Econ 432: Chapter I

1. Econ 432: Chapter I Introduction

2. Measuring the Size of Government In order to consider public policy we need a basic understanding of the framework in which our government operates and the size of government (and growth over time).

3. Ways to Measure the Size of Government 1. Government employment figures given us one estimate of the size of government. • With about_____________________, the Federal Government, excluding the Postal Service, is the Nation's largest employer.

4. US Federal Government Structure and Employment A. The _____________is responsible for forming and amending the legal structure of the Nation. Its largest component is Congress, the U.S. legislative body, which is made up of the Senate and the House of Representatives. This body includes senators, representatives, their staffs, and various support workers. The legislative branch employs only about ______ of Federal workers. B. The __________is responsible for interpreting the laws that are established by the legislative branch. The judicial branch employs about _________ of Federal workers, and unlike the legislative branch, its offices and employees are dispersed throughout the country.

5. C. The _____________has the widest range of responsibilities. Consequently, it employed about 97 percent of all Federal civilian employees (excluding Postal Service workers) in 2008. The executive branch is comprised of the Executive Office of the President, 15 executive Cabinet departments, and about 70 independent agencies, each of which has clearly defined duties. • Each of the 15 executive Cabinet departments administers programs that oversee an aspect of life in the United States. • Each department, listed by employment size, is described below and in Table 1 along with the totals for the judicial and legislative branches. You will see that civilian employment is close to 2 million at the federal level.

6. Table 1. Federal Government civilian employment, except U.S. Postal Service, November 2008

7. Disadvantage of Employment Figures • Employment figures may overestimate or underestimate the importance of government—or the extent to which society’s resources are subject to control by government. • Why?

8. Measuring Size of Government (continued) 2. Economists typically measure the size of government by the volume of its annual expenditures. These expenditures include A. Purchases of goods and services B. Income transfers C. Interest Payments

9. Size of US Government 2008 For 2008 total government expenditures were $4.7 trillion dollars. Of this approximately ____ is done at the federal level; ____ at the state level and ____ at the local level. (Source: Economic Report of the President 2009),

10. Measuring Growth in Government Comparison of Expenditures over time: In 2008 total expenditures were $4.7 trillion compared to $2.9 trillion in 2000. Does this mean that government has grown over time? What else needs to be considered?

11. Other Considerations 1. 2. 3.

12. Overview of US Revenues 2008 In 2008, federal revenue was approximately $2.5 trillion dollars. At the federal level revenue is primarily generated from 3 sources: 1. 2. 3.

13. State and Local Revenue Streams 2008 In 2008, state and local revenue was estimated at $1.9 trillion dollars. At the state and local level revenue comes from: 1. 2. 3. 4. 5.