In The Budget Balance powerpoint, I pointed out that the real economic sacrifice imposed on the country by government borrowing could be zero – or it could be substantial – depending on what the government does with the money. In the article, “Entitlements, Public Investment, and the Changing Nature of the U.S. