Federal & State Budgets

Federal debt is defined as...

• the total of all principal and interest owed to foreign and domestic creditors.

• the difference between government expenditures and revenues each year.

• interest on loans the U.S. government owes to foreign and domestic creditors.

• the total amount of money college students spend on textbooks, coffee, and late night pizza.

Answer explanation

Federal debt refers to the total amount owed by the government, including both principal and interest to all creditors, both foreign and domestic. This is often confused with the concept of the federal deficit which refers to the amount of federal spending that exceeds federal revenue (often measured annually).

The tax code is primarily used as a means to...

• prove that your iPhone's autocorrect is actually quite helpful in comparison

• encourage or discourage economic or social behaviors

• redistribute wealth

• teach Americans how to do math

Answer explanation

The tax code is primarily used to redistribute wealth. A progressive tax code increases tax rates as income rises, with higher-earning individuals contributing a larger share of their income and uses revenue to fund government services that benefit society as a whole. A regressive tax code places a heavier tax rate burden on lower-income earners and limits the ability to adequately fund government services that benefit society as a whole. Secondarily, it is also used as a means for encouraging or discouraging social or economic behaviors (e.g., marriage, childbirth, savings).

The term "submerged state" refers to...

• how I am feeling about my policy review essay

• social welfare programs such as TANF and food stamps

• how parts of Florida may soon be under water due to climate change

• government policies that are designed to be hidden from view through indirect mechanisms (like tax breaks)

Answer explanation

The submergence of the state is a significant problem, because it obscures the role of the government and exaggerates that of the 'free' market.

Increasingly, the US government has been borrowing money from other sources to cover our deficit spending; foremost among those is...

• US pension and mutual funds

• creditor nations such as China, Japan and Germany

• your

  • roommate's emergency ramen noodle fund

• the World Bank

Answer explanation

The structure of US government borrowing has evolved significantly. Historically, deficit spending was funded entirely through domestic sources - US banks, pension funds, mutual funds, and individual citizens buying Treasury securities. Today, while domestic investors still hold the majority of US debt (about 75-80%), foreign countries now own a significant portion (20-25%). These foreign holders, often called 'creditor nations,' include major economies like Japan, China, and the Germany. This shift to partial foreign ownership of US debt represents a significant change in how America finances its government spending.

What is an example of an "invisible" or "hidden" government policy that primarily benefit middle and upper-class Americans?

Answer explanation

Hidden (submerged) policies are overwhelmingly regressive and misleading. They often include benefits that are viewed as smart financial planning rather than government aid. Some examples of these "invisible" benefits include: property tax deductions, college savings plan tax benefits, mortgage interest deduction for homeowners, retirement tax deferrals (paying taxes later, like a free loan), capital gains tax deductions (profit from selling investments), estate tax exemptions, municipal bond tax exemptions (protects money loaned to state/local govt by wealthy private investors)

Grants received by states to pay for specific programs approved by the federal government are called...

Answer explanation

Categorical grants. These are the opposite of block grants which require states to spend funds in a general area but allow them to design programs without federal approval