Chapter 10
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Transcript of Chapter 10
Chapter 10:The Economics of
Government Spending
Chapter 10:The Economics of
Government Spending
10-1: The Economics of Taxation
• Government Spending in Perspective• Public sector spending was low prior to the Great
Depression• Video - The New Deal
John Stossel in the Classroom
2008 Pig Book
"Fighting for the interests of my constituents“
• Two types of government spending– Purchase of goods and services
• Tanks, planes, ships, space shuttle• Office buildings, parks, schools• Supplies, utilities• Employees
– Transfer payments • Can be made to an individual
– Social Security, Welfare, Medicare, etc.• Can be made to another level of
government– Called a grant-in-aid– Necessary for large construction projects
• Impact of Government Spending
– Resource Allocation
– Redistribution of Income
– Competition with the Private Sector
– Increasing the Tax Burden
10-2: Federal, State and Local Government Expenditures
• Federal Expenditures
– Fiscal year or budget year for U.S. Gov’t is 10/1 – 9/30
– Appropriations bill is an act of Congress that allows federal
agencies to spend money for a specific purpose.
– Mandatory spending is spending authorized by law that
continues without the need for annual approvals by
Congress, such as Social Security.
– Discretionary spending must be approved by Congress in
the annual budgetary process, such as defense spending.
• Why you should care about the national debt
• Video - Debt auction• Video - Interest on debt• Video - Jon Stewart
10-3: Deficits, Surpluses and the National Debt