business, making its own roadbicycles using quality parts from Americanmanufacturers. In the early 1980s, Trekintroduced a line of mountain bikes. By theend of the decade, Trek was producingbicycle clothing, safety equipment, andchildren’s bikes.
As a result, Trek expanded its pro-duction facilities, building three factor-ies in Wisconsin—one right next doorto the barn in Waterloo. It alsoopened facilities in Europeand Japan. Today Trek employsabout 2,000 people worldwide
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Have students identify hobbiesthat they enjoy. Ask them if theythink they might be able to developthese hobbies into businesses. Theninform them that this is exactlywhat the founders of the TrekBicycle Corporation did.
Mention that Trek was a sponsorof Lance Armstrong and the UnitedStates Tour de France team ofwhich he was a member. Ask stu-dents why they think Trek would bewilling to sponsor professionalcyclists and cycle teams. Most stu-dents will note that it is good public-ity for their product. Others mightalso suggest that Trek might get usefulfeedback from professional cyclists,which will help in improving theirproduct.
Trek Bikes In 1996, in the first-ever automobile/bicycle company partnership, TrekBicycle joined with Volkswagen to market an interesting combination—an automobile witha bike attached! The special edition Jetta Trek featured a Volkswagen Jetta combined witha Trek mountain bike. The Volkswagen/Trek partnership continues today—as cosponsorsof a mountain bike race team.
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and has yearly sales in excess of $550 mil-lion. It ranks as one of the world’s leadingquality bicycle manufacturers.
Building a Better BikeTrek Bicycle’s success is due to its com-
mitment to product improvement. Trek hascontinually made research and developmentone of its top priorities. This focus hasresulted in many innovations in bicycle con-struction. Their carbon fiber frame is oneexample. Weighing less than 2.5 pounds, itwas designed using the same technologythat developed the Stealth fighter.
Another example is the aluminum-frame Y bike. The tech-nology used in its constructioncombined the comfort of mountainbikes with the quickness of roadbikes. The Y bike is popular in anunusual market—law enforcement.Many police forces use the Y bikefor their bicycle units. Even thePresident’s Secret Service squadpatrols the White House grounds onspecially designed Y bikes!
Trek’s innovations also are pop-ular with people in the industry. In1995 the Trek engineers whodesigned the Y bike won PopularMechanics magazine’s DesignEngineer of the Year Award. In
1996 the Industrial Designers Society ofAmerica gave Trek’s Y bike its Gold IndustrialExcellence Award.
Future PlansTrek Bicycle plans to continue develop-
ing new and exciting products for cyclingenthusiasts. The most recent is a line ofbikes built especially for riding in the city—the Urban Assault Vehicle. Trek also wantsto solidify itself as an American operation.At present, some 70 percent of Trek bikesare made at the company’s Wisconsin facili-ties. In the next few years, Trek hopes topush this figure higher. For Richard Burkeand other Trek executives, “Made inAmerica” is an important and proud boast.
Free Enterprise in Action
1. What is the key to Trek Bicycle Corporation’ssuccess?
2. How do Trek Bicycle’s future plans show thatthe company takes the statement “Made inAmerica” seriously?
Police patrol on Y bikes
Have students answer the FreeEnterprise in Action questions.
Answers to Free Enterprise In Action1. Trek’s key to success is its commitment to product improvement.2. At present, 70 percent of Trek bikes are made at the company’s facilities in
Wisconsin, and Trek wants to increase this number over the next few years.
To celebrate Armstrong’s 1999Tour de France victory, Trekreleased a “Lance ArmstrongSignature” limited edition—just1,999 models—of the Trek 5500OCLV.
Ask students to discuss if theywould be more willing to buy aproduct labeled as “Made inAmerica.” Have students explaintheir responses.
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