Abstract

<p>Ideally, government activities reflect a nation’s values and aspirations. As shown in Chapter 1, federal deficits are moderately high relative to historical norms, but federal debt—the sum of all past deficits—is higher than any time except during World War II, putting the nation on a precarious course. Income and payroll taxes comprise more than 80 percent of revenue. Most spending goes to Social Security, Medicare, Medicaid, and defense.Providing a safety net and investing in infrastructure, research, and human capital covers much of the rest of the budget. Compared to other advanced countries, the United States has lower taxes—especially on consumption and energy-- lower public spending on children, but higher spending on defense. It has more inequality and less economic mobility.</p>