The Economics of Public Policy 2. Government Revenue and Expenditure in the USA and elsewhere

Transcription

1 Fletcher School of Law and Diplomacy, Tufts University The Economics of Public Policy 2. Government Revenue and Expenditure in the USA and elsewhere Prof George Alogoskoufis

2 The Size of the Public Sector in the Industrial Economies Most industrial economies have a significant public sector, which on average is about 40. There has been a rise in the size of the public sector in the post war period in almost all the industrial economies. In the USA it rose from 30 in 1960 to 34% in In Japan from 21% to 39%. In Italy from 28% to 45%. In Sweden from 33% to 54%. The biggest rises occurred between 1960 and The public sector in the OECD group of industrial economies rose from 30 to 39, where it has roughly stabilized. Countries with higher public sectors on average also have a higher tax burden (revenues as a percentage of GDP). However, on average, current revenues fall short of total government disbursements, with the result that most governments have accumulated a significant stock of public debt. 2

3 Trends in the Size of Government in Selected Economies 80 Total Disbursements of General Government in Selected OECD Economies USA Japan OECD Italy Sweden 3

4 Trends in Government Revenue in Selected Economies 70 Total Revenue of General Government in Selected OECD Economies USA Japan OECD Italy Sweden 4

5 The Size of Government in the OECD 70 General Government Disbursements in the OECD Economies, FIN FRA DNK BEL AUT PRT SWE ITA GRC SLV HUN NDL NOR ICE ESP GER GBR LUX CZE POL JAP SVK NZL ISR CAN EST USA IRE LAT AUL SWZ KOR 5

6 Government Expenditure and Revenue in the OECD, General Government Disbursements and Revenue, FIN FRA DNK BEL AUT PRT SWE ITA GRC SLV HUN NDL NOR ICE ESP GER GBR LUX CZE POL JPN SVK NZL ISR CAN EST USA IRE LAT AUL SWZ KOR Total Disbursements Total Revenue 6

7 Government Debt in the OECD Economies, Gross Financial Liabilities of General Government, JPN GRC ITA PRT BEL IRE FRA ESP GBR USA AUT HUN SLV CAN ICE GER NDL FIN ISR POL SVK DNK CZE SWE LAT SWZ KOR AUL NZL NOR LUX EST 7

8 Fiscal Decentralization The public sector in many economies is characterized by fiscal centralization between local, regional and national government units. In the USA the Federal government provides the majority of government spending, but state and local government spending are large as well, amounting for about one third of government spending. The degree of fiscal decentralization differs across the OECD economies. 8

9 Federal Receipts and Outlays in the USA 30.00% Federal Receipts and Outlays in the USA 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Federal Receipts () Federal Outlays () 9

10 The Evolution of Government Debt 120% Gross Federal Debt in the USA 100% 80% 60% 40% 20% 0% 10

11 Spending, Taxes, Deficits and Debts Government spending is financed through current government revenues (mainly taxes). On average, government revenues fall short of total government spending in most years. Thus, governments tend to accumulate public debt What are the costs and benefits of taxes, deficit and debts is a significant question for public economics. State and local governments in the USA are mostly close to balance. Why them and not the federal government. 11

12 The Changing Structure of Federal Outlays 30.00% Structure of Federal Outlays in the USA 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% National Defence International Affairs Social Outlays (Health, Medicare, Income Security, Social Security) Net Interest Other 12

13 The Changing Structure of Federal Receipts The Structure of Federal Receipts in the USA 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Individual Income Tax Corporate Income Tax Social Insurance and Retirement Receipts Other 13

14 Federal and State and Local Spending 14

15 Federal and State and Local Revenues 15