Introduction to Finance

mandatory spending 
government 
spending on entitlement programs 
that must be funded according to 
existing law
discretionary spending 
government spending provided by 
passage of appropriations bills that 
set aside funds for specifi c federal 
agencies and programs

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C H A PT E R 7 Savings and Investment Process
people. Decisions relating to taxing and spending, and the resulting impact on whether federal 
budgets will be surpluses or defi cits, are important to voters. Voters also expect their elected 
politicians to behave ethically by acting honestly and fairly with their constituencies. 
For the most part, our elected federal politicians seemed to have acted ethically and 
with integrity. However, there have been some examples of unethical and illegal behavior. 
Impeachment 
is a formal legislative process in which charges of “high crimes and misdemean-
ors” are brought against high-level offi
cials. The House of Representatives votes on whether to 
impeach an offi
cial; if it does impeach, a trial is held in the Senate. In the United States, only 
two presidents out of 43 have been impeached. They were Andrew Johnson, the 17th president, 
and William Clinton, the 42nd president. Both were acquitted. Former President Richard 
Nixon resigned before being impeached. 
Occasionally, members of Congress have engaged in illegal activities. Some have been 
convicted in criminal court. Since the mid-1970s, at least 12 members have received prison 
sentences for such activities as accepting bribes, taking part in kickback schemes, extortion, 
illegal sex off enses, and mail fraud. While the activities of these individuals have tainted 
Congress, by far most members behave ethically, both personally and professionally, when 
representing the people who elected them. 
Debt Financing
As defi ned in Chapter 5, the 
national debt 
is the total debt owned by the government and it 
refl ects the cumulative amount of annual budget surpluses and defi cits throughout the history 
of the United States. Annual budget defi cits have occurred in most fi scal years since the end 
of the 1960s. Beginning in fi scal year 1970 and continuing until 1998, the federal government 
operated with an annual budget defi cit. The government was willing to spend much more than 
it received in the form of taxes and other revenues for more than 25 consecutive fi scal years.