Chapter 16 Exercises

These exercises are designed to move you from passive reading to active engagement with the federal budget. The numbers in this chapter only mean something once you have used them. Each exercise can be completed in 30–90 minutes; several can serve as the basis for short papers or class presentations.

Exercise 1 — Federal Spending in Your District (Democracy Audit)

Go to USAspending.gov, the official federal spending database. Use the "Advanced Search" or the state/district selector to pull the most recent fiscal year's federal outlays in your congressional district (or, if your data is sparser at the district level, your county).

Produce a one-page memo that answers:

  1. What were the top five categories of federal spending in your district last fiscal year, by dollar amount?
  2. What share of the total was direct payments to individuals (Social Security, Medicare, veterans' benefits, etc.) versus grants to state and local governments versus federal contracts (a defense contractor, a university research grant) versus other?
  3. Which federal agencies were the largest sources of spending in your district?
  4. How does this distribution compare with the national breakdown described in §16.2.2 of the chapter (mandatory ~63%, defense discretionary ~13%, non-defense discretionary ~11%, net interest ~13%)?

Write the memo as if it were going to a member of Congress's staff. Use round numbers. Cite the USAspending.gov queries you ran (URLs help). The point is not to make a normative argument; it is to know the numbers for the place you live.

Exercise 2 — The President's Budget Request

Go to the OMB website (whitehouse.gov/omb/budget) and download the most recent President's Budget. The full document is enormous; you do not need to read all of it. Focus on the Summary Tables and the Major Savings and Reforms chapter (or its equivalent).

Identify the top three priorities by spending change in the most recent request — that is, the three accounts where the President proposed the largest dollar-amount or percentage-amount increases relative to the current year's appropriated level. Then identify the top three proposed cuts by the same metric.

In a 500–700-word analysis:

  • Describe each of the six items factually, with dollar figures and percentages.
  • Identify the political constituency each item appeals to or threatens.
  • Assess whether each item is likely to survive Congress, given current partisan control of the House and Senate.
  • Note which items are inside mandatory programs (which require authorizing legislation to change) versus discretionary (which can be addressed through annual appropriations).

The goal is to read a real budget proposal the way a Congressional Budget Office analyst, an interest-group lobbyist, or a beat reporter would read it.

Exercise 3 — Tax Expenditures Affecting You

Tax expenditures (§16.8.6) are economically equivalent to spending but receive far less public scrutiny. Identify at least three federal tax expenditures that affect you, your family, or people in your community:

  • The mortgage interest deduction (if anyone in your household owns a home with a mortgage)
  • The exclusion of employer-provided health insurance from taxable income (if anyone in your household has employer-sponsored coverage)
  • The Earned Income Tax Credit or Child Tax Credit (if anyone in your household qualifies)
  • Tax-deferred retirement contributions (401(k), IRA)
  • The mortgage interest deduction, state and local tax deduction, charitable deduction, or medical expense deduction (if anyone in your household itemizes)
  • Section 529 education savings plans
  • The home-sale capital gain exclusion (if anyone in your household has sold a primary residence)

For each, estimate (or look up): the federal revenue cost of that tax expenditure (the Joint Committee on Taxation publishes annual tax-expenditure estimates), the distributional pattern (which income deciles benefit most), and whether directing the same dollars as direct spending would produce different distributional outcomes. Reflect on why these are structured as tax expenditures rather than direct spending.

Exercise 4 — Steel-Manning Both Sides

Write two short essays of 600–800 words each. In the first, present the strongest version of the conservative budget-reform argument: that the long-run fiscal trajectory is a spending-side problem, that entitlement reform is unavoidable, that tax increases would slow growth, and that the federal government has grown beyond what a market economy can sustain. Cite specific policies (premium support for Medicare, increased retirement age, means-testing, work requirements, block grants, etc.) and the strongest empirical and philosophical arguments behind them. Use sources from AEI, Cato, the Heritage Foundation, the Manhattan Institute, the Hoover Institution, or center-right academic economists.

In the second, present the strongest version of the progressive tax-reform argument: that the U.S. has a low-revenue problem relative to peer democracies, that the TCJA reduced revenue without producing the promised growth, that capital-gains preferences and corporate-tax avoidance produce a regressive de facto rate structure, and that higher taxes on high earners and corporations are both fair and economically tractable. Cite specific policies (top-bracket increase, higher capital gains rates, stronger corporate tax, wealth tax variants, financial transaction tax, IRS enforcement). Use sources from the Tax Policy Center, the Center on Budget and Policy Priorities, Brookings, or center-left academic economists.

For each essay, the test is: could a thoughtful adherent of that view read your essay and feel it represented their position fairly? If not, rewrite.

Exercise 5 — The CBO Outlook

Download the most recent Budget and Economic Outlook from cbo.gov. Find Summary Table 1 (the 10-year projection summary).

Pull the following numbers from the table:

  • Total outlays in the most recent completed fiscal year and projected for ten years out.
  • Total revenues in the most recent completed fiscal year and projected for ten years out.
  • The deficit for each year of the projection.
  • Debt held by the public, in dollars and as a percentage of GDP, at the end of each year.
  • Net interest for each year of the projection.

Write a 400–500-word translation of the table into plain English. Pretend you are explaining the trajectory to a smart relative who has never seen a federal budget document. Identify the two or three lines that matter most for understanding the long-run picture, and explain why.

This exercise is the literacy test for the chapter. If you can do it competently, you have learned what the chapter is trying to teach.

