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Government spending

"Public Purse" redirects here. For the term used in relation to the British monarchy, see Privy Purse.


Government spending or expenditure includes all government consumption, investment, and transfer payments.[1][2] In national income accounting the acquisition by governments, of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment (government gross capital formation). These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product.

Government spending can be financed by government borrowing, seigniorage, or taxes. Changes in government spending is a major component of fiscal policy used to stabilize the macroeconomic business cycle.

Macroeconomic fiscal policy

Main article: fiscal policy

For fiscal policy, increases in government spending are expansionary, while decreases are contractionary. John Maynard Keynes was one of the first economists to advocate government deficit spending (increased government spending financed by borrowing) as part of the fiscal policy response to an economic contraction. According to Keynesian economics, increased government spending raises aggregate demand and increases consumption, which leads to increased production and faster recovery from recessions. Classical economists, on the other hand, believe that increased government spending exacerbates an economic contraction by shifting resources from the private sector, which they consider productive, to the public sector, which they consider unproductive.

Current use: final consumption expenditure

Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is called government final consumption expenditure (GFCE.) It is a purchase from the national accounts "use of income account" for goods and services directly satisfying of individual needs (individual consumption) or collective needs of members of the community (collective consumption). GFCE consists of the value of the goods and services produced by the government itself other than own-account capital formation and sales and of purchases by the government of goods and services produced by market producers that are supplied to households - without any transformation – as "social transfers" in kind.[3]

Infrastructure and investment: gross fixed capital formation

Government acquisition intended to create future benefits, such as infrastructure investment or research spending, is called gross fixed capital formation, or government investment, which usually is the largest part of the government.[4] Acquisition of goods and services is made through production by the government (using the government's labour force, fixed assets and purchased goods and services for intermediate consumption) or through purchases of goods and services from market producers. In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production (i.e. capital). Examples include railroad or factory construction.

Infrastructure spending is considered government investment because it will usually save money in the long run, and thereby reduce the net present value of government liabilities.

Spending on physical infrastructure in the U.S. returns an average of about $1.92 for each $1.00 spent on nonresidential construction because it is almost always less expensive to maintain than repair or replace once it has become unusable.[5]

Likewise, government spending on social infrastructure, such as preventative health care, can save several hundreds of billions of dollars per year in the U.S., because for example cancer patients are more likely to be diagnosed at Stage I where curative treatment is typically a few outpatient visits, instead of at Stage III or later in an emergency room where treatment can involve years of hospitalization and is often terminal.[6]

Transfer payments

Main article: Transfer payment

Government expenditures that are not acquisition of goods and services, and instead just represent transfers of money, such as social security payments, are called transfer payments. These payments are considered to be exhaustive[jargon] because they do not directly absorb resources or create output. In other words, the transfer is made without any exchange of goods or services.[7] Examples of certain transfer payments include welfare (financial aid), social security, and government giving subsidies to certain businesses (firms).

International government spending

Per capita

In 2010 the average national government spent $2,376 per citizen, whilst the average for the world's 20 largest economies (in terms of GDP) was $16,110 per citizen. Norway and Sweden topped the list with per citizen spending of $40,908 and $26,760 respectively. The federal government of the USA spent an average of $11,041 per citizen (per capita), ahead of only South Korea ($4,557), Brazil ($2,813), Russia ($2,458), China ($1,010), and India ($226) in the twenty largest world economies.[8]

As a percentage of GDP

File:Depense-publique-sur-PIB.png
Public spending / GDP in Europe.
Legend: maroon > 55%, red 50–55%, orange 45–50%, yellow 40–45%, green 35–40%, blue 30–35%
File:Government Expenditure as a Percentage of GDP (2014 Index of Economic Freedom).svg
Government Expenditure as a Percentage of GDP (2014 Index of Economic Freedom).[9]
File:Tax Burden as a Percentage of GDP (2014 Index of Economic Freedom).svg
Tax Burden as a Percentage of GDP (2014 Index of Economic Freedom).[9]

This is a list of countries by government spending as a percentage of gross domestic product (GDP) for the listed countries, according to the 2014 Index of Economic Freedom[9] by The Heritage Foundation and The Wall Street Journal. Tax revenue is included for comparison.

