Government spending is changing radically based on the fact that public investments are being squeezed out by the entitlements of the retiring baby boomers. Investment spending in the year 1992 was two and a half times the spending on entitlements. Baby boomers benefits have grown faster than inflation and wages and as a result the spending on entitlements is now three times that of investments. This is evident from the proposed US budget where three-quarters of payment for mandatory spending was from the social security fund – an entity of entitlements.
National debt refers to the amount of money the federal government owes at a time. It creates an economic burden on a country’s budget. Investment spending usually tends to bring long term benefits for instance, the federal spending or grants are channeled into education, training and even development which impact positive benefits to the economy (Gerald and Rauch, 31). Currently only half of the federal spending goes to create physical capital for investment. Entitlement spending has more than half of the federal spending, limiting the capital needed for general investment spending, which, according to analysis is headed to 5% of the federal spending. This means that consumption of the government’s resources is more than the investment meant to realize profit. The governments eventually resort to funding from other outside bodies which makes the debt heavier to the future generations (Kusuoka and Maruyama, 32). Such debts cannot be reclaimed if the government is not building productive businesses that add value to the economy of the country, hence future generations have to use their savings to purchase the national debt.
Work Cited
Kusuoka, S, and Tōru Maruyama. Advances in Mathematical Economics: Volume 18. , 2014. Internet resource.
Meier, Gerald M, and James E. Rauch. Leading Issues in Economic Development. New York: Oxford University Press, 2005. Print.
