Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 4 The Economics of the Public Sector
Chapter 12 of 36 The Design of the Tax System
Section 7 of 22
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Total spending was $2,730 billion, or $9,040 per person on average.
Social Security is largest spending category, this is mostly transfer payments to those age 62 and up.
A transfer payment is a government transfer of money, as opposed to a government payment made in exchange for a good or service.
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National defense is the second largest category, including military personnel salaries and purchases of military equipment.
Defense spending rose from 17% to 20% from 2001 to 2007, in part because of the wars in Iraq and Afghanistan.
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Medicare is the federal government's healthcare insurance program for those age 65 and up.
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Income security, transfer payments to poor families, programs include
· Temporary Assistance for Needy Families (TANF), often called welfare
· the vouchers for buying food
· child tax credit
· housing assistance
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Health, is other health spending, including
· Medicaid, the federal health insurance program for the poor
· spending on medical research, such as by the National Institutes of Health
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Net interest, interest payments to those who own U.S. government bonds.
When someone borrows from a bank, the borrower must pay interest on the loan.
The same is true when the government borrows from the public through sales of bonds.
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The "other" category covers many less expensive functions of government, including
· salaries of federal government employees including members of Congress and the president
· the federal court system
· the space program
· farm support programs
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Total spending of the federal government in 2007 was $2,730 billion compared to tax revenues of $2,568.
Spending was more than revenue by $162 billion.
The government finances a budget deficit by borrowing from the public though selling bonds.
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budget deficit and surplus
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