Fiscal policy has to do with spending and taxation policies. Government can adjust the amount of money people have to spend through tax rates. The Congress and the President are key actors.
Proportional flat tax - fixed percent for all levels of income
Progressive - percent varies with level of income.
Regressive tax - percent varies with level of income. Lower percentage of income paid in taxes as income rises.
Automatic stabilizers versus discretion - With a progressive tax system (rising income push people into higher tax brackets which withdraws consumption and expenditures from the economy) and transfer payments that inject purchasing power.
Government expenditures - direct purchases of goods and services and transfer payments.
Discretionary interventions include setting up the automatic stabilizers, marginal tax rates, and spending levels.
Fiscal policies involve tax and spend decisionthat expand or contract the economy
Monetary policy involves growth or contraction in the money supply. The Federal Reserve Board is the key institutional actor.
Line item budget (1910 through the 1930’s): The emphasis is fiscal accounting through tracking objects of expenditure.
Performance budget (1939 to 1960): The emphasis moves from what money was spent to how it was spent (the focus is efficiency, unit cost, and reflexive type goals)
Planning, Programming, and Budgeting was concerned with the outcome of expenditures, that is the external societal effect.The focus of budgeting shifted from agencies to programs.
President Carter brought Zero Based Budgeting to the national government.