CHAPTER 15: CONGRESS, THE PRESIDENT, AND THE BUDGET: THE

POLITICS OF TAXING AND SPENDING

READING COMPREHENSION QUIZ
Multiple Choice Questions
1. A policy document allocating taxes and expenditures, or a series of goals with price tags attached,
is a(n)
b. balance sheet.
c. procurement.
d. fiscal register.
e. appropriation.
f. budget.
2. An excess of federal expenditures over federal revenues is called a
a. budget.
b. deficit.
c. tax.
d. debt.
e. tax expenditure.
3. The Sixteenth Amendment, ratified in 1913,
a. explicitly permitted Congress to levy an income tax.
b. limited the total income tax Congress could levy on an individual.
c. set up the Social Security system.
d. forbade Congress from levying an income tax.
e. required the federal government to balance its budget each year.
4.

The income tax is generally progressive, meaning that

a.
b.
c.
d.
e.

it increases incrementally on an annual basis.

those with more income pay higher rates of tax on their income.
those with more income pay more taxes than those with less income.
it is a newer form of taxation than sales taxes.
it is better than a flat tax.

5. The federal debt

a. consists of all the money borrowed over the years by the national government that is still
outstanding.
b. is money owed to foreign nations by the United States government.
c. is all money borrowed over the years by the federal government and owed to state
governments.
d. is the difference between the amount of annual tax receipts and government expenditures.
e. is money owed by taxpayers to the United States government but never paid.

6. Tax expenditures are

b. sales taxes paid when goods and services are purchased.
c. money spent by the IRS collecting taxes.
d. rebates provided to individuals who have overpaid federal taxes.
e. revenue losses that result from special exemptions, exclusions, or deductions on federal
tax law.
f. income that is taxable by the federal government.

d. rebates provided to individuals who have overpaid federal taxes.

e. revenue losses that result from special exemptions, exclusions, or deductions on federal
tax law.
f. income that is taxable by the federal government.
7. Currently, the most expensive part of the federal budget is
a. spending on income security.
b. spending on education.
c. spending on national health care.
d. spending on roads and bridges.
e. military spending.
8. Medicare is
a. given only to those who do not have private insurance.
b. administered separately from the Social Security system.
c. provided only for hospital care of poor people.
d. the most expensive of all welfare programs, providing basic medical care for the poor.
e. designed to provide both hospital and physician coverage to the elderly.
9. What is the largest social policy of the federal government?
a. Early childhood education
b. Childrens health insurance
c. College loans
d. Social Security
e. Job training programs
10. Policies for which Congress has obligated itself to pay a certain level of benefits based on a
certain number of recipients are known as
a. earmarks.
b. pork.
c. entitlements.
d. incremental expenditures.
e. welfare.
11. Expenditures that are determined by how many eligible beneficiaries there are for a program,
making them hard for Congress to control, are called
a. political pork.
b. incremental policies.
c. uncontrollable expenditures.
d. progressive taxes.
e. regressive taxes.

12. The statement, The largest determining factor of the size and content of this years budget is last
years is an expression of
a. earmarks.
b. welfare.
c. incrementalism.
d. entitlement.
e. regulation.
13. Which of the following is NOT a feature of incrementalism?
a. Policymakers focus all of their attention on the policy basethat is, the amounts agencies
have had over previous years.
b. Policymakers focus little attention on the policy basethat is, the amounts agencies have
had over previous years.
c. Agencies can often safely assume that they will get at least the budget they had last year.
d. Most attention is given to proposed increments in the budget.
e. The budget for any given agency tends to grow a little bit every year.

