    [A Citizen's Guide to the Federal Budget]
    [1. What is the Budget?]
    [From the U.S. Government Printing Office, www.gpo.gov]

    1. What Is the Budget?

    The Federal budget is:

     a plan for how the Government spends your money.

    What activities are funded? How much does it spend for defense,
    national parks, the FBI, Medicare, and meat and fish inspection?

     a plan for how the Government pays for its activities.

    How much revenue does it raise through different kinds of taxes--
    income taxes, excise taxes, and social insurance payroll taxes?

     a plan for Government borrowing.

    If revenues are greater than spending, the Government runs a surplus.
    When there is a surplus, the Government can reduce the national debt.

     something that affects the Nation's economy.

    Some types of spending--such as improvements in education and
    support for science and technology--increase productivity and raise
    incomes in the future.

    Taxes, on the other hand, reduce incomes, leaving people with less
    money to spend.

     something that is affected by the Nation's economy.

    When the economy is doing well, people are earning more and
    unemployment is low. In this atmosphere, revenues increase and the
    deficit shrinks.

     an historical record.

    The budget reports on how the Government has spent money in the
    past, and how that spending was financed.

    The 2000 Budget is a document that embodies the President's budget
    proposal to Congress for fiscal 2000, the fiscal year that begins on
    October 1, 1999. It reflects the President's priorities and proposes to
    protect the budget surplus until Social Security is reformed.

    The Federal budget, of course, is not the only budget that affects the
    economy or the American people. The budgets of State and local

    [[Page 2]]

            Chart 1-1.  Government Spending as a Share of GDP, 1998

           Total Government spending accounts for about one-third of
         the national economy. Federal spending is about two-thirds of
                       this amount, or 20 percent of GDP.

    governments have an impact as well. While Federal Government spending
    was a little less than 20 percent of the Gross Domestic Product (or GDP,
    which measures the size of the economy) in 1998, State and local
    governments spending was about another nine percent (see Chart 1-1).

    State and local governments are independent of the Federal Government,
    and they have their own sources of revenue (taxes and borrowing). But
    the Federal Government supplements State and local revenues by making
    grants to them. Of the $989 billion that State and local governments
    spent in 1998, $230 billion came from Federal grants.

    As shown in Chart 1-2, compared to six other industrialized nations,
    the United States allocates the smallest share of its GDP to government
    spending (Federal, State, and local combined).

    [[Page 3]]

            Chart 1-2.  Total Government Outlays as a Percent of GDP

          The United States allocates a smaller portion of its GDP to
                    government than any other nation shown.