Financial Management in U.S. Government

Financial Management in U.S. Government

Answer 1

Gross Domestic Product

GDP refers to the added value of all goods and services produced within a country in a given period of time. Since it is a measure of the level of economic activity, GDP is the main indicator used to examine an economy's state (Darity, 2008).

Total Spending compared to U.S. GDP

Total Government Spending refers to the chunk of a country's budget spent on the overall Government expenditures. These expenses include allocations of pension, health care and educational costs etc. on the national level. In 2013, the budgeted total spending is $6.3 trillion.

Figure 1

Source: http://www.usgovernmentspending.com/breakdown_2013USpt_13pc5n

Looking at the figures of 2013, we can conclude that 38% of the U.S. GDP is spent on Total Government Expenditures. Out of these, greatest addition is made in the spending of pensions and health care for the Government officials. Whereas, government supported welfare holds the least portion.

Federal Spending compared to U.S. GDP

The total government spending can be broken down on federal, state and local levels. More than half of the total spending i.e. $3.8 trillion is allocated to the Federal government. The federal spending includes federal expenditures for salaries, grants and federal defense etc.

Figure 2

Source: http://www.usgovernmentspending.com/breakdown_2013USpt_13pc5n

After analyzing the federal spending budget, it can be clarified that its amount is equal to 23% of the country's GDP. In 2013, federal government has increased spending budgets for health care and national defense by most amounts. However, the least addition is made to the Education sector.

State Spending compared to U.S. GDP

After the federal government's chunk, $1.5 trillion budget is allocated to the 50 State Governments for spending.

Figure 3

Source: http://www.usgovernmentspending.com/breakdown_2013USpt_13pc5n

The State Government has decided to spend 3% of the GDP on health care, whereas national defense has suffered from spending point of view. The total state spending in comparison to GDP is 9%.

Local Spending compared to U.S. GDP

The last and most diverse is the Local Government budget; inclusion of local spending completes the Total Spending budget.

Figure 4

Source: http://www.usgovernmentspending.com/breakdown_2013USpt_13pc5n

Local Spending budget totals to $1.6 trillion. Since national defense is not an issue at the local level, it is not considered much. Most amount is spent on Education by the Local Government.

Answer 2

Federal Debt

The federal debt refers to the money that the government has borrowed or rented. The main source of Government's revenue is the taxes paid by citizens; however if the collected taxes are not enough for the planned Government expenditures, more money is borrowed from the people for spending. The main sources used by the government to borrow money including selling notes, Treasury bills and bonds to investors. Moreover, the government has to pay interest to the investors on these borrowings (Carson & Bonk, 1999).

Federal Surplus & Deficit

When the amount of revenues the Government receives, exceeds the amount that was planned & expected to be received, it is said that there is a budget surplus (Hillstrom & Hillstrom, 2002). Federal Surplus is generally seen as a stable condition in the country's economy because the amount of money available in treasury is more than the expected ...