Government spending is a key aspect of fiscal policy that is used to support either expansionary or contractionary economic goals.
Frequently Asked Questions
  • What is meant by government spending?

    Government spending refers to all expenditures made by a government, which are used to fund public services, social benefits, and investments in capital. There are essentially two types of government spending: government current expenditures and government gross investment. Government current expenditures can be broken down into government consumption expenditures (spending to produce and provide services to the public), current transfer payments (spending on social benefits and other transfers), interest payments, and subsidies. Government gross investment encompasses spending on structures, equipment, and own-account production of structures and software.

  • How does government spending affect national debt?

    If government spending exceeds the revenue it makes via taxes and other sources, this results in what is known as a budget deficit. In order to make up the difference, a government borrows money by selling Treasury marketable securities to other federal government agencies, individuals, businesses, state and local governments, as well as people, businesses, and governments from other countries. Issuing this debt in turn raises the government’s overall national debt.

  • Who owns the most U.S. debt?

    As of July 2021, at $9.8 trillion, U.S. investors held the largest portion of the U.S. federal government’s $28.43 trillion total debt. The Federal Reserve owned the second-largest portion, at $5.3 trillion, which accounted for 53% of total U.S. federal debt when combined with the amount owned by U.S. investors. Various trust funds accounted for another 22% of federal debt, while the remaining 25% belonged to foreign investors, with Japan accounting for the largest share of this group at $1.3 trillion.

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Introduction to Fiscal Policy

Page Sources
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  1. U.S. Bureau of Economic Analysis. "Government Current Expenditures." https://www.bea.gov/help/glossary/government-current-expenditures

  2. U.S. Bureau of Economic Analysis. "Government." https://www.bea.gov/resources/learning-center/what-to-know-government

  3. U.S. Bureau of Economic Analysis. "Government Gross Investment." https://www.bea.gov/help/glossary/government-gross-investment

  4. Data Lab. "Sources of Revenue for the Federal Government." https://datalab.usaspending.gov/americas-finance-guide/revenue/categories/

  5. Khan Academy. "Lesson Summary: Deficits and Debts." https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/ap-long-run-consequences-of-stabilization-policies/deficits-and-debts/a/lesson-summary-deficits-and-debts

  6. TreasuryDirect. "How Does the U.S. Government Borrow Money?" https://www.treasurydirect.gov/kids/what/what_borrow.htm

  7. Data Lab. "Breakdown of the Federal Government's Debt." https://datalab.usaspending.gov/americas-finance-guide/debt/analysis/

  8. U.S. Bureau of Economic Analysis. "Gross National Income (GNI)." https://www.bea.gov/help/glossary/gross-national-income-gni

  9. Drexel University. "Universal Basic Income: Key to Reducing Food Insecurity and Improving Health." https://drexel.edu/hunger-free-center/research/briefs-and-reports/universal-basic-income/

  10. Committee for a Responsible Federal Budget. "Q&A: Everything You Should Know About the Debt Ceiling." https://www.crfb.org/papers/qa-everything-you-should-know-about-debt-ceiling

  11. U.S. Department of the Treasury. "Debt Limit." https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit