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The role of government has grown tremendously over the past six decades (60 years). Actually, most of that growth took place between 1 and 145 during the administration of Franklin Delano Roosevelt. The major crisis of the period ?The Great Depression and WW II. The role of government has grown since after these events. Americans made a vow never again will we leave ourselves vulnerable to a depression or a military attack by another nation.The federal, state and local government spend about trillion a year. Nearly ?
is paid to individuals as transfer payment and the rest is government purchased. We represent these purchases by the letter G and they go into our GDP equation.
The use of government funds to purchase or provide certain goods to the public with some goods and services. The biggest purchase is defense spending, which accounts for 5 cents out of every dollar that goes into G (0 billion). Others are; education, police, health and highway construction. A tax may be defined as the private sector compulsory contribution to government spending. This is one of the major and most vital ways in which productive resources are transfer form private to the public sector. Taxes are design in such that they do not harm people incentive to work and to produce. There is a conflict between the raising of revenue and the stimulation of incentives. This give rise to differential tax rates and the existence of subsidies allowance side taxes. Suppose you made $100 in overtime and the government took $70. Would you work overtime? Chances are you wouldn¡¦t and that supplication forms the cornerstone of supply-side economics. The supply-sided (Reagan) belief is that our high marginal tax rates rob people of the incentive to work as hard and as long as they would have been willing to has their tax burden been lower. one two three four five six seven eight nine ten
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