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Each year, the government borrows funds from U.S. citizens and foreigners to cover its budget deficits. It does this by selling securities (Treasury bonds, notes, and bills)—in essence borrowing from the public and promising to repay with interest in the future. From 1961 to 1997, the U.S. government has run budget deficits, and thus borrowed funds, in almost every year. It had budget surpluses from 1998 to 2001, and then returned to deficits.

The interest payments on past federal government borrowing were typically 1–2% of GDP in the 1960s and 1970s but then climbed above 3% of GDP in the 1980s and stayed there until the late 1990s. The government was able to repay some of its past borrowing by running surpluses from 1998 to 2001 and, with help from low interest rates, the interest payments on past federal government borrowing had fallen back to 1.4% of GDP by 2012.

We investigate the patterns of government borrowing and debt in more detail later in this chapter, but first we need to clarify the difference between the deficit and the debt. The deficit is not the debt . The difference between the deficit and the debt lies in the time frame. The government deficit (or surplus) refers to what happens with the federal government budget each year. The government debt is accumulated over time; it is the sum of all past deficits and surpluses. If you borrow $10,000 per year for each of the four years of college, you might say that your annual deficit was $10,000, but your accumulated debt over the four years is $40,000.

These four categories—national defense, Social Security, healthcare, and interest payments—account for roughly 73% of all federal spending, as [link] shows. The remaining 27% wedge of the pie chart covers all other categories of federal government spending: international affairs; science and technology; natural resources and the environment; transportation; housing; education; income support for the poor; community and regional development; law enforcement and the judicial system; and the administrative costs of running the government.

Slices of federal spending, 2014

The pie chart shows that healthcare (including Medicaid) makes up roughly 26% of federal spending; Social Security makes up 24%; national defense makes up 17%; net interest makes up over 6%; and all other spending makes up over 25%.
About 73% of government spending goes to four major areas: national defense, Social Security, healthcare, and interest payments on past borrowing. This leaves about 29% of federal spending for all other functions of the U.S. government. (Source: https://www.whitehouse.gov/omb/budget/Historicals/)

State and local government spending

Although federal government spending often gets most of the media attention, state and local government spending is also substantial—at about $3.1 trillion in 2014. [link] shows that state and local government spending has increased during the last four decades from around 8% to around 14% today. The single biggest item is education, which accounts for about one-third of the total. The rest covers programs like highways, libraries, hospitals and healthcare, parks, and police and fire protection. Unlike the federal government, all states (except Vermont) have balanced budget laws, which means any gaps between revenues and spending must be closed by higher taxes, lower spending, drawing down their previous savings, or some combination of all of these.

Questions & Answers

What is ceteris peribus
Kelvin Reply
Simply put, All things being equal
Mary
What is the important of Economic
Parnda Reply
what is demand
Coded Reply
what is a clearing house
barry Reply
so can we conclude that mircoeconomics is a under marcoeconomics
Florence Reply
l don't understand that part please teach me
gideon
microeconomics and Marco economic are not the same.one have to do with part of the economy and the other have to do with the entire economy
jackie
so how can we conclude microeconomics and macroeconomic in our stadies
Noah
please explain
Mathias
Am confuse can you please explain
Belinda
Pls Explain more
Parnda
what is monopoly
Pop Reply
is market situation in which an individual or group of person acting as a unit control supply of a good which has no close substitute
gideon
what is the role that the government can play
Caroline Reply
what is a subsidy
Caroline
subsidy is government help to producers that reduces cost of production .
Pop
subsidy is government help to producers that reduces cost pf production
Pop
money is anything money can buy discuss
Patrick Reply
what is equilibrium price
Bismark Reply
when demand price and supply price are equal
Asit
what is equilibrium
Ashiq
When supply and demand are equal in one point is equilibrium
learn
equilibrium of price is that price at which the quantity of goods demanded is equal to the quantity supplied
Samuel
what is a portable
Eeme Reply
able to be carried or easily moved......just movie okay
Amadou
2) One of the major assumption of the classical school is A) Lack of aggregate demand causes involuntarily unemployment B) Governments fiscal operations can reduce unemployment C) Unemployment and inflation can exist together D) Economy will be in full employment equilibrium in the long run
Ajay Reply
explain the scope of economics
Bhimshi Reply
Inflation occurs in a country due to what causes?
Daniel Reply
Lack of natural resources management
Kosiso
scarce of natural resources
Eeme
What is demand
TECK Reply
the amount of a good that buyers are willing and able to purchase
Asit
what is population
Amadou Reply
The people living within a political or geographical boundary.
Ziyodilla

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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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