11/24/2023 0 Comments Federal budget pie chartcitizens and foreigners to cover its budget deficits. (Source: Economic Report of the President, Tables B-2 and B-22, )Įach year, the government borrows funds from U.S. 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. 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. Interest payments are the final main category of government spending shown in the figure.įigure 1. Medicaid is also partially funded by state governments. Healthcare expenditures include both payments for senior citizens (Medicare), and payments for low-income Americans (Medicaid). In contrast, Social Security and healthcare have grown steadily as a percent of GDP. 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. The other lines in Figure 1 show the major federal spending categories: national defense, Social Security, health programs, and interest payments. 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 top line in Figure 1 shows the level of federal spending since 1960, expressed as a share of GDP. A more useful method of comparison is to examine government spending as a percent of GDP over time. 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. Government Spendingįederal 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. This section presents an overview of government spending in the United States. 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 deficit was about 10% of the size of the U.S. government experienced its largest budget deficit ever, as the federal government spent $1.4 trillion more than it collected in taxes. If government spending and taxes are equal, it is said to have a balanced budget. Conversely, when the government receives more money in taxes than it spends in a year, it runs a budget surplus. When the federal government spends more money than it receives in taxes in a given year, it runs a budget deficit. Government spending covers a range of services provided by the federal, state, and local governments. federal budget, and state and local budgets Explain the differences between the U.S.budget deficit and surplus trends over the past five decades By the end of this section, you will be able to:
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