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Public finance
This article is part of the series: Finance and Taxation
Taxation
Income tax  ·   Payroll tax CGT  ·   Stamp duty Sales tax  ·   VAT  ·   Flat tax Tax, tariff and trade
Tax incidence
Tax rate  ·   Proportional tax Progressive tax  ·   Regressive tax Tax advantage
Taxation by country Australia British Virgin Islands Canada France Germany Hong Kong India Indonesia Netherlands New Zealand Peru Republic of Ireland Russia Singapore Tanzania United Kingdom United States European Union  v • d • e  Tax rates around the world Tax revenue as % of GDP
Economic policy
Monetary policy Central bank  ·   Money supply
Fiscal policy Spending  ·   Deficit  ·   Debt
Trade policy Tariff  ·   Trade agreement
Finance
Financial market Financial market participants Corporate  ·   Personal Public  ·   Banking  ·   Regulation
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Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product.

John Maynard Keynes was one of the first economists to advocate government deficit spending as part of a fiscal policy to cure an economic contraction. In Keynesian economics, increased government spending is thought to raise aggregate demand and increase consumption.

Contents 1 European Union 1.1 United Kingdom 2 United States 3 Spending Patterns 3.1 Divided vs. United Government 4 References 5 See also 6 External links

Main article: European Union budget

Main article: United Kingdom budget

A constitutional monarchy, the UK government has greatly increased public sector spending (i.e. government spending of taxes) since 1995, and annual spending on investment in infrastructure has grown from £5.6 billion in 1997 to £29 billion in 2006.^{[citation needed]}

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Main article: United States federal budget

As of September 2004 the U.S. Congressional Budget Office reported that federal government spending for 2004 was projected to be $2.293 trillion, or slightly less than 20% of the GDP. Of that, $159 billion was for net interest, $486 billion for "defense", $492 billion for Social Security, $473 billion for Medicare and Medicaid, $191 billion for various welfare programs, $136 billion for "retirement and disability" benefits, and $64 billion was projected to be spent elsewhere.

There are two types of government spending — discretionary and mandatory. Discretionary spending, which accounts for roughly one-third of all Federal spending, includes money for things like the Army, FBI, the Coast Guard, and highway projects. Congress explicitly determines how much to spend (or not spend) on these programs on an annual basis. Mandatory spending accounts for two-thirds of all government spending. This kind of spending is authorized by permanent laws. It includes "entitlements" like Social Security, Medicare, and Food Stamps — programs through which individuals receive benefits based on their age, income, or other criteria. Spending levels in these areas are dictated by the number of people who sign up for these benefits, rather than by Congress.^{[citation needed]}

In an interview with Charlie Rose, Milton Friedman noted that government spending declines fastest in the United States when Democrats control the executive branch while Republicans control the legislature.^{[citation needed]}

Referencing accounts from the Bureau of Economic Analysis and the voting record, it can be seen that spending typically declines as a percentage of GDP when no party controls both the executive and legislative branches.^{[citation needed]}

• CBO's Current Budget Projections, Congressional Budget Office, March 2, 2007.

• Government operations

• The Concise Encyclopedia of Economics (CEE)