c. Agencies can often safely assume that they will get at least the budget they had last year.
d. Most attention is given to proposed increments in the budget.
e. The budget for any given agency tends to grow a little bit every year.
True/False Questions
1. Corporate taxes yield more revenues than do individual taxes.
2. The federal income tax is an example of a progressive tax.
3. The total federal debt is about $15 million.
4. Homeowners mortgage interest tax deduction is an example of a tax expenditure.
5. The budget of the Department of Defense now constitutes about one-fifth of all federal
expenditures.
6. Medicare was added in 1965 to the Social Security system that provides health insurance for the
elderly.
7. Social Security and agricultural subsidies are examples of entitlements.
8. Large budget deficits can constrain government, for example, as fear of increasing national debt
limited President Obamas proposal for health care reform.
9. The picture of the federal budget is one of constant growth.
10. As a general rule, the bigger the budget, the bigger the government.
Multiple Choice Questions
1. A policy document allocating burdens and benefits is known as
a. a budget.
b. tax regulations.
c. a revenue statement.
d. an expenditure list.
e. a rate of interest.
2. A budget deficit occurs when expenditures exceed
a. revenues.
b. borrowing.
c. appropriations.
d. inflation.
e. authorizations.
3. The total national debt is projected to be approximately _______ by 2011.
a. $1 trillion
b. $2 trillion
c. $3 trillion
d. $10 trillion
e. $15 trillion
4. Approximately what percentage of the annual federal budget pays interest on the national debt?
a. 2 percent
b. 7 percent
c. 9 percent
d. 15 percent
e. 25 percent
5. Which of the following is not one of the major sources of federal revenues?
a. Personal income taxes
b. Corporate income taxes
c. Social insurance taxes

5. Which of the following is not one of the major sources of federal revenues?
a. Personal income taxes
b. Corporate income taxes
c. Social insurance taxes
d. Sales taxes
e. Borrowing
6. In the early years of the nation, the federal government raised most of its revenue through
a. income taxes.
b. sales taxes.
c. fees collected on imported goods.
d. sales of natural resources.
e. property taxes.
7. The first income tax in America was adopted
a. in 1913 with the adoption of the Sixteenth Amendment.
b. to pay for the Civil War.
c. to pay for the American Revolution.
d. to create Social Security for elderly Americans.
e. to build the White House.
8. What was the result of the Supreme Courts ruling in Pollock v. Farmers Loan and Trust Co.?
a. A federal income tax was ruled unconstitutional.
b. Poll taxes were abolished.
c. The federal government was prohibited from spending tax revenue on farm subsidies.
d. The IRS was established.
e. Taxes on home loans were ruled unconstitutional.

9. Which amendment to the U.S. Constitution permitted the federal income tax?
a. Tenth
b. Fourteenth
c. Fifteenth
d. Sixteenth
e. Eighteenth
10. Congress was officially given the power to levy an income tax through the
a. Sixteenth Amendment.
b. Supreme Court case of Pollock v. Farmers Loan and Trust Co.
c. Internal Revenue Act.
d. Balanced Budget Amendment.
e. revenue clause of the Constitution.
11. A budget is
a. a blueprint for what the government should do.
b. a policy determination of how much to spend.
c. a policy document allocating burdens (taxes) and benefits (expenditures).
d. passed by the presidents cabinet.
e. None of the above is true.
12. A tax system where those with more taxable income not only pay more taxes but also higher rates
of taxes is known as
a. communism.
b. socialism.
c. progressive.
d. regressive.
e. unfair.
13. Because wealthier Americans pay higher rates of income taxes than others, the federal income tax
is an example of a
a. progressive tax.
b. regressive tax.
c. liberal tax.
d. user-based tax.

a.
b.
c.
d.
e.

progressive tax.
regressive tax.
liberal tax.
user-based tax.
flat tax.

14. The fastest growing source of federal revenue has been

a. fees for services.
b. social insurance taxes.
c. personal income taxes.
d. borrowing.
e. corporate income taxes.
15. Which federal agency was created in order to collect the federal income tax?
a. The Congressional Budget Office
b. The Treasury Department
c. The General Accounting Office
d. The Auditors General
e. The Internal Revenue Service
16. Corporations today pay
a. income taxes, which account for most federal revenue.
b. income taxes, which account for more federal revenue than individual income taxes.
c. income taxes, which account for less federal revenue than individual income taxes.
d. no income taxes.
e. capital gains taxes and property taxes instead of income taxes.
17. Who pays Social Security taxes?
a. Employers and employees
b. Employees only
c. Employers only
d. Employees and Social Security recipients
e. Employers and Social Security recipients
18. All of the money borrowed by the federal government over the years that still needs to be paid
back is known as
a. the federal deficit.
b. government bonds.
c. the Social Security Trust Fund.
d. the federal debt.
e. the revenue gap.
19. The government borrows money principally by
a. selling bonds.
b. maintaining numerous credit card accounts.
c. printing more currency.
d. obtaining loans from foreign governments.
e. obtaining loans from the Federal Reserve.
20. A majority of the U.S. national debt is currently held by
a. Fortune 500 companies.
b. the American public.
c. foreign investors.
d. the World Bank.
e. Bank of America.
21. Revenue losses attributable to provisions of the federal tax laws, which allow a special
exemption, exclusion, or deduction are known as
a. tax dividends.
b. fiscal seepages.
c. treasury bills.
d. tax reductions.
e. tax expenditures.

