Chapter 14 The Congress, The President, and the Budget: – Flashcards
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In Pollock v. Farmer?s Loan and Trust Co. (1895), the United States Supreme Court ruled that
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the income tax was unconstitutional.
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The Sixteenth Amendment, ratified in 1913,
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explicitly permitted Congress to levy an income tax.
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A(n) ________ is a policy document allocating taxes and expenditures, or a series of goals with price tags attached.
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budget
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A budget is
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a policy document allocating burdens (taxes) and benefits (expenditures).
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Congress was officially given the power to levy an income tax through the
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Sixteenth Amendment.
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The federal government?s budget is mainly
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a policy statement that allocates burdens and benefits by attaching price tags to policy goals.
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According to Aaron Wildavsky, budgeting is a process most concerned with
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translating financial resources into human purposes.
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Which of the following is NOT the responsibility of the Internal Revenue Service?
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establishing the annual tax rates that Americans of different incomes must pay
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Income taxes
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provide the largest source of federal revenue.
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In order of decreasing amounts, the sources of federal revenue include
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individual income tax, social insurance receipts, borrowing and corporate income tax.
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Corporations today pay
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income taxes which account for much less federal revenue than individual income taxes
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The income tax is generally progressive, meaning that
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those with more income pay higher rates of tax on their income.
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Social Security taxes are
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paid for by employees and employers.
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Social insurance taxes
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are earmarked for a specific purpose.
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The fastest growing source of federal revenue has been
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Social Security taxes.
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The government borrows money principally by
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selling bonds.
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Who can purchase United States government bonds?
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) financial institutions B) citizens C) corporations D) mutual funds
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The federal debt
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consists of all the money borrowed over the years by the national government and still outstanding.
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The federal debt in the United States
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has increased due to the budget deficit caused by the difference between revenues and expenditures.
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Unlike state and local governments, the federal government is borrowing primarily for
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its day-to-day expenses.
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________ are revenue losses attributable to provisions of the federal tax laws which allow a special exemption, exclusion, or deduction.
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Tax expenditures
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Tax expenditures consist of
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tax exemptions, deductions, and exclusions.
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The federal income tax deduction for mortgage interest on an owner-occupied home is an example of a
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tax expenditure.
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An example of a tax expenditure is
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a tax deduction for the mortgage interest paid by homeowners.
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The Office of Management and Budget estimates that the total tax expenditures is more than ________ of the federal government?s total receipts.
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30 percent
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Tax expenditures tend to most benefit
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middle- and upper-income people and corporations.
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Which of the following statements about President Reagan?s 1981 tax cut is FALSE?
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Corporate taxes were increased.
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Which of the following statements about President Reagan?s 1981 tax cut is TRUE?
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It provided new tax incentives for personal saving and investment.
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Which of the following was NOT a provision of President Reagan?s 1985 tax simplification program?
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It increased the number of tax expenditures available to businesses.
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Beginning in 1985, federal income taxes were ________ to the cost of living, so that government no longer got a larger percentage when inflation pushed incomes into higher brackets while the tax rates stayed the same.
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indexed
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President Reagan?s 1981 tax cuts were most beneficial to
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high-income families.
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In 1993, Congress agreed to President Clinton?s proposal to
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raise the income tax rate for families in the highest income brackets
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The United States government?s annual budget is now approximately
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$2.75 trillion.
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Compared to most other countries with developed economies, the national, state, and local governments in the United States tax
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less.
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Compared to other Western nations, America?s total government expenditure as a percentage of the Gross Domestic Product (GDP) is
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one of the smallest.
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Which of the following countries have the smallest total tax revenues as a percentage of their gross domestic product?
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United States
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The federal budget consumes ________ of America?s gross domestic product.
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50 percent
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America?s national, state and local governments spend an amount equal to ________ of the GDP.
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20 percent.
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During the 1950s and early 1960s, over half the federal budget was spent every year on A) agricultural subsidies and programs.
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the Department of Defense.
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From the mid-1960s to the early 1980s, the biggest change in government spending was the
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increase in social service expenditures and decline in defense spending.
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The military industrial complex refers to
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the close relationship between defense officials and the corporations that supply their hardware needs.
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The budget of the Department of Defense
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decreased in the 1990s.
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The purchasing of military hardware is known as
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procurement.
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The biggest expenditure in the federal budget today is
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income security programs
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The Social Security Act, which set up the Social Security system, was passed in
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1935
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The Social Security Act was passed under the administration of President
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Franklin D. Roosevelt.
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In 1965, ________ was added to the Social Security program to provide hospital and physician coverage to the elderly.
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Medicare
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Medicare
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provides both hospital and physician coverage to the elderly.
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The biggest slice of the federal budget pie belongs to
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income security expenditures.
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By 1990, the Social Security system was financed by a payroll tax of
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over 15 percent.
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A major feature of incremental budgeting is that it
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provides small increases in the current budget over the previous year?s budget.
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An example of incremental budgeting is
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giving an agency a little more than it had last year
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Which of the following is not a feature of incremental budgeting?
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Agencies must justify their entire budget request.
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________ refers to the concept that in the spending appropriations process, the best predictor of this year?s budget is last year?s budget plus a little bit more.
