18 Fiscal Policy, Part 2 - Agenda The Government Budget:...

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1 19-1 Government Spending and its Financing, Part 2 19-2 Agenda • The Government Budget: Facts and Figures • Gov’t Spending, Taxes, and the Economy • Government Deficits and Debt 19-3 • Government outlays: ¾ Government purchases ( G ) ¾ Transfer payments ( TR ) ¾ Net interest payments ( INT ) ¾ Also: Subsidies less surpluses of government enterprises. • Relatively small, so ignore it. 19-4 • Government outlays: ¾ Government purchases ( G ) • Government consumption expenditures. – About 5/6 of total government purchases. • Government investment is purchases of capital goods. – About 1/6 of total government purchases. The Government Budget: Facts & Figures
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2 19-5 • Government outlays: ¾ Transfer payments ( TR ) • Transfers are expenditures for which the government receives no current goods or services in return. • Examples: social security benefits, pensions for government retirees, welfare payments 19-6 • Government outlays: ¾ Net interest payments ( INT ) • Interest paid to holders of government bonds less interest received by the government. 19-7 19-8 • Government outlays: ¾ U.S. government spending is a smaller percentage of GDP than almost any other OECD country. The Government Budget: Facts & Figures
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3 19-9 19-10 • Taxes: ¾ Personal taxes (income taxes and property taxes) ¾ Contributions for social insurance ¾ Taxes on production and imports » ¾ Corporate taxes 19-11 19-12 • The composition of outlays and taxes: ¾ To get an overall picture of government spending, combine Federal, state, and local government spending. • The composition of the Federal government budget is quite different from state and local government budgets. The Government Budget: Facts & Figures
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4 19-13 19-14 • The composition of outlays and taxes: ¾ Consumption expenditures • About 75% of state and local current expenditures are purchases of goods and services. • About 30% of Federal current expenditures are for purchases. – About 2/3 of those are for national defense. • For all government purchases of nondefense goods and services, over 80% is done by state and local governments. 19-15 • The composition of outlays and taxes: ¾ Transfer payments • The Federal government budget is more heavily weighted to transfers than state and local budgets. ¾ Grants-in-aid are payments from the Federal government to state and local governments.
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18 Fiscal Policy, Part 2 - Agenda The Government Budget:...

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