c. treasury bills.
d. tax reductions.
e. tax expenditures.
22. An example of a tax expenditure is
a. a lower tax rate for lower-income families.
b. direct government support of charities.
c. the Social Security system.
d. a tax deduction for the mortgage interest paid by homeowners.
e. the purchase of a Stealth Bomber by the Pentagon.
23. Tax expenditures tend most to benefit
a. lower-income people and the poor.
b. lower-middle-class people and small businesses.
c. the government.
d. middle- and upper-income people and corporations.
e. state and local governments.
24. Which of the following is NOT true about federal expenditures?
a. Spending on payments to individuals now makes up the largest chunk of federal
expenditures.
b. Spending on national defense is greater today than it was during the Vietnam War.
c. Spending on national defense and on payments for individuals has continually risen since
1967.
d. All of the above are true.
e. None of the above is true.
25. The military-industrial complex refers to the
a. global network of bases that the Department of Defense maintains.
b. close relationship between defense officials and the corporations that supply their
hardware needs.
c. competition between the military and civilian industries for government dollars.
d. government-owned industries that manufacture military weapons and equipment.
e. Pentagon and the buildings that surround it.
26. The military-industrial complex, a term referring to the link between the military and the
defense industry, was coined by which president?
a. Harry Truman
b. Dwight Eisenhower
c. John F. Kennedy
d. Lyndon Johnson
e. Richard Nixon
27. Spending on the defense currently makes up approximately what proportion of all federal
expenditures?
a. One-tenth
b. One-fifth
c. One-quarter
d. One-third
e. One-half
28. As a federal program, Social Security began under which president?
a. John F. Kennedy
b. Lyndon Johnson
c. Theodore Roosevelt
d. Franklin Roosevelt
e. Herbert Hoover

29. In 1965, _______ was added to the Social Security program to provide health care coverage to
the elderly.
a. Medplan

29. In 1965, _______ was added to the Social Security program to provide health care coverage to
the elderly.
a. Medplan
b. Medicare
c. Medicaid
d. disability
e. unemployment insurance
30. The federal program designed to provide health care coverage for older Americans is known as
a. Social Security.
b. Medicare.
c. Medicaid.
d. Medical Security.
e. retirement insurance.
31. By 1990, the Social Security system was financed by a payroll tax of
a. 2 percent.
b. 5 percent.
c. 7.5 percent.
d. 15 percent.
e. 10 percent.
32. How many workers supported the Social Security benefits for one retiree in 1945?
a. 1
b. 5
c. 20
d. 25
e. 50
33. How many workers support the Social Security benefits for one retiree as of 2005?
a. 3
b. 5
c. 10
d. 20
e. 50
34. A major feature of incremental budgeting is that it
a. provides small increases in the current budget over the previous years budget.
b. greatly inflates government spending each year.
c. fragments the budget into many small items, making it hard to plan for a unified budget.
d. reduces current budgets by small amounts over successive years.
e. reevaluates the budgetary base on which past budgets were built.
35. An example of incremental budgeting is
a. reviewing an agencys budget to establish a lower base.
b. Carters zero-based budgeting.
c. reducing an agencys budget a little each year.
d. giving an agency a little more than it had last year.
e. breaking a budget into its component parts and reviewing each part individually.
36. All of the following are examples of entitlements that contribute to uncontrollable expenses
EXCEPT
a. Social Security.
b. Medicare.
c. veterans aid.
d. funding for new roads and bridges.
e. agricultural subsidies.
37. The biggest uncontrollable expenditure in the federal budget is
a. national defense spending.
b. pay for military personnel.
c. veterans aid.
d. the Social Security system.

a.
b.
c.
d.
e.

national defense spending.

pay for military personnel.
veterans aid.
the Social Security system.
interest on the national debt.

