Money and Politics: Sound intelligent, Be intelligent with knowledge of these terms

It’s election time! Keep up with all the lively (and sometimes heated) political discussions with your sound knowledge and correct usage of these frequently used political/financial terms.

  1. Inflation: The general rise in prices over a time. It means your money is worth less because it buys less. (Note: Inflation in moderation is not always a bad thing.)
  2. Unfunded Liabilities: With respect to our subject matter, an unfunded liability is something the government has promised to pay in the future but does not have money set aside for it as of today. Example: Social Security for people now in their 30s (at least) is an unfunded liability because it has been promised at retirement but the money hasn’t been set aside for it yet.
  3. Social Programs: Also referred to as Welfare or Entitlement Programs, these are programs in which the government provides a service, good, or money to individuals and families qualifying for the specific program.
  4. Progressive Tax System: A tax system where the tax rate rises as income rises. The US income tax is a progressive system.
  5. Flat Tax System: A tax system where everyone pays the same tax rate, regardless of income. Sales tax is an example of a flat tax.
  6. Capital Gains: A capital gain is the difference for what you paid for an investment and what you received when you sold it. Examples of these investments include stocks, bonds, real estate, collectibles, precious metals.
  7. The Federal Reserve Bank: Sometimes referred to as The Fed, the Federal Reserve Bank is an independent bank (not part of the government) that, in short, plays a huge role in the US economy and monetary policy by setting interest rates and controlling how much money is in circulation.  If you want to read more, go here or here.
  8. CBO: The Congressional Budget Office was created as a nonpartisan group–meaning being neutral with respect to political party–to provide Congress with financial analysis and economic data. They are essentially the number crunchers for the government.
  9. GDP: Gross Domestic Product is the basic measure of country’s overall economic output. It is the value of all goods and services produced in a set period of time.
  10. Economic Recession: In general a recession is a slow down in the economy. A common rule of thumb is two calendar quarters  in a row of downward movement in GDP.
  11. Economic Depression: A depression is a long term down turn in the economy. There is no set rule of thumb to mark a depression, although it is usually marked by it’s sustained length of time.

Remember also to brush up on how tax rates work. Now you are ready to go and make informed arguments and decisions!