Question

Identify the major differneces between federal government outlays and spending by state and local governments.

Answer 1

In The US there are 3 levels of government- Federal (Congress, President etc., the central government), State (state legislature, Governer etc.) and Local (city of county government, Mayor etc.). All of these levels of government have their own taxes, through which they earn their revenue, and spendings, through which they spend the same revenue.

Our question concerns mostly with how the different types of government spend the revenue. There is a big difference between how these 3 spend their money- especially between the Federal government vs the state and local government.

Broadly speaking, most of the services that a common citizen utilizes daily, are run by state and local governments. These include fire and police department, public schooling, cleaning of public spaces etc. Federal government, on the other hand, provides services which, while equally important, arent as visible. These include national security, running the economy, salaries to central employees etc. Lets now break down the outlays in detail.

• Federal Government-

The biggest spendings in the federal government budget comes from mainly 2 sources- National Defence spending and Social Security/Healthcare. When combined, these two represent more than 50% of the spending the Federal government does. Then there are spendings such as on NASA, Postal spending, transportation etc. The main 2 and the rest combined make up around 90% of the spending. The rest 10% goes as interest on the debt the government has. That includes debt owed to foreign countries etc.

• State Level-

The states do not spend as much on healthcare or defence. They do spend a little on the state national guard and some on healthcare, but combined these do not account for more than 10-15%. The majority expenditures for a state are Education and social services. Social services include, as mentioned above, Fire department, police department, cleaning etc. Education of course includes the public school system and universities. Other expenditures include housing, administration, transportation and of course- interest on debt, if any.

• Local-

Local government expenditure looks quite like state level, except they usually spend even more on education and lesser on social services. The education expenditure often reaches 40%. Social services usually account for 10-15%. Rest is spent on the same as state level- transportation, administration and interest on debt.

As we can see, there is substantial difference between the nature of spending at federeal and other levels, owing mostly to the kind of services they are expected to provide to the citizens.