The US government incurs significant expenditures in each fiscal year to ensure the well-being of its citizens. Over the past decades, the country has been spending mainly in areas such as social security, defense, transportation, income security, and payrolls. The system of governance is divided into three key categories; federal, state, and local governments ((Gwartney et al., 2021). Each of the mentioned forms of government undertakes spending activities at its own level to facilitate different activities in the country. In order to facilitate and sustain the development and recurring expenditures, the US authority has an active tax system at both the state and federal levels. Some of the key sources of taxes include capital gains, income, and sales.
Over the past years, government expenditure has been increasing significantly as well as its composition. In 1930, the US spent approximately 9.9% of its gross domestic product (GDP) (Gwartney et al., 2021). Based on the figure, about a third of the expenditure was channeled to the federal government. Between the years 1930 and 1980, the spending increased to over 30% of the country’s GDP. The adjustment was directed to the federal government implies that the US government raised its share of federal expenditure as compared to both the local and state administrations. Key fundamental factors such as the need to improve national security and competition to remain one of the superpowers prompted the government to invest heavily in the defense system, thus increasing the federal expenditure value. From 1940 to about 2015, federal spending has been higher the state and local expenditures combined.
The components of US government spending vary among the three key levels. The federal government mainly spends on social security, Medicare and health, Income, defense, transportation, net interest, and other mandatory spending. In 2015, the mentioned composition constituted approximately 24.1%, 27.9%, 13.8, 16.0%, 2.4%, 6.1%, and 9.8% of the GDP (Gwartney et al., 2021). The portion has changed as the needs of the US citizens keep changing each year. In the year 2022, the federal government spent 19% on social security, 15% on health, 14% on income security, 12% on national defense, 12% on Medicare, about 11% on training, education, employment, and social services (“Fiscal Data explains federal spending,” n.d). Additional expenditures incurred are 8% net interest, 2% transport, and 1% on other activities. By examining the figures, it is evident that the US government has managed to lower some of its federal spending and a further increase in other critical areas.
Federal spending on defense has been declining over the past decades while the expenditure is increasing on the healthcare and income transfer sector. The focus is to enable the country to reduce the cost associated with inpatient and outpatient care services. The spending on health rose from about 25% in 1960 to approximately 65% in 2015 (Gwartney et al., 2021). The changes depict a significant shift in federal spending over the past five decades. The adjustments in the expenditures are geared towards improving the welfare of the people in the country. Another key area in which the US has allocated more funds is social security. The increment is aimed at paying the eligible people, thus requiring the federal government to have enough resources to facilitate the payment process. Furthermore, the US government has currently invested in education and unemployment programs to ensure the marginalized community attains the necessary education and sources of income.
In most cases, when the government increases its expenditure, it facilitates productivity in the respective sector, thus benefiting the general public. For instance, by channeling more funds into the health and education sector, US citizens will receive effective and affordable care services. The increment will imply an improvement in service delivery, quality patient care, and advancement in the facilities being used in the hospitals. Such improvement will guarantee efficacy in patient outcomes hence facilitating better living standards. Similarly, by financing the education sector, the federal government will promote a subsidized learning system; hence many individuals, irrespective of socioeconomic status, will be able to access basic and quality education. The aspect will ensure that most people gain the necessary skills needed to acquire job opportunities, thus leading to the generation of income for the citizens. Therefore, with such changes in government spending, the US netizens will be apposition to receive better services that improve their living conditions.
Basically, in a situation where the majority of the citizens do not pay taxes or pay little, the likelihood of democracy surviving is low. When people fail to contribute revenue to the government, the burden will be directed to the minority whose wealth will be taxed significantly to raise the necessary funds to support government expenditure. This aspect will make the minority individuals lose their incentive to earn. Since the majority relies on direct government spending, they will depend mainly on subsidies, thus causing inefficiencies. Similarly, the smaller section of the population that is being taxed will have a reduced ability to work, causing a rise in unemployment. In such a scenario, cases of social tension are likely to occur which might prompt a clash between the two groups.
References
Fiscal Data explains federal spending. Federal Spending | U.S. Treasury Fiscal Data. (n.d.). Web.
Gwartney, J. D., Stroup, R. L., Sobel, R. S., & Macpherson, D. A. (2021). Economics: Private & public choice. Cengage Learning.