Where does government spending go - Essay Example

?Introduction The main source of revenue for the government is always the taxes which are imposed on general public and businesses. The same revenue is then spent by the government on various services rendered by the government as well as the purchases made. It is also important to note that often the overall expenditure made by the government on its purchase of goods and services exceeds the revenue generated by the government through taxes. As such government tend to borrow either from the international or domestic market in order to fill short fall or deficit arising in its budget. US government spent its revenues on major goods and services which it renders including the defense services, infrastructure development, salaries of the government employees as well as other heads under which the overall revenue or budget of the country is spent. Almost 54% of the revenue earned by the government is spent on the military related activities whereas 46% of the revenue is spent on the non-military related expenditure. The recent surge in the military related expenditure has mostly been associated with the new military activities conducted by US government in Afghanistan and Iraq. The current budget proposed by the Obama administration show a complete breakdown of how the overall budget will be spent on different activities of the government. The government has also proposed different budget cuts in order to improve the situation of its finances. (Harris). The overall public debt in US still more than $14.2trillion dollars suggesting that the government may be borrowing heavily in order to finance its activities. This paper will trace as to where the government money is spent and why US faces such huge debt of $14.2 trillions. How government money is spent? The recent budget proposed by the Obama administration shows how the government money will be spent under different heads1. A critical analysis of the data would suggest following: National Defense 2011 proposed budget is $3.69 trillions out of which $738 billions will be spent on the national defense which is mostly related with the military related expenditure. The money spent on the national defense however, is further broke down into different sub-headings such as operations and maintenance, military personnel, procurement, research and development, military construction, energy as well as family housing and other benefits to the military personnel. This composition of the spending suggests that most of the spending on the national defense is made in terms of operations and maintenance. Social Security The second largest chunk on which government money is spent is social security services provided by the government. Under social security, most of the money is spent on the old age and survivors insurance whereas the rest of the money is spent on the disability insurance. Income Security Another important source where most of the money is spent by the government is providing income security to the citizens. Under this head, money is spent on the unemployment insurance, food stamps, child tax credit, supplemental security income, military retirement, unemployment insurance, rental income support, child nutrition and various other heads. Income security therefore serves as an income stabilizing factor for the citizens with the help of government. Health and Education Another important source on which the government spends money is health and education sector under which State offer both these basic services. Under the health and education, government offers grants to the States for health facilities as well as the health services are offered to the retired employees, funding to National Institute of Health, children health insurance program as well as other expenditure is made. Under the head of education, government offers assistance in terms of student scholarships, support for the disadvantaged, elementary and vocational training, training and employment services as well as other services which are offered by the government under the head of education. Net Interest Government also has to pay the interest on the borrowing made by it and the payments against such interest are shown in the net interest. Net interest is the gross interest paid minus gross interest received by the government. Under the proposed budget, government will spend $251 billions on the payment of net interest on the different borrowing made by it. Transportation Transportation expenditure on the development of highways, airports, mass transit, marine safety as well as air transportation security are some of the heads on which government spend money out of the revenues earned by it. International aid and humanitarian support Government also spends money on the international aid to the poor nations and provides humanitarian aid to different countries or groups in the time of need. This is however, relatively smaller portion of the total revenue of the government. The above are some of the ways government of US actually spends money which is earned through taxation or borrowing. It is important to note that after 9/11 and due to the current financial crisis, tax cuts were announced by Bush administration. Due to this reason, the government revenue declined thus government has to increase its borrowing in order to finance its expenditure. The current public debt level in US is over $14.2 trillions2 thus making US as the largest borrower in the world. The current size of the public debt may therefore suggest that the government may be incurring budget deficits due to the higher expenditures. (Kukis) Conclusion The overall budget size of the US government is over $3 trillion outlining that the US government spends the same on different goods and services provided. The major expenditure made by the US government is on the national defense under which military expenditure account for almost 54% of the total budget of the country. Rest of the budget and money is shared by the non-military services. Most of the money on the non-military services is spent on the social and income security under which government provides different benefits to the citizens in order to maintain and raise the standards of life of the citizens. Higher budget expenditure of the government however, also result into greater budget deficits and government has to borrow to finance such deficits. It is because of this reason that the public debt of US is over $14.2 Trillions. Bibliography Harris, Paul. US budget deal avoids government shutdown, but painful cuts ahead. 10 April 2011. 18 April 2011 . Kukis, Mark. Spend, Baby, Spend: US Budget Deficit to Soar Again. 20 October 2008. 18 April 2011 . Read More