Entitlement Spending in Historical Perspective
1). The composition of the government spending has changed remarkably since the 1960s. It can, however, be analyzed from the fact that the government spending on the investment was about 2.5 times more than the entitlements, but now the entitlement spending is more and is abort 3 time more than the investments. In the 1960s, there were only 15% entitlement spending, but now it accounts for half or more of all the federal spending. It is estimated that the increase in the entitlement spending will continue in the future with the retirement of the Baby Boomers. The entitlement spending also keeps on growing because the benefits of the Baby Boomers are increasing more than their salaries and inflation (Talylor). The government is spending a huge amount on the social spending, Medicaid, Medicare, unemployment benefits, food and nutrition, and paying to the retired people of the federal government. Moreover, federal government the federal government had allocated approximately 1/3rd of all the spending for the formation of different types of capital, but now just half spending is used for capital formation (Taylor).
2). The shift in the pattern of government spending exerts its influence on the economic burden of the national debt, because with the change in the government spending the national debt increases , which crowd out the investment spending that ultimately decreases the long term growth of the economy. With the increase in the debt, the savings of individuals are used in purchasing the government debt instead of investing them in the productive goods such as factories. The burdensome of the debt for the future generation depends on the government spending on the consumption and investment (McEachern). The national debt crowds out the investment; it also replaces the investment with that of the spending on consumption, it is owed to the foreign people, and it also enhances the risk of debt crisis.
Further, several categories of the federal government spending qualify as either the consumption or the investment spending. These categories are durability and value in the long run. Consumption comprises of the durable products, whereas investment spending includes spending on such goods and services whose worth and value is not utilized in the shorter period of the time (Sexton).
In a nutshell, the structure of the government spending has changed noticeably since the 1960s, the entitlement spending has increased, and the investment spending for capital goods has declined. The change in the government spending structure is paving the way to the creation of national debt, which is crowding out investment and increasing the risk of the debt crisis. Moreover, durability and long run value are the categories that qualify as government spending for the consumption and the investment spending respectively
References
McEachern, William A. Interactive Text, Macroeconomics: A Contemporary Introduction. Nashville, Tennessee: South-Western College, 2002. Print.
Sexton, Robert L. Exploring Economics. Mason, Ohio: Thomson Learning, 2012. Print.
Taylor, Timonthy. "Entitlements, Public Investment, and the Changing Nature of the U.S. Government." Conversable Economist. 2 Aug. 2012. Web. 15 Nov. 2014.
http://conversableeconomist.blogspot.com/2012/08/entitlements-public-investment-and.html.
