Budget Deficit

Budget Deficit | Terms to Know and Love | Long Term Effects | Outlook for the Future | Comparisons | Data | Works Cited

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Government Budget

Government Outlays

• government purchases(G): expenditures on currently produced goods and services (government consumption) or capital goods (government investment).

• transfer payments(TR): payments made to individuals, which the government does not receive current goods or services.

examples:

Social Security payments

military and civil service pensions

unemployment insurance

welfare payments

Medicare

• net intrest payments (INT): intrest paid to the holders of government bonds minus the intrest received by the government. (outstanding government loans, which increase with higher rates of government borrowing)

Subsidies

Another minor category included in government outlays is subsidies less surpluses of government enterprises. Subsidies are government payments that are implemented to affect the production and prices of goods

Taxes

• personal taxes- the largest form of government taxes, includes personal income and property taxes

16th Amendment: in 1913 this bill legalized income taxes

• contributions for social insurance- primarily Social Security taxes

• inderect business taxes- sales tax

• corporate taxes- taxes received from corporate profit

Deficit

A budget deficit occurs when outlays exceed revenue collected from taxes.

  current deficit = outlays - tax revenue
                  = (government purchases + transfers + net interest) - tax revenues
                  = (G + TR + INT) - T