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By the end of this section, you will be able to:

  • Identify U.S. budget deficit and surplus trends over the past five decades
  • Explain the differences between the U.S. federal budget, and state and local budgets

Government spending covers a range of services provided by the federal, state, and local governments. When the federal government spends more money than it receives in taxes in a given year, it runs a budget deficit    . Conversely, when the government receives more money in taxes than it spends in a year, it runs a budget surplus    . If government spending and taxes are equal, it is said to have a balanced budget    . For example, in 2009, the U.S. government experienced its largest budget deficit ever, as the federal government spent $1.4 trillion more than it collected in taxes. This deficit was about 10% of the size of the U.S. GDP in 2009, making it by far the largest budget deficit relative to GDP since the mammoth borrowing used to finance World War II.

This section presents an overview of government spending in the United States.

Total u.s. government spending

Federal spending in nominal dollars (that is, dollars not adjusted for inflation) has grown by a multiple of more than 38 over the last four decades, from $93.4 billion in 1960 to $3.9 trillion in 2014. Comparing spending over time in nominal dollars is misleading because it does not take into account inflation or growth in population and the real economy. A more useful method of comparison is to examine government spending as a percent of GDP over time.

The top line in [link] shows the level of federal spending since 1960, expressed as a share of GDP. Despite a widespread sense among many Americans that the federal government has been growing steadily larger, the graph shows that federal spending has hovered in a range from 18% to 22% of GDP most of the time since 1960. The other lines in [link] show the major federal spending categories: national defense, Social Security, health programs, and interest payments. From the graph, we see that national defense spending as a share of GDP has generally declined since the 1960s, although there were some upward bumps in the 1980s buildup under President Ronald Reagan and in the aftermath of the terrorist attacks on September 11, 2001. In contrast, Social Security and healthcare have grown steadily as a percent of GDP. Healthcare expenditures include both payments for senior citizens (Medicare), and payments for low-income Americans (Medicaid). Medicaid is also partially funded by state governments. Interest payments are the final main category of government spending shown in the figure.

Federal spending, 1960–2014

The graph shows five lines that represent different government spending from 1960 to 2014. Total federal spending has always remained above 17%. National defense has never risen above 10% and is currently closer to 5%. Social security has never risen above 5%. Net interest has always remained below 5%. Health is the only line on the graph that has primarily increased since 1960 when it was below 1% to 2014 when it was closer to 4%.
Since 1960, total federal spending has ranged from about 18% to 22% of GDP, although it climbed above that level in 2009, but quickly dropped back down to that level by 2013. The share spent on national defense has generally declined, while the share spent on Social Security and on healthcare expenses (mainly Medicare and Medicaid) has increased. (Source: Economic Report of the President, Tables B-2 and B-22, http://www.gpo.gov/fdsys/pkg/ERP-2014/content-detail.html)

Questions & Answers

how did microeconomics
Oladeji Reply
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Umar Reply
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Nathaniel
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Anjali
what is demand elasticity
liyah
distinguish between increase in demand curve and extenaion in demamd curve
Farhan Reply
what are the shapes of an indifference curve?
Ovensi Reply
division of labour is simply the breaking of job functions so that each individual is engage to one set or the other for easy delivery
EMMANUEL Reply
Division of labor is the break down of labor into smaller units with each handed over to a particular person or group of people.
Amanor
What is division of labor
peter Reply
it is also simply the breaking down of work into various part so that each individual is entitle to one for easy delivery
EMMANUEL
it is the simplifying of tasks into smaller easily workable divisions where each person specialises on what they understand better
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EMMANUEL
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EMMANUEL
what are the sources of monopoly power?
Winnerman Reply
the first source, are informations
amine
political power and influence in monetary institutions
Shahul
what is imperfect competition ?
SHAH Reply
the situation in which elements of monopoly ( R&D, EOS and stability of prices etc.) allow individual producers or consumers to exercise some control over market prices
Ghulam
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Sowmya Reply
where p is less than avc
Koushik
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Shahul
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Shahul
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Pov
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SHAH
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olaleye Reply
what is microeconomics
Ayedun
Micro-economics refers to the branch of economics which deals with smaller unit or element of the economy.
Amadu
or Is the study of individual economic unit in a economy..
Neriel
micro economis is the studay of how Households and firms make decision and they interecr it.
mahad
what is financial intermediaries?
Imran Reply
financial intermediaries are those who are link between borrowers and lenders for.eg bank... Bank is a financial intermediary
Ajit
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Imran
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Ajit
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Ajit
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انا باخدها غصب عني في الكليه حضرتك
لس كدااا
I am student of ecnomics ,
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Ajit
what is the law of dimis
Toyin Reply
what is the feature of public ownership of production factors
Toyin
what is the demand for commodity that posses identical utilities called
Toyin
law of diminishing utility...as the quantity consumed of a commodity increases,the utility derived from each successive unit goes on decreasing... condition___ consumption of other commodities remaining the same.
Malik
sorry it's...Law of diminishing marginal utility
Malik
demand for commodities that posses identical utilities? The commodities having identical utilities are perfect substitutes...and the demand for such type of commodities is called "Competitive Demand".
Malik
thanks
Toyin
Why many people can't differentiate Economists and financial analysts
Hatimu
what is the function of the central bank in an economic?
Toyin
the central bank may lend some money to banks if necessary
konglan
what economics
Toyin Reply
Is this a question?
Tala
is the study of how societies allocate and manage their scare resources
Neriel
What is populatiin
Azer Reply
Population is a number of people living in a particular area within a particular time
Rabby
Population is the number of people living in a particular geographical area within a particular time
Rabby
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Dalaya
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South
so what's the next question?
South
population is defined as the number of people living in a defined geographical area within a specific period of time.
Amanor
what is bank
Levi
I were we secure our wealth
David
is bank only for securing wealth
Levi
what is demand schedule
Toyin Reply
is a tabular representation of the quantity demanded of a particular product at a particular price over a given period of time
Loveth
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Toyin
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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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