38. Entitlements are

a. increases in funding for specific individuals or groups like farmers or small business
owners.
b. policies for which Congress has obligated itself to pay X level of benefits to Y number of
recipients.
c. special rights granted to elderly Americans.
d. government efforts to redistribute and equalize wealth.
e. budget items, the funding of which fluctuates greatly from year to year.
True/False Questions
1. The Constitution allocates the task of budgeting to the executive branch alone.
2. If the president and Congress fail to appropriate funds every year, the government will come to a
standstill.
3. Over the past 30 years, the size of the annual budget deficit of the national government has shrunk.
4. The three major sources of federal revenue are personal income taxes, corporate income taxes, and
social insurance taxes.
5. The Supreme Court ruled the federal sales tax unconstitutional in the case of Pollock v. Farmers
Loan and Trust Co.
6. The Sixteenth Amendment permits Congress to levy an income tax.
7. The top 10 percent of taxpayers pay more than 70 percent of all federal income taxes.
8. The Internal Revenue Service was established to collect federal sales taxes.
9. About 70 percent of all federal income taxes are paid by the wealthiest 10 percent of Americans.
10. The federal income tax is a flat tax.
11. When the federal government wants to borrow money, the Treasury Department sells bonds.
12. Debt that the Treasury owed Social Security is called intergovernmental debt.
13. Social Security taxes are paid by both employees and by employers.
14. Social Security taxes have grown faster than any other source of federal revenue.
15. More of the governments revenue now comes from borrowing than from taxes.
16. A capital budget is a budget for expenditures on items that will serve for the long term, such as
equipment, roads, and building.
17. Most of the governments budget is paid for by borrowing, rather than through taxes.
18. Tax exemptions are revenue losses that result from special exclusions or deductions on federal taxes.
19. Taxpayers ability to deduct contributions to charities from their taxable income is an example of a tax
expenditure.
20. The home mortgage deduction is an example of a tax expenditure.
21. Tax expenditures benefit poor people just as much as they benefit middle- and upper-income people.

21. Tax expenditures benefit poor people just as much as they benefit middle- and upper-income people.
22. All tax expenditures amount to revenues that the government loses because certain items are
exempted from normal taxation or are taxed at lower rates.
23. The United States has one of the highest tax burdens among democracies with developed economies.
24. In 2003, President George W. Bush persuaded Congress to enact a tax cut that lowered tax rates over
the next 10 years.
25. In 2003, Congress increased tax rates on capital gains and dividends.
26. National government expenditures represent approximately one-half of the nations GDP.
27. The term military-industrial complex was coined by President George W. Bush.
28. Social welfare expenditures now exceed expenditures on national defense.
29. The Social Security Act was passed as part of Lyndon Johnsons Great Society programs.
30. By the year 2055, only about two workers will be supporting each Social Security beneficiary.
31. Americas social services expanded more than similar services in Western European nations over the
second half of the twentieth century.
32. Because of incrementalism, the budget for any given agency tends to grow a little every year.
33. Payments for veterans aid are an example of an uncontrollable expenditure.
34. In general, the bigger the government, the bigger the budget.
35. Americans have chosen to tax less and spend less on public services than almost all other
democracies with developed economies.
Short Answer Questions
1. Explain what is meant by a budget deficit.
Learning Objective: 15.1
Page Reference: 505
Skill: Knowledge
2. What was the purpose of the Sixteenth Amendment? Why was it necessary?
Learning Objective: 15.1
Page Reference: 505507
Skill: Knowledge
3.

What was the result of the Supreme Courts decision in the case of Pollock v. Farmers Loan and Trust
Co. (1895)?
Learning Objective: 15.1
Page Reference: 505507
Skill: Comprehension
4. Why is the federal income tax an example of a progressive tax?
Learning Objective: 15.1
Page Reference: 507
Skill: Application
5. How does a flat tax differ from a progressive tax?
Learning Objective: 15.1
Page Reference: 507
Skill: Analysis
6. How does the federal government borrow money?
Learning Objective: 15.1
Page Reference: 508

6. How does the federal government borrow money?

Learning Objective: 15.1
Page Reference: 508
Skill: Knowledge
7.

