In 2005 the federal government spent approximately

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Unformatted text preview: Key Terms national debt budget deficit budget surplus How Does the Federal Government Spend Money? In 2005, the federal government spent approximately $2,451 billion. How was this money spent? The federal government breaks down its spending according to categories, a few of which are briefly discussed here. National Defense In 2005, the federal government spent $497 billion on national defense (and about $31 billion on homeland security). If we sum national defense and homeland security, this total amount was about 21.5 percent of “It’s a billion here and a total federal government billion there; the first thing you know it adds up spending in that year. In other words, out of every to real money.” dollar the federal govern—Senator Everett Dirksen ment spent in 2005, 21.5 cents went to national defense and homeland security. This money largely goes to pay the men and women in the armed services and to buy and maintain military weapons. 376 Chapter 14 Taxing and Spending Income Security, Retirement, and Disability Income security refers to government programs such as housing assistance, food and nutrition assistance for the poor, unemployment compensation (for those persons who have lost their jobs), food stamps, child nutrition programs, federal employee disability payments, and so on. The federal government spent $197 billion on income security in 2005. On other retirement and disability programs it spent $147 billion. The sum total here is $344 billion or 14 percent of total federal government spending. Social Security The federal government in 2005 spent $516 billion on Social Security payments, which largely go to retired persons. These payments were a little more than 21 percent of total federal government spending. Medicare In 2005, the federal government spent $297 billion on Medicare, which is hospital 14 (364-389) EMC Chap 14 11/18/05 10:58 AM Page 377 It is likely that many of these senior citizens participate in the federal government’s Medicare program. In 2005 the federal government spent $297 billion on Medicare. and medical insurance for Social Security beneficiaries. This amount was 12.1 percent of total federal government spending. Net Interest on the National Debt When the government spends more money than it receives in tax revenues, it is said to run a budget deficit. For example, if the government spends $2,000 billion and its tax revenue is $1,800 billion, the budget deficit is $200 billion. The government has to borrow the $200 billion, in much the same way that people have to borrow money if their expenditures are greater than their income. The federal government borrowed much money over the years; on October 24, 2005, its total debt— referred to as the n ational debt —was $8,009 billion or $8.009 trillion. If you want to know what the national debt is today, go to This Web site will show you the national debt to the penny. The federal government has to pay interest on this debt, in much the s...
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This document was uploaded on 01/16/2014.

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