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The federal government budget increased from the year 1979 through 1992, 2000, 2004 to 2009. The increase is attributable to various external and internal macroeconomic factors. The budget estimates for these years are 967.3, 2472.7, 3814.2, 4173 and 5622.7 billion dollars respectively. This shows a five years increase in budget. The main components of government spending are national defense, social security and healthcare. When expressed as a fraction of GDP the following values were in next volumes: in 1979 – 5.7, 4.4 and 1.8% respectively, 1992 – 6.2, 5.1 and 2.3%, 2000 – 10,8.4 and 7.6%, 2004 – 11.4,9.6 and 8.6% and in 2009 – 12.4, 13.7 and 9.67%. Over these years government expenditures in these components have grown substantially. These components are critical for every government that looks after its people’s welfare. Huge allocations have been made to national defense due to its involvement in wars such as gulf war, war in Iraq and Afghanistan, ( Bittle, 2008)
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Increase in deficit between 1979 and 1992 was caused by increase of government expenditures since in the same period the receipt by the government continued to increase. However reduction in deficit between 1992 and 2000 was due to: increased private sector investment caused by reduction in interest rates, the government formulated a deficit reduction plan to slash the deficit in budget and there was enactment of the balanced budget act of 1997. In the same period, the government significantly reduced its huge spending on national defense since United States didn’t go into any war. Wars are very costly for any country. Then Clinton government came up with stringent measures to reduce budget deficit. Taxes collection was also made efficient so that the government could efficiently and effectively collect revenues from people and corporate firms. The government formulated fiscal policy to reduce expenditures.
The period between 2000 and 2004 saw increased budget deficit. This was due to participation in war with Iraq hence increasing its spending on military and national defense. Spendings on health care ware increased. The government strengthened defense due to terrorist attack of 2001 at World Trade Centre. Thus economy was also facing challenges of deficit to huge public debts and unfavorable trade practices by its main trading partner, China, that practiced the devaluation of currency to boost her balance of payment surplus.
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