Chapter 12, Problem 1.1PA

To determine

the Spending category that claimed the major share of federal outlays during 1960’s and during the most recent decade.

Concept Introduction: The federal budget is used to finance a variety of federal expenses, which range from paying federal employees, disbursing agricultural subsidies and paying for U.S. military equipment. It is an itemized plan for the annual public expenditures of the United States.

Explanation of Solution

Spending by the Federal Government is inclusive in the fields of human resource, including income maintenance, health, support for the elderly and disabled, and education and training. Spending on national defense claimed largest share of federal outlays during the 1960’s. Spending on national defense constituted between 40-50% of federal outlays. It had been over 70 percent for 1942 through 1946, with a maximum of 89.5% in 1945. However, the share towards national defense declined to be only 18% in 2013. During the most recent decade, federal government has moved its spending focus from national defense to redistribution of income. Programs such as social security, Medicare and other welfare related programs account for majority of federal spending. In recent decade, social security and Medicare accounted for around 35% of federal outlays. The share going towards such programs that aid the elderly has been more than double of that being proportioned between 1960 and 2013. If we combine welfare spending to social security and Medicare, around 50% of outlays is for these programs.