What are tax expenditures and how do they work? Provide two examples of contemporary tax
expenditures.
Learning Objective: 15.1
Page Reference: 510511
Skill: Application
8.

How does the public sector in America compare with the size of the public sector in other western
nations?
Learning Objective: 15.1, 15.3
Page Reference: 514; 523524
Skill: Analysis
9. What expenditures make up the bulk of federal spending?
Learning Objective: 15.2
Page Reference: 516
Skill: Comprehension

10. What are the purposes of Social Security? How is Social Security funded?
Learning Objective: 15.2
Page Reference: 518519
Skill: Comprehension
11. What are the challenges facing the future of Social Security?
Learning Objective: 15.2
Page Reference: 518519
Skill: Comprehension
12. What does incrementalism refer to when used to describe the spending and appropriations process?
Learning Objective: 15.2
Page Reference: 520521
Skill: Comprehension
13. Why is it that the largest determining factor of the size and content of this years budget is last
years?
Learning Objective: 15.2
Page Reference: 520521
Skill: Comprehension
14. What are uncontrollable expenditures, and how do they affect the federal budget? Provide an
example of an uncontrollable expenditure.
Learning Objective: 15.2
Page Reference: 521522
Skill: Application
15. How is tax policy and spending in the United States different from other Western nations?
Learning Objective: 15.3
Page Reference: 523525
Skill: Evaluation
Essay Questions
1.

Compare and contrast the idea of a progressive tax with the idea of a flat tax. Which type of tax do
you find more democratic? Why?
Learning Objective: 15.1
Page Reference: 505507
Skill: Evaluation
2.

Explain the relationship between individual income taxes and corporate income taxes as
proportions of federal revenues. Who pays the greatest share of taxes? In your thinking, is the
burden of taxation distributed in a way that is beneficial to democracy?

2.

Explain the relationship between individual income taxes and corporate income taxes as
proportions of federal revenues. Who pays the greatest share of taxes? In your thinking, is the
burden of taxation distributed in a way that is beneficial to democracy?
Learning Objective: 15.1
Page Reference: 505507
Skill: Evaluation
3.

What are entitlements? Are they fundamentally desirable, or are they an unnecessary burden on
taxpayers?
Learning Objective: 15.1
Page Reference: 510512
Skill: Evaluation
4.

What are tax expenditures, and why are they part of American tax policy? Are they fair? Who
benefits and who loses from tax expenditures?
Learning Objective: 15.1
Page Reference: 510512
Skill: Analysis
5. What are the advantages and disadvantages of the home mortgage deduction? Do you favor or
oppose the repeal of this tax expenditure and why?
Learning Objective: 15.1
Page Reference: 510512
Skill: Evaluation
6.

Describe the role of incrementalism and uncontrollable expenditures in the budget process. Is
incrementalism necessary for an efficient bureaucracy? In what sense are uncontrollable
expenditures really uncontrollable? Why, or why not?
Learning Objective: 15.2
Page Reference: 520521
Skill: Analysis
7.

How have federal expenditures changed over the course of the twentieth century and into the
twenty-first?
Learning Objective: 15.2
Page Reference: 515522
Skill: Analysis
8.

Compare and contrast federal expenditures on the national security state versus the social welfare
state. What explains changes in the proportion of federal expenditures spent in each area over the
last few decades?
Learning Objective: 15.2
Page Reference: 515520
Skill: Analysis
9.

Your textbook suggests that when it comes to the budget and the scope of government, two
phenomena seemingly exist at the same time. On the one hand, it may seem that there is no limit
to budgetary growth. On the other hand, the budgetary process can limit government. Explain this
tension.
Learning Objective: 15.3
Page Reference: 523525
Skill: Synthesis
10. What does it mean to say that a lack of consensus is to blame for governments failure to balance
the budget? How might a consensus be achieved? Or, are their other priorities other than
consensus that should guide policymakers when it comes to balancing the federal budget?
Learning Objective: 15.3
Page Reference: 523525
Skill: Evaluation
American Govt. 2305
Page 13 of 13

Chapter 15