Exercise 6 — Where Does the Money Go? (Public Misperceptions)

Conduct an informal survey. Ask at least eight people — friends, family members, classmates — the following questions, without explanation or context, and without showing them the answers:

  1. What share of federal spending goes to foreign aid? (Actual: ~1%)
  2. What share goes to "welfare" (TANF cash assistance)? (Actual: ~0.2%)
  3. What share goes to the National Endowment for the Arts, NEH, and CPB combined? (Actual: ~0.014%)
  4. What share goes to defense? (Actual: ~13%)
  5. What share goes to Social Security, Medicare, and Medicaid combined? (Actual: ~47%)
  6. What share goes to interest on the federal debt? (Actual: ~13%)

Tabulate the responses. Compute the median estimate and the mean estimate for each item. Compare with the actual figures.

In a short reflection (300–500 words), discuss the patterns you observed. Were the misperceptions partisan (do conservatives over-estimate certain categories and progressives over-estimate others)? Were they generational? What does this tell you about how budget debate is conducted in everyday political conversation?

Exercise 7 — Tracing a Reconciliation Bill

Pick one of the following reconciliation bills and trace it from introduction to enactment:

  • 2017 Tax Cuts and Jobs Act (TCJA)
  • 2021 American Rescue Plan Act (ARPA)
  • 2022 Inflation Reduction Act (IRA)
  • The most recent reconciliation effort (if one is currently in progress or recently completed)

Produce a one-page timeline that includes:

  • The budget resolution containing the reconciliation instructions (who controlled each chamber, what the instructions specified)
  • The committee markups in the relevant committees (Finance/Ways and Means, Energy and Commerce, etc.)
  • Any Byrd Rule challenges that altered the bill (the "Byrd bath")
  • The CBO score at key stages
  • The floor vote margins in House and Senate
  • Any sunset provisions required by Byrd Rule
  • The post-enactment political response (the rating agencies, the markets, the public)

Reflect on what this trace reveals about how major fiscal legislation actually passes in the contemporary Congress.

Exercise 8 — The Trust Fund Question

Read the most recent Social Security Trustees' Report (ssa.gov/oact/TR) and answer:

  • When is the OASI Trust Fund projected to be depleted under intermediate assumptions?
  • After depletion, what share of currently scheduled benefits would be payable from continuing payroll-tax revenue?
  • What combinations of policy changes could close the 75-year actuarial deficit? (The Trustees' Report contains specific tables on this; pick three combinations and describe each.)
  • Which combinations would be politically tractable? Which would not? Why?

Write a 600–800-word analysis that takes the trustees' report as a data source and the political constraints as a separate set of facts. The analytical question is not what should be done — that is a contested values question — but what the actual feasible policy space looks like given the math and the politics.

Exercise 9 — The Mandatory-vs.-Discretionary Choice

Imagine you are a member of Congress with strong fiscal-discipline views. Your stated goal is to reduce the federal deficit by $500 billion per year, sustained over a decade. Produce a one-page memo that:

  • Considers a discretionary-only path. If you achieve all $500 billion in annual reductions from non-defense discretionary spending, what percentage cut does that imply across the agencies in §16.2.2 (NIH, Education, FAA, NASA, EPA, NPS, CDC, foreign aid, federal courts, IRS, federal law enforcement, infrastructure grants, Pell Grants)? Is this politically and operationally feasible? What missions would have to be reduced or eliminated?
  • Considers a defense-only path. If you achieve all $500 billion in annual reductions from defense discretionary, what percentage cut does that imply? What programs (force structure, modernization, personnel, R&D) would bear the cuts?
  • Considers a mandatory-program-reform path. What combination of changes to Social Security (retirement age, COLA formula, payroll-tax base), Medicare (eligibility age, premium support, drug pricing), and Medicaid (block grants, work requirements, federal-share adjustments) could produce $500 billion in annual savings?
  • Considers a revenue-only path. What combination of rate increases, base-broadening, or new taxes could produce $500 billion in annual additional revenue?
  • Considers a balanced path that draws roughly equally from spending and revenue.

For each path, identify the political constituency you would mobilize and the constituency you would alienate. Conclude with your recommendation, justified explicitly.

This exercise is the most demanding in the chapter. Done well, it requires reading from CBO, the Tax Policy Center, AEI, the Manhattan Institute, and the Center on Budget and Policy Priorities. Done poorly, it produces partisan boilerplate. The goal is to make the trade-offs concrete enough that you cannot pretend they do not exist.

Exercise 10 — Reading the Tea Leaves on the 2025 Sunset

The 2017 Tax Cuts and Jobs Act's individual-tax provisions, the SALT cap, the doubled estate-tax exemption, the pass-through deduction (Section 199A), and several other provisions are scheduled to sunset at the end of 2025. The political battle over what to do — full extension, partial extension, full expiration, modification — is among the most consequential fiscal questions of 2025–2026.

Research the current state of the debate. Identify:

  • The CBO score of full extension (what it would cost over ten years).
  • The distributional impact of full extension (Tax Policy Center analyses by income decile).
  • The distributional impact of expiration (which income groups would face the largest tax increase).
  • The competing proposals from various Republican and Democratic factions.
  • The likely procedural vehicle (will it be a reconciliation bill? a bipartisan deal? a series of smaller bills?).

Write a 600–800-word analysis predicting what will likely happen and why. Identify the institutional and political constraints that shape the outcome. Note the elements of the outcome that are essentially predetermined by reconciliation procedure (e.g., that any extensions enacted via reconciliation will themselves require sunsets) versus those that are open to political negotiation.

This is a moving target — the actual outcome may be settled by the time you read this — but the analytical exercise is what matters. Reading the political constraints, the procedural constraints, and the substantive trade-offs in real time is the skill the chapter has tried to build.

These ten exercises are minimum work for the chapter. Pick any three or four to complete in depth; the others are starting points for further independent study. The goal across all of them is the same: to move from intuitions about the budget to specific, sourced, defensible numbers — and from there to informed political judgment about what those numbers mean.