Federal Budget Glossary

Concise definitions of federal budget related terms

by Jennie Wood

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In 2013, Congress continues to struggle to resolve ongoing Federal Budget issues, constantly creating headlines in the news. What does it all mean? Here is a Federal Budget glossary to help explain some of the terms being used.

• Adjusted Gross Income: Amount of income subject to federal income tax. In addition to any other tax credits, contributions to IRAs and 401(k) plans are subtracted from the total.
• Annual Percentage Rate (APR): A standardized method of calculating interest rates. It permits the comparison of different interest rates just as unit pricing enables comparison shopping at the supermarket.
• Appreciation: An increase in value of an asset.
• Austerity: A policy used to reduce budget deficits during adverse economic conditions by governments. The policy could include spending cuts and/or tax increases.
• Balanced Budget: A budget where receipts equal outlays.
• Bear Market: An extended period of general price declines in the securities market.
• Bond: A long-term promissory note that obligates the borrower to make specified payments over a specific period of time. Bonds vary widely in maturity, security and type of issuer, although most are sold in $1,000 denominations.
• Bull Market: An extended period of general price increases in the securities market.
• Capital Gain: The excess by which proceeds from the sale of a capital asset exceeds the cost.
• Collateral: Assets used as security for a loan.
• Compound Interest: Interest paid on interest from previous periods in addition to principal.
• Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a fixed "market basket" of day-to-day expenses (including food, automobile registration, clothing).
• Continuing Resolution: Legislation enacted by the U.S. Congress to fund government agencies if a federal budget has not been agreed on by the end of the Congressional fiscal year
• Correction: Reverse movement in the price of an individual stock, bond, commodity or index after any long-term move. Can be a movement up or down, but usually refers to a fall in the price.
• Credit Rating: A grading of a borrower's ability to meet financial obligations in a timely manner.
• Default Risk: Risk that a particular debtor will fail to make timely payments of interest and principal. Interest rates on a debt instrument rise as the default risk increases.
• Deficit: The amount of spending that exceeds revenue over a period of time.
• Depression: An on-going downturn in economic activity for a country or group of nations.
• Dow Jones Industrial Average (DJIA): A widely quoted measure of stock market price movements of 30 large, seasoned industrial firms.
• Earnings: Income of a business, typically after-tax income, but it may refer to before-tax income or revenues.
• Federal Funds: Reserve balances above those required that are maintained by commercial banks in the Federal Reserve System.
• Federal Funds Rate: The rate of interest, determined by the Federal Reserve, on overnight loans of excess reserves among commercial banks. A declining federal fund rate may indicate the Federal Reserve has decided to stimulate the economy by making it cheaper for one bank to borrow from another.
• Federal Reserve: The independent central bank that influences the U.S.'s supply of money and credit through its control of bank reserves.
• Federal Reserve Board: The seven governing members of the Federal Reserve System who determine the country's monetary policy.
• Fiscal Cliff: An increase in tax rates and decrease of government spending through budget cuts set to go into effect on January 1, 2013, through a series of previously enacted laws.
• Fiscal Policy: The use of taxation and expenditure by a government to influence the economy.
• Gross National Product (GNP): The dollar output of final goods and services in the economy during a period of time.
• Index: Statistical composite that measures changes in the economy or in financial markets and that can be expressed in percent changes from a base year or from the previous month. Most common are the S&P and the Dow Jones Industrial Average.
• Inflation: A general increase in prices resulting in the loss of value of currency.
• Interest Rate: A measure of the cost of credit, expressed as a percent.
• Keynesian Economics: The economic philosophy espoused by John Maynard Keynes that advocated an active government role in maintaining the economy.
• Misery Index: An index that considers both inflation and unemployment rates.
• Outlay: The release of cash, checks or the electronic transfer of monetary funds to liquidate a federal obligation.
• Recession: An economic downturn marked by two consecutive quarters of declines in the gross national product.
• Securities and Exchange Commission (SEC): Federal agency that administers U.S. securities law; created in 1934.
• Sequester: Budget cuts to particular categories of federal spending that were implemented on March 1, 2013, as an austerity fiscal policy.
• Stagflation: A period of time in an economy where the inflation and unemployment is high while economic growth slows.
• Standard of living: The level of wealth, comfort, and material goods experienced in a country or geographical area.
• Surplus: The amount by which the receipts exceed outlays for a set period, for example, a fiscal year.
• Unemployment: The number of people without a job, often as a percentage of the total labor force.