About the National Budget Simulation

The National Budget Simulation was first created in 1995 as the Gingrich-led Congress was facing off against President Clinton over how to balance the budget.   The NBS was designed to challenge the simple assumptions many people had about the national budget.

This new updated version is sponsored by Agenda for Justice, a policy center that supports progressive state and local policy campaigns around the country.

HOW TO PLAY THE GAME

There are two ways to play the game: a simple version that challenges you to cut major categories of spending and/or eliminate tax loopholes, or a longer version with sub-categories of spending.

I suggest that you do the simulations first without knowing the budget. You may be surprised that cutting certain programs yields little revenue. This makes the simulation a bit more challenging since it tests whether your perception of where money goes in the budget matches the reality.

Living on Credit

The impact of debt on the finances of our government is much like the impact of debt on the finances of a family:  it makes a big difference whether debt is incurred to finance long-term investment or immediate consumption.

Most family debt finances the purchase of items that will provide enjoyment over a number of years.  This debt has two important characteristics:) the value of the capital asset being f9inanced exceeds the debt and 2) the debt is paid off on a schedule that normally means the asset will have some; useful life after the debt is paid off on a schedule that normally means the asset will have some useful life after the debt is paid.  This kind of debt can also be seen as a way of avoiding other costs by paying interest.  For example, incurring the cost of interest on a mortgage saves the cost of paying rent.

If government followed this policy, it would borrow only to finance its investments in such things as federal dams, public buildings, and perhaps weapons.  However, this is not why the federal government does most of its borrowing.  Less than 12 percent of the federal budget is spent for these types of investments.  The bulk of the budget goes for paying employees, financing Social Security benefits, making welfare payments, and providing farm price supports.  Federal borrowing is less like family purchases of homes and cars and more analogous to a family that spends $2,9000 a year more than it makes in order to pay rent and buy clothes, food and entertainment.

In addition, interest costs on the federal debt have been taking an increased share of our national output GNP.  Interest represented 1.4 percent of GNP in 1973.  By 1985 the share consumed by interest had more than doubled, to 3.3 percent.

Budget Questions:                name__________________

1.  Is the United States Government mortgaging our future by assuming a large national debt?  Explain

 

 

 

2.      Is a large deficit really something to be concerned about?  Explain

 

 

 

3.      While you were required to balance the budget, were the actions(s) you took realistic?  Explain

 

 

 

4.      What other information would yopu  like to hafve before you attempted to balance the budget?

 

 

 

 

5.      How are entitlements different from other types of benefits?

 

 

 

6.      What is the President’s role in the budget-m,aking process?

 

 

 

7.      What is the role of Congress in the budget-making process?

 

 

 

8.      The text states that the “federal budget is a hugely important political document”.  Use evidence from the chapter to support and/or explain this statement

 

 

 

9.  In your opinion, should Americans seek a amendment to the Constitution requiring a balanced budge?  Explain