Government Spending:
Why Do We Spend the Way We Do?
An update and computer application of
Lesson 5 from Focus on Economics: Civics and Government.
Student Edition

Go to the Teachers' Edition

Introduction

Income after taxes is used for two purposes: spending and saving. The benefit of consuming things today versus the benefit of consuming some things later through savings reflects the economic problem of scarcity. Due to scarcity, choices must be made. Just as you must make choices on how to use your income, the federal government must also make difficult choices on how to use tax dollars to fund a variety of programs.

In this lesson you will learn about the ways the federal government uses tax dollars. You will also learn how the role for government has changed over time, as has the mix of programs it has funded. Listening to an interview with David Wyss you will gain insights into current issues related to the use of tax dollars and government spending priorities past, present, and future.

Part I

1. Print a copy of Activity 1. Review the definitions of government purchases, government transfer payments, and government interest rates.
2. Go to http://www.infoplease.com/ipa/A0873746.html to locate examples of the different types of expenditures and write examples of each on Activity 1. Review your answers with your classmates.
3. Complete Activity 2. Print a copy of Activity 2A and record your answers if your teacher requests you to do so.

Part II

4. Look at Activity 3 and answer the following:
   1. Which categories of federal government spending have grown the most in importance since 1960? answer
   2. Which categories have declined the most? answer
5. Your teacher will divide you into six groups. Each group will be assigned one of the following time periods:
   • 1960-1975
   • 1970-1975
   • 1978-1988 (2 groups, one defense spending, one transfer payments)
   • 1988-2000 (2 groups, one defense spending, one transfer payments)
6. Print a copy of Activity 4 by clicking on the group above that you have been assigned to. Use the listed websites and the information on Activity 3 to answer the questions.
7. Your teacher will have groups share their answers. Record the information on Activity 5.
8. Review the information on Activity 5. Use this information to answer the following. What factors have caused the shift in priorities for federal spending? Cite examples.
9. Listen to David Wyss to learn more about government expenditures.

Closure

Discuss:

1. What are the three categories of government spending? answer
2. Give an example of each type of spending. answer
3. What government programs have grown significantly in recent years? What ones have declined in recent years? answer
4. What are the causes in the changes in priorities in government spending over the last 40 years? Cite examples for both purchases and transfers. answer

Assessment

The President is suggesting increased spending for a missile defense system. He is also proposing a major long-term tax cut. Predict some possible outcomes for the federal budget categories and the relative importance of each during the next ten years.