Country Tax burden % GDP Govt. expend. % GDP
23x15px Afghanistan 8.7 23.0
23x15px Albania 23.0 28.5
23x15px Algeria 10.0 40.4
23x15px Angola 6.1 38.6
23x15px Argentina 34.6 40.9
23x15px Armenia 16.7 25.0
23x15px Australia 25.6 35.3
23x15px Austria 42.1 50.5
23x15px Azerbaijan 12.8 34.2
23x15px Bahamas 16.4 23.0
23x15px Bahrain 3.1 30.9
23x15px Bangladesh 9.9 16.0
23x15px Barbados 27.4 40.9
23x15px Belarus 24.7 36.0
23x15px Belgium 44.0 53.3
23x15px Belize 23.3 29.3
23x15px Benin 15.5 21.5
23x15px Bhutan 13.5 37.8
23x15px Bolivia 22.2 35.4
23x15px Bosnia and Herzegovina 38.9 49.2
23x15px Botswana 28.1 31.8
23x15px Brazil 34.8 39.1
23x15px Bulgaria 26.1 34.4
23x15px Burkina Faso 13.7 24.3
23x15px Burma 3.7 19.0
23x15px Burundi 14.3 40.0
23x15px Cambodia 10.9 19.6
23x15px Cameroon 11.0 21.6
23x15px Canada 31.0 41.9
23x15px Cape Verde 20.2 32.3
23x15px Central African Republic 9.4 15.7
23x15px Chad 5.1 25.8
23x15px Chile 18.7 23.2
23x15px China 19.0 23.9
23x15px Colombia 15.1 28.9
23x15px Comoros 12.4 22.1
23x15px Democratic Republic of the Congo 23.6 29.1
23x15px Congo 8.4 26.1
23x15px Costa Rica 21.9 18.2
23x15px Ivory Coast 13.1 25.9
23x15px Croatia 32.6 42.5
23x15px Cuba 24.4 66.7
23x15px Cyprus 26.5 46.1
23x15px Czech Republic 35.3 43.3
23x15px Denmark 48.1 57.6
23x15px Djibouti 20.3 35.2
23x15px Dominica 24.2 35.7
23x15px Dominican Republic 12.9 16.1
23x15px Ecuador 17.6 44.0
23x15px Egypt 13.8 31.8
23x15px El Salvador 15.4 21.7
23x15px Equatorial Guinea 1.5 35.3
23x15px Eritrea 50.0 33.6
23x15px Estonia 32.8 38.3
23x15px Ethiopia 11.3 18.4
23x15px Fiji 23.0 28.2
23x15px Finland 43.4 55.1
23x15px France 44.2 56.1
23x15px Gabon 10.1 24.7
23x15px Gambia 13.2 26.0
23x15px Georgia 25.4 31.8
23x15px Germany 37.1 45.4
23x15px Ghana 14.6 23.6
23x15px Greece 31.2 51.9
23x15px Guatemala 10.9 14.6
23x15px Guinea 15.6 21.5
23x15px Guinea-Bissau 8.6 21.2
23x15px Guyana 21.2 30.6
Template:Country data Haiti 13.1 33.5
Template:Country data Honduras 16.1 25.9
Template:Country data Hong Kong 14.2 18.5
23x15px Hungary 35.7 49.4
Template:Country data Iceland 36.0 47.3
Template:Country data India 7.0 27.2
Template:Country data Indonesia 11.8 18.5
Template:Country data Iran 9.3 21.7
Template:Country data Iraq 1.9 44.6
23x15px Ireland 27.6 48.1
Template:Country data Israel 32.6 44.6
23x15px Italy 42.9 49.8
Template:Country data Jamaica 23.4 31.9
Template:Country data Japan 27.6 42.0
Template:Country data Jordan 14.4 33.2
Template:Country data Kazakhstan 14.6 22.4
Template:Country data Kenya 20.1 29.1
Template:Country data Kiribati 20.2 91.8
  1. REDIRECT Template:Country data North Korea || N/A || N/A
  1. REDIRECT Template:Country data South Korea || 25.9 || 30.2
