Retrieved from https://studentshare.org/macro-microeconomics/1424899-fiscal-policy-government-expenditures-and-revenues
https://studentshare.org/macro-microeconomics/1424899-fiscal-policy-government-expenditures-and-revenues.
Apart from that 40 percent is contributed social insurance taxes. Total revenue earned by the government had reached its highest peak in the year 2000 with 20.6. However due to the recession the US economy had witnessed a dip in its revenues to 14.8 percent in 2009. The contribution of individual taxation had reached its lowest level of 6.4 percent in 2009. It has been projected by the Congressional Budget Office (CBO) that revenues will increase by almost 23 percent in 2011 (The Revenue Outlook, n.d). 2.
What are the three major categories of expenditures for the federal government? Please comment on each and indicate their relative importance to each other. Relative importance can be indicated by dollar amounts, percent of total revenue or expenditure or, though less informative, by ranking. Government expenditure is also a very important part in the budget of the government. It is an essential requirement for the government to plan their expenditure accordingly so as to steer the economy towards increasing economic growth.
As government invests in the crucial sectors of the economy, one can observe that government expenditures have been increasing over time. In the year 2009 it was seen that the federal government had spent $3.518 trillion which accounted for 24.7 percent of GDP for that particular year (Arnold, 2010, p.232). There are several areas where the federal government directs its expenditures. They are consumption expenditures, transfer payments, social benefits of governments, social security schemes, Medicare benefits, unemployment benefits, subsidies, grants to state and local governments, and military expenditures (Federal government receipts and expenditures, 2010).
As government spends in different area its sources of financing also varies. Like in case of Medicare, it is financed through Medicare payroll tax premiums and general revenue which is mostly income tax (Potetz, 2008). 3. Discuss the current level of the Federal debt, and the past trend of the debt level. Discuss whether or not you are concerned about the current and future projected debt and level of associated interest expense. It has been observed in the past few years that there has been an increase in federal debt more than the output of the nation.
The main factors responsible for this debt were imbalances between federal revenue and spending leading to recession and economic turmoil, reduced revenue and increased spending as a result of the above economic conditions, and as a result of different types of costs emerging in response to the economic conditions. If the level of federal debt goes on increasing then it is an alarming situation for the economy as it might lead to fiscal crisis. If there is a fiscal crisis then confidence of the investors on the government will receive a set back and the economy will suffer.
If the current debt is compared with that seen between the periods covering the World Wars then it is less. The recent jump in debt is 25 percent of GDP. It was projected by CBO that 62 percent of federal debt will be held by the public. Further it has been
...Download file to see next pages Read More