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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

compare pakistan's economic conditions and development with other countries
Adnan Reply
please tell me about. GOAL AND INVESTMENT IN MACROECONOMICS
SHAKEEL Reply
1. Division of labour increases the quality of output 2. it brings about specializations where a worker has an advantage of his area of competence. 3. The pay you get help you to buy the goods and wants
Becky Reply
1. to make choice in the face of scarcity 2. specializations 3.division of labour
Becky
Human wants and needs are numerous but the resources available are limited in supply.
Becky
The maximum amount of ham the residents will consume in a month is 30000
Becky
it makes economic sense to her because she works to get paid. since she cannot produced vegetables,
Becky
A computer systems engineer only specialized in his field of study as a computer engineer not a painter. so he needs to get the service of a painter to paint his house and he will pay for the service of the painter
Becky
the kitchen will produce more meals because there is division of labour and area of expertise
Becky
division of labour without trade will not work because there is no training in a particular field
Becky
it also increase productivity
Asiedu
or increase productivity
Asiedu
how to print
Siti Reply
what is flow variable
Siyanda Reply
a flow is a quantity that can be measured over a specific period of time
Abhishek
is economics a social science or a pure science
Hilda Reply
social science
Sammy
social science
Babarali
social Science as a Subject and Pure science as a study
Abhishek
How to compute National income by using the expenditure approach
Bridget Reply
explain the method?
Sammy
hy
Sajjad
C+I+G+(X-M) C= Consumption Expenditure I= Investment Expenditure G= Government Expenditure X-M = Net Export
Abhishek
hw r u..?
Sharat
am good
lukimia
o nice
Sajjad
please I need a guardian on this topic
Albert
What do you need? Maybe we can help
Annisa
What's going on here?
Ivan
l need some information about macroeconomic
Sharat
First tell us what you already know about macroeconomic.
Ivan
any lecturer in here?
Albert
yes !! am here !! Lecturer of Economics And Statistics
Abhishek
Macroeconomics is too vast,so please be specific your question
niguse
I need help in statistics my lecturer is too fast at times I dont understand
Diana
Y=C+I+G+NX
Ayesha
Briefly explain whether the discipline of economics is a social science or pure science( normative or positive)
Okafor Reply
answer.... Economics is social science
Sammy
different between absolute advantage and comparative advantage
EDSON Reply
mathematical economics
masele Reply
show some questions under this topic
hassan
why met worth is added with libilitys in the balance sheet
bijoy Reply
what are the implications of inflation targeting?
Alinaitwe Reply
maximize profit
Murry
What happens to the goods and money market if the government cuts public spending?
Harman Reply
then the government will be punished by the public
soul
GDP, INFLATION, UNEMPLOYMENT & PRODUCTIVITY and then write a paragraph on the behavior of each variable after analyzing them graphically.
AWY
what is international trade
Stella Reply
International trade is the exchange of capital, goods, and services across international borders.
Bilal
international trade is the exchange of goods and services across boundaries
Zamu
international trade is the exchange of goods and services of country and abroad
Uwase
international is the process of exchanges of value interm of goods and services along national frontier
Murry
Trade*
Murry
Increase knowdge and skill. it save time and cost. Increase high Efficiency of production .
betta Reply
List kinds of Elastcity of Demand
betta

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Source:  OpenStax, Macroeconomics. OpenStax CNX. Jun 16, 2014 Download for free at http://legacy.cnx.org/content/col11626/1.10
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