Transcript Chapter 1 PPT - Personal homepages

CHAPTER 1
INTRODUCTION
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Defining the Field of Study
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Public Finance/Public Sector
Economics/Public Economics
– the field of economics that analyzes
government taxation and spending policies
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Public Finance and Ideology
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Organic view of government
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Mechanistic view of government
1-3
The Legal Framework
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Federal government
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Federal Constitutional provisions – may
effectively undertake any expenditure it wishes
and use debt and taxes to finance them.
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16th Amendment empowers the federal
government to tax personal income.
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The Size of Government
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How to measure the size of government
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Number of workers
Annual expenditures
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Types of government expenditure
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Purchases of goods and services
Transfers of income
Interest payments
Budget documents
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Unified budget
Regulatory budget
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State, Local, and Federal Government
to
AdjustingRelative
for
Expenditures (selected years)
Adjusting for
Economy
Inflation
Population
1
2
3
4
2005 Dollars
(billions)*
2005 Dollars
per capita
Percent of
GDP
1960
Total
Expenditures
(billions)
123
655
3,627
24.3%
1970
295
1,201
5,858
28.4%
1980
843
1,749
7,679
30.2%
1990
1,873
2,574
10,289
32.2%
2000
2,887
3,237
11,461
29.4%
2005
3,876
3,876
13,066
31.1%
*Conversion to 2005 dollars done using the GDP deflator
Source: Calculations based on Economic Report of the President, 2006
(Washington, DC: US Government Printing Office, 2006), pp.
280,284,323,379
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Figure 1.1: Government expenditures as a percentage of
Gross Domestic Product (2005, selected countries)
0.6
0.5
0.4
0.3
0.2
0.1
United
States
0
Sweden
France
Germany
United Kingdom
Canada
Japan
Australia
Source: Organization for Economic Cooperation and Development [2006]. Figures are for 2005.
Figure 1.2: Composition of federal expenditures (1965
and 2005)
100%
90%
Note increase in
Social Security,
Medicare and
Income Security
80%
70%
Other
Net interest
60%
Note
Social security
decline in
Defense
Income security
50%
Medicare
Health
40%
Defense
30%
20%
10%
0%
1965
2005
Source: Economic Report of the President [2006, p. 377].
Figure 1.3 Composition of state and local expenditures
(1965 and 2002)
100%
90%
80%
Increase in
public
welfare
Decline in
highways
70%
60%
Other
Public welfare
50%
Highways
Education
40%
30%
20%
10%
0%
1965
2002
Source: Economic Report of the President [2006, p. 383].
Figure 1.4: Composition of federal taxes
(1965 and 2005)
Social insurance
and individual income
tax have become
more important
Corporate and other
taxes have become
less important
100%
90%
80%
70%
60%
Other
Social insurance
50%
Corporate tax
40%
Individual income
tax
30%
20%
10%
0%
1965
2005
Source: Economic Report of the President [2006, p. 377].
Figure 1.5: Composition of state and local
taxes (1965 and 2002)
100%
90%
Individual tax
more important
80%
Other
70%
Grants from
federal
government
Corporation
tax
60%
50%
Inidividual
income tax
40%
Sales tax
30%
Property tax
20%
10%
Property tax
less important
0%
1965
2002
Source: Economic Report of the President [2006, p. 383].
Doing Research in Public Finance
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Public Finance journals
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International Tax and Public Finance
Journal of Public Economics
National Tax Journal
Public Finance
Public Finance Quarterly
General-interest journals
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American Economic Review
Journal of Economic Perspectives
Journal of Political Economy
Quarterly Journal of Economics
Review of Economics and Statistics
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Doing Research in Public Finance
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Other sources
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Journal of Economic Literature
Brookings Institution’s Studies of Government Finance
Congressional Budget Office reports
National Bureau of Economic Research working papers
Tax Foundation’s Facts and Figures on Government Finance
U.S. Government Printing Office publications
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Statistical Abstract of the United States
Economic Report of the President
Budget of the United States
U.S. Census of Governments
Historical Statistics of the United States from Colonial Times to 1970
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Doing Research in Public Finance
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Public Finance data available on internet
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Resources for Economists on the Internet
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U.S. Census Bureau
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University of Michigan’s Office of Tax Policy
Research
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Urban-Brookings Tax Policy Center
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