Part 1:

Since you are just finishing the module that covers fiscal policy and the federal deficit, it would be a good time to discuss the economics of President Trump’s budget which was proposed this week. Before we get into the economics of the budget, we need to review a few basic things about the U.S. budget process which may not be familiar to all of you.

1. The federal budget is proposed each year by the president around this time for the next fiscal year, which begins on Oct. 1, 2017 and goes to Sept. 30, 2018. The budget is made up spending by the federal government (G) and tax revenues (T). If G = T then the budget is balanced; when G>T then we have a deficit; when G<T we have a surplus. Watch the Khan Academy video on deficits and the national debt.  (Links to an external site.)Links to an external site.

 2. The president gives the budget to Congress (the House of Representatives and the Senate), who will spend the next few months debating and modifying it. Chances are the total budget will be revised by Congress.

3. Once Congress passes the budget then the president signs it into law or vetoes it and the process starts again. He cannot veto part of the budget; it is all or nothing. If he does not sign the budget by Sept. 30, then the government will “shut down” because it only have limited funds in which to operate.

While it is very unlikely that Trump’s plan will become reality, his spending and tax proposals do have significant potential consequences for the United States.

Here’s your discussion instructions:

  • Read the following articles, plus any other you find on the topic
  1. https://www.nytimes.com/2017/05/22/us/politics/budget-spending-federal-deficit.html?_r=0 (Links to an external site.)Links to an external site.
  2. http://thehill.com/blogs/pundits-blog/economy-budget/334603-budget-process-puts-defense-spending-in-straightjacket (Links to an external site.)Links to an external site.
  3. https://www.washingtonpost.com/business/economy/trumps-budget-proposal-slashes-spending-by-36-trillion-over-10-years/2017/05/22/69dbdb5e-3f1c-11e7-adba-394ee67a7582_story.html?utm_term=.f4f467cd6b2f (Links to an external site.)Links to an external site.http://thehill.com/blogs/pundits-blog/economy-budget/334603-budget-process-puts-defense-spending-in-straightjacket (Links to an external site.)Links to an external site.
  4. https://www.washingtonpost.com/news/politics/wp/2017/05/23/the-impossible-magic-math-of-trumps-budget-proposal-explained/?utm_term=.2ebbdbbfc7ac

Then respond to the following:

  • What do you like and dislike about Trump’s spending and tax plan.
  • Do you feel that Trump’s growth proposals are realistic?

  • Why do you believe they are or are not?

  • If they are not, then what will happen?


    • Do you feel that Trump’s budget and tax plan favors the rich, the middle class, or the poor? Explain with specific examples
    • What would be the changes you would propose to the budget in terms of spending and taxes?

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