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Citizen's Guide to the Federal Budget: Fiscal Year 20011. What Is the Budget?The Federal budget is:
What activities are funded? How much does it spend for defense, national parks, the FBI, Medicare, and meat and fish inspection? How much revenue does it raise through different kinds of taxes- income taxes, excise taxes, and social insurance payroll taxes? If revenues are greater than spending, the Government runs a surplus. When there is a surplus, the Government can reduce the national debt. Some types of spending-such as improvements in education and support for science and technology-increase productivity and raise incomes in the future. Taxes, on the other hand, reduce incomes, leaving people with less money to spend. When the economy is doing well, people are earning more and unemployment is low. In this atmosphere, revenues increase and the deficit shrinks. The budget reports on how the Government has spent money in the past, and how that spending was financed. The 2000 budget is a document that embodies the President's budget proposal to Congress for fiscal 2000, the fiscal year that begins on October 1, 1999. It reflects the President's priorities and proposes to protect the budget surplus until Social Security is reformed. Chart 1-1. Government Spending as a Share of GDP, 1999Note: Numbers do not add due to rounding
Total Government spending accounts for less than one-third
of the national economy. Federal spending is about two-thirds
of this amount, or about 19 percent of GDP.
The Federal budget, of course, is not the only budget that affects the economy or the American people. The budgets of State and local governments have an impact as well. While Federal Government spending was a little less than 20 percent of the Gross Domestic Product (or GDP, which measures the size of the economy) in 1998, State and local governments spending was about another nine percent (see Chart 1-1). State and local governments are independent of the Federal Government, and they have their own sources of revenue (taxes and borrowing). But the Federal Government supplements State and local revenues by making grants to them. Of the $989 billion that State and local governments spent in 1998, $230 billion came from Federal grants. Chart 1-2. Total Government Outlays as a Percent of GDPSource: OECD, calendar year data.
The United Sates allocates a smaller portion of its GDP to
government spending than any other nation shown.
As shown in Chart 1-2, compared to six other industrialized nations, the United States allocates the smallest share of its GDP to government spending (Federal, State, and local combined).
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