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Incrementalism
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The most prevalent model of budgetary decision making in practice is
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incrementalism.
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Which of the following is NOT associated with incremental budgeting?
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An agency or program must prove it still merits its very existence every year.
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Budget items mandated by law or by a previous obligation are known as
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uncontrollable expenditures
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Social Security payments are an example of a(n)
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entitlement.
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An ?uncontrollable? expenditure in the federal budget is defined as
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an expenditure that is required by current law or a previous government obligation to people automatically eligible for some benefit.
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Social Security programs, interest on the national debt, and military pensions are examples of
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uncontrollable expenditures.
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The biggest uncontrollable expenditure in the federal budget is
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the Social Security system.
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An estimated ________ of the federal budget is considered uncontrollable, unless Congress changes a law or existing benefit levels.
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two-thirds
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The ultimate power to determine how much the government will tax and spend, and what it will spend taxes for, lies with
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Congress.
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In the House of Representatives, it is the ________ Committee that writes tax codes, subject to the approval of Congress as a whole.
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Ways and Means
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Agencies invariably pad their budget requests because
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they want the almost inevitable budget cuts to be bearable
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In the Senate, the ________ Committee is responsible for writing tax codes, subject to the approval of Congress as a whole.
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Finance
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The budget cycle begins in the executive branch ________ months before the fiscal year begins
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19
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The Director of the Office of Management and Budget
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is a presidential appointee requiring approval of the Senate.
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The ________ is responsible for supervising preparation of the federal budget and advising the president on budgetary matters.
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Office of Management and Budget
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Until Congress passed the Budget and Accounting Act of 1921,
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agencies of the executive branch sent their budget requests to the secretary of the treasury, who forwarded them on to Congress, with the president playing little or no role in the entire process.
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Before the president submits her budget to Congress, the Office of Management and Budget (OMB) coordinates the requests of
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executive agencies.
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The heads of executive agencies send their budget requests to the
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Office of Management and Budget
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Agencies? behavior and budgets are audited, monitored, and evaluated for Congress by the
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General Accounting Office.
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The Office of Management and Budget parcels out money to government agencies and is accountable to
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the president.
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Which of the following statements about the Office of Management and Budget (OMB) is FALSE?
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The OMB is one of the few government agencies created by the Constitution.
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Once the Office of Management and Budget has prepared the federal budget,
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the president makes revisions and submits it to Congress.
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According to the Constitution, all federal appropriations must be authorized by
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Congress.
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The Congressional Budget and Impoundment Control Act of 1974 set up all of the following EXCEPT
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the Office of Management and Budget.
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The Congressional Budget and Impoundment Act of 1974 requires that
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Congress agree on a budget according to a fixed schedule, with target figures for the total budget size
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The congressional equivalent of the Office of Management and Budget is the
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Congressional Budget Office.
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One of the important purposes of the Congressional Budget Act of 1974 is to
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force Congress to consider the budget as a whole rather than in terms of individual appropriations.
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The main purpose of the Congressional Budget Office is to
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advise Congress on the consequences of its budget decisions.
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To set a limit on total government spending, both houses of Congress are required to pass a(n) ________ every April, binding Congress to a total expenditure level, or bottom line, of all federal spending for all programs.
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budget resolution
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A budget resolution
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sets limits on expenditures based on revenue projections.
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Congress attempts to bind itself to a total expenditure level that should form the bottom line of all federal spending for all programs by passing
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a budget resolution.
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Budget ________ revises program authorizations to achieve required savings
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reconciliation
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A budget reconciliation
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revises program authorizations to achieve required savings.
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An ________ bill is an act of Congress that establishes a discretionary government program or an entitlement, or that continues or changes such programs.
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authorization
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To actually fund a program, Congress must pass an ________ bill.
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appropriations
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Which of the following would be a specific example of an appropriations bill?
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a bill funding the Department of the Interior for the fiscal year
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Failing to meet its own budget timetable, Congress has frequently resorted to ________, which are laws that allow agencies to spend at the previous year?s level.
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continuing resolutions
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An authorization bill
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establishes, continues, or changes a discretionary program or an entitlement.
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In order to actually fund programs established by authorization bills, Congress must pass
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an appropriations bill.
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The Balanced Budget and Emergency Deficit Control Act called for the president to order ________, if Congress failed to meet specific deficit-reduction goals.
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sequestrations
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The Gramm-Rudman-Hollings Act
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mandated maximum allowable deficit levels for each year until 1993, when the budget was to be balanced.
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In 1990, Congress split discretionary spending into three categories. Which of the following was NOT one of the three categories?
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debt service
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Near the end of 1990, Congress approved a major change in the making of budget policy that shifted the focus from cutting spending to
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controlling increases in spending.
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By 2002, the budget deficit had increased again due to
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the first Iraq war.
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Some economists argue that less affluent voters will always use their votes to support public policies that
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redistribute benefits from the rich to the poor.
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________ are not unwilling victims of big government and its big taxes in a democracy, they are at least its co-conspirators.
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Citizens
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Research has found that the public sector expands principally
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in response to changes in economic and social conditions that affect the public?s preferences for government activity.
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Economists Allen Meltzer and Scott Richard argue that the cost of government grows because
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people in a democracy use the government to secure benefits.
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