Template:Country data Kuwait 0.8 38.5
  1. REDIRECT Template:Country_data_Kyrgyzstan || 18.5 || 36.4
23x15px Laos 13.7 21.0
23x15px Latvia 27.2 38.8
23x15px Lebanon 17.0 29.6
23x15px Lesotho 37.6 63.1
23x15px Liberia 19.8 31.4
23x15px Libya 1.0 66.6
23x15px Liechtenstein N/A N/A
23x15px Lithuania 16.0 38.3
23x15px Luxembourg 37.1 41.8
23x15px Macau 34.5 16.6
23x15px Macedonia 25.6 31.3
23x15px Madagascar 11.1 16.0
23x15px Malawi 19.9 35.1
23x15px Malaysia 15.3 28.5
23x15px Maldives 16.2 43.3
23x15px Mali 14.0 24.7
23x15px Malta 34.4 42.0
23x15px Mauritania 17.5 28.4
23x15px Mauritius 18.3 24.7
23x15px Mexico 10.6 26.6
23x15px F.S. Micronesia 12.0 65.3
23x15px Moldova 30.8 39.0
23x15px Mongolia 33.1 45.1
23x15px Montenegro 24.2 43.8
23x15px Morocco 23.0 34.6
23x15px Mozambique 19.6 34.4
23x15px Namibia 28.0 37.0
File:Flag of Nepal.svg   Nepal 12.6 18.6
23x15px Netherlands 38.7 49.8
23x15px New Zealand 31.7 47.5
23x15px Nicaragua 18.4 25.8
23x15px Niger 14.1 19.6
23x15px Nigeria 4.7 29.2
23x15px Norway 43.2 43.9
23x15px Oman 2.2 38.3
23x15px Pakistan 9.3 19.8
23x15px Panama 17.8 26.6
23x15px Papua New Guinea 25.8 28.6
23x15px Paraguay 13.4 19.1
23x15px Peru 17.0 19.1
23x15px Philippines 12.3 16.0
23x15px Poland 31.7 43.5
23x15px Portugal 31.3 49.4
23x15px Qatar 2.9 30.5
23x15px Romania 28.0 36.9
23x15px Russia 29.5 35.8
23x15px Rwanda 13.1 27.0
23x15px Saint Lucia 25.1 34.8
23x15px Saint Vincent and the Grenadines 22.1 30.3
23x15px Samoa 23.4 43.9
23x15px São Tomé and Príncipe 16.8 49.0
23x15px Saudi Arabia 3.7 35.1
23x15px Senegal 19.0 28.6
23x15px Serbia 35.2 45.2
23x15px Seychelles 31.7 35.7
23x15px Sierra Leone 11.5 21.9
23x15px Singapore 13.8 17.1
23x15px Slovakia 28.8 38.3
23x15px Slovenia 36.8 50.8
23x15px Solomon Islands 36.9 51.2
23x15px South Africa 27.3 32.1
23x15px Spain 31.6 45.2
23x15px Sri Lanka 12.4 21.4
23x15px Sudan 6.7 17.9
23x15px Suriname 19.0 26.9
23x15px Swaziland 23.3 31.2
23x15px Sweden 44.5 51.2
23x16px  Switzerland 28.5 33.8
23x15px Syria 10.4 N/A
23x15px Taiwan 8.8 22.6
23x15px Tajikistan 19.5 27.0
23x15px Tanzania 15.2 26.9
23x15px Thailand 16.2 23.4
23x15px Timor-Leste 276.7 139.7
23x15px Togo 16.7 24.2
23x15px Tonga 17.5 29.0
23x15px Trinidad and Tobago 16.5 35.4
23x15px Tunisia 21.1 34.8
23x15px Turkey 25.0 34.9
23x15px Turkmenistan 17.8 15.2
23x15px Uganda 17.0 20.6
23x15px Ukraine 38.0 45.6
23x15px United Arab Emirates 6.1 23.7
23x15px United Kingdom 35.5 48.5
23x15px United States 25.1 41.6
23x15px Uruguay 27.2 32.6
23x15px Uzbekistan 20.2 31.4
23x15px Vanuatu 16.4 24.7
23x15px Venezuela 12.5 40.1
23x15px Vietnam 21.1 30.9
23x15px Yemen 5.3 28.9
23x15px Zambia 19.3 23.9
23x15px Zimbabwe 30.0 34.6
23x15px Somalia N/A N/A
23x15px Brunei 24.0 33.6

