Question 1
Since the 1960s, the priorities of the federal government have been on a collision course that threatens to destroy public investments. There has been a dramatic expansion of entitlements that started under the great society. Likewise, investments have taken a decreasing share of the federal budget. As the Baby Boomers enter retirement, entitlements are expected to intrude upon an even larger part of the federal dollars reserved for building roads, educating kids and way for technological breakthroughs. This is so because entitlements are an extremely essential part of economic security and without change investments will diminish affecting the ability of the economy to grow and create opportunity. Likewise, the composition of government spending is changing from offering commodities to the public toward becoming a means for household payments.
Entitlement costs have used an ever-increasing part of federal dollars. For instance, the budget share of significant welfare programs such as Medicare, health care and social security have tripled since the 1960s. While 14 cents of federal dollar were spent on installments in 1962, currently that amount is 57 cents and at 2030 61 cents of every non-interest dollar is expected to fund these programs. Therefore, the outcome of this dramatic expansion is the entitlements that are overcrowding public investments. Likewise, the spending, investments in 1962 were two and half times that of entitlement, but currently entitlement spending is three times that of investment.
Since the 1960s the reduction in investment has contributed to the core Democratic funding priorities. This is so because a failure to protect investment funding threatens the economy’s ability to support a healthy citizen. However, the fact that entitlement spending is crushing investments is a bad sign for the United States growth. Therefore, it is vivid that the composition of government spending has changed significantly.
Question 2
The shift in the pattern of government spending tends to affect the real economic burden of the national debt. The burden of the national debt is the amount of private consumption of goods given by the community at the moment of time the borrowed funds are spent. Therefore, the real burden of the public debt can be shifted to the future generations. This is so because the national debt tends to increase the government borrowings that affect future consumption and investments. The current generation receives the advantage of extra spending, reduction in taxes, but the future generation pays the cost by paying the interest rate on debt. When the government decides to pay the debt, this will reduce the GDP the situation which is a burden to future generation. This is so because the burden of debt is determined by the labor force, capital stock, natural resources and production technology. Likewise, the burden of the national debt tend to reduce the consumption prospects of future generations. However, the use of long-term fiscal sustainability will result in the zero government debt where the government can tax the current generation and spend on the future generation.
The federal government spending qualifies to be investment spending when used to produce capital, goods or services. Investment spending includes purchases such as production inputs or infrastructure. On the other hand, the federal government quality to be consumption spending when goods and service are purchased and consumed by government. Some of examples of spending that can be considered consumption includes education, training, spending on health care programs and infrastructures among others.
Conclusion
In a recap, the composition of government spending is changing from offering commodities to the public toward becoming a means for household payments. Likewise, this shift affects the real burden of the public debt, which can be shifted to future generations. This affects the investment spending and consumption possibilities of future generations. The composition of government spending includes consumption and investment spending, which influences the economy.
