Government spending - Definition and Overview

Government spending consists of government purchases, including transfer payments, which can be financed by seigniorage (the creation of money for government funding), taxes, or government borrowing. It is considered to be one of the major components of gross domestic product.

John Maynard Keynes was one of the first economists to advocate government deficit spending as a way to cure an economic contraction. In Keynesian economics, increased government spending is thought to raise aggregate demand and increase consumption.

United States

As of September 2004, the U.S. Congressional Budget Office reported that federal government spending for 2004 was projected to be $2,293 billion, or slightly less than 20% of the GDP. Of that, $159 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.

References

• Congressional Budget Office. "CBO's Current Budget Projections". [1] (http://www.cbo.gov/showdoc.cfm?index=1944&sequence=0). November 24, 2004.

See also

• Gross domestic product
• Government operations