United States of America

Government spending in the United States of America occurs at several levels of government, including primarily federal, state, and local governments. The Organisation for Economic Co-operation and Development (OECD) reports that total federal, state and local spending in the United States was $6.134 trillion in 2010.[10] This is tracked in National Income and Product Accounts.

Federal spending

File:U.S. federal government spending, 2010-2014.jpg
Chart showing how the United States Congress has spent the federal tax revenue, 2010-2014.[11]
For more details on this topic, see United States federal budget.

As of September 2001 the U.S. Congressional Budget Office reported that federal government spending for 2004 was projected to be $2.293 trillion, or slightly less than 20% of the GDP. Of that, $646.7 billion was for net interest, $486 billion for defense, $492 billion for Social Security, $473 billion for Medicare and Medicaid, $191 billion for various welfare programs, $136 billion for "retirement and disability" benefits, and $64 billion was projected to be spent elsewhere.

There are two types of government spending – discretionary and mandatory. Discretionary spending, which accounts for roughly one-third of all Federal spending, includes money for things like the Army, FBI, the Coast Guard, and highway projects. Congress explicitly determines how much to spend on these programs on an annual basis in annual appropriations bills.[citation needed]

Mandatory spending accounts for two-thirds of all federal spending. This kind of spending is authorized by permanent laws, and includes insurance programs like Social Security, Medicare/Medicaid, the Supplemental Nutrition Assistance Program, and federal retirement and disability programs that provide benefits to federal civilian employees, members of the military, and veterans. Spending levels in these areas are mostly determined by the number of people who request and qualify for the program benefits as determined by the agencies. In some cases, mandatory spending is influenced by earmarks in multi-year spending bills like highway bills and farm bills.[citation needed]

All government agencies face congressional oversight and most programs are updated and amended by congressional legislation, as well as internal agency rules and regulations. U.S. Congress members who seek to influence agencies with direct control have at times been prosecuted or disciplined by the respective House and Senate Ethics Committees.[citation needed]

State and local spending

The United States Census Bureau conducts a Census of Governments every five years for fiscal years ending in 2 or 7. The latest fiscal year covered by the Census of Governments is 2012.

History

The United States Census Bureau publishes historical data on government spending in the United States in its Statistical Abstract of the United States[12] and in its special release of historical statistics in 1976 at the time of the US Bicentennial.[13]

Over the last century, overall government spending in the United States has increased substantially from about seven percent of GDP in 1902 to about 35 percent of GDP in 2010. Major spikes in spending occurred in World War I and World War II.

When broken down by major function, the history of US government spending as a percent of GDP shows a slow and consistent increase in education spending; it shows the spikes in defense spending during World War I and World War II, and the sustained high level maintained during the Cold War. Spending on welfare shows a clear takeoff during the Great Depression and a modest decline following reform in 1996. Spending on pensions (primarily Social Security) begins to show up in the 1950s. Health care spending takes off after the birth of Medicare and Medicaid in the 1960s and shows sustained growth ever since.

See also

References

  1. ^ "Frequently Asked Questions: BEA seems to have several different measures of government spending. What are they for and what do they measure?". Bureau of Economic Analysis. May 28, 2010. Retrieved 12 July 2014. 
  2. ^ Robert Barro and Vittorio Grilli (1994), European Macroeconomics, Ch. 15–16. Macmillan, ISBN 0-333-57764-7.
  3. ^ F. Lequiller, D. Blades: Understanding National Accounts, Paris: OECD 2006, pp. 127–30
  4. ^ "Gross capital formation" Statistics Explained European Union Statistics Directorate, European Commission
  5. ^ Cohen, Isabelle; Freiling, Thomas; Robinson, Eric (January 2012). The Economic Impact and Financing of Infrastructure Spending (PDF) (report). Williamsburg, Virginia: Thomas Jefferson Program in Public Policy, College of William & Mary. p. 5. Retrieved October 1, 2012. 
  6. ^ Hogg, W.; Baskerville, N.; Lemelin, J. (2005). "Cost savings associated with improving appropriate and reducing inappropriate preventive care: Cost-consequences analysis" (PDF). BMC Health Services Research 5: 20. PMC 1079830. PMID 15755330. doi:10.1186/1472-6963-5-20. 
  7. ^ Bishop, Matthew (2012). "Economics A-Z terms beginning with T;transfer". The Economist. Retrieved 11 July 2012. Payments that are made without any good or service being received in return. Much PUBLIC SPENDING goes on transfers, such as pensions and WELFARE benefits. Private-sector transfers include charitable donations and prizes to lottery winners. 
  8. ^ CIA World Factbook, population data from 2010, Spending and GDP data from 2011. These numbers fail however to account for State and Local Government Spending which when included bring the per Capital Spending to $16,755
  9. ^ a b c 2014 Index of Economic Freedom
  10. ^ "11. Government expenditure by function (COFOG)". OECD.Stats. Retrieved 18 April 2012. 
  11. ^ Federal Budget Spending and the National Debt
  12. ^ Statistical Abstract of the United States
  13. ^ Bicentennial Edition: Historical Statistics of the United States, Colonial Times to 1970, Part 2

External links

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