Nothing in Washington is ever simple, and that includes the jargon. The media often throws around terms when it talks about Washington’s out-of-control spending. Often times these words are spoken, but they are not explained. Here are key words that will be used during the fiscal fights emanating from our nation’s capital this fall.
Appropriation Bills: These are bills that delineate the specific amount that the government will spend. Appropriations bill are segmented by agencies and dictate the spending for the fiscal year which runs from October 1 through September 30.
Authorization Bill: An authorization bill either establishes a new government agency or program or renews or extends an existing program whose funding has expired. An authorization bill must be passed before money can be spent, but even if an agency or program has been authorized, it doesn’t mean that it will be funded. Also, a program can be funded at less than the authorizing level.
Bailout: A bailout is when the government offers money to a failing business in order to prevent the consequences that arise from the business’s downfall. Bailouts can take the form of loans, bonds, stocks, or cash. They may or may not require reimbursement.
Budget Control Act of 2011: This legislation set up the current sequester. It stated that if the Joint Select Committee on Deficit Reduction failed to come up with a long-term plan to reduce the nation’s debt by January 15, 2012, then a series of automatic spending reductions would occur.
Budget Gimmicks: These are the “accounting measures” used by government officials to disguise the size of deficits, debts, program costs, and revenue losses. Some of these gimmicks include timing, keeping things off the “official budget” and classifying spending as “emergency spending.”
Chained CPI: CPI is the Consumer Price Index. The CPI is a formula that looks at how the prices of items we need (food, for example) change over time. It is used to make cost-of-living adjustments in programs such as Social Security, veterans’ benefits, and food stamps. A chained CPI would mean Social Security benefits would increase at a slower rate than they do using the current index.
Continuing Resolution: This is a temporary bill passed to provide spending authority for Federal agencies and programs to continue in operation until the regular appropriations acts are enacted. The continuing resolution keeps the government funded and precludes a “shutdown.”
Debt: The amount of money borrowed.
Debt Ceiling: This is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.
Deficit: A deficit is when more money is spent during a month than received.
Discretionary Spending: This is the amount of government spending that Congress can control, and it is set on a yearly basis. Discretionary spending includes defense and education funding.
Entitlements: This is a government program that establishes certain eligibility criteria, and anyone fitting those criteria may receive its benefits. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Examples of entitlement programs include Social Security, Medicare, Medicaid, Veterans’ Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.
Equity: Equity is ownership in any asset after all debts associated with that asset are paid off.
Federal Expenditures: This is the actual spending of money (i.e. outlays).
Fiscal Year: The fiscal year is the accounting period for the federal government which begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends. For example, if September 30, 2014, is the end of the budget year, the fiscal year would be FY2014.
GDP (Gross Domestic Product): The monetary value of all the finished goods and services produced within a country’s borders within the year. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.
GNP (Gross National Product): The monetary value of all the products and services produced in one year by labor and property supplied by the residents of a country. GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. GNP measures the value of goods and services that the country’s citizens produced regardless of their location.
Government Shutdown: A government shutdown occurs when funding measures for the day-to-day operations of the federal government expire and Congress and the president do not agree on new spending levels by enacting appropriations bills or a continuing resolution in time. During such a funding gap, all non-emergency federal government activities cease until Congress passes, and the president signs, new spending legislation into law. Mandatory spending, like Social Security and Medicare, which have their own streams of revenue from payroll taxes and require no congressional vote and presidential approval to authorize, would continue.
Mandatory Spending: Mandatory spending refers to the government spending that is required by law and not subject to annual limits. The amount of money spent on mandatory programs is based on formulas already written into law. Mandatory spending includes things such as Social Security, Medicare, and the interest on the national debt.
Sequester: This is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled to enforce certain budget policy goals. It was first authorized by the Balanced Budget and Emergency Deficit Control Act of 1985, commonly known as the Gramm-Rudman-Hollings Act.
Subsidy: Generally, a payment or benefit made by the federal government where the benefit exceeds the cost to the beneficiary. Subsidies are designed to support the conduct of an economic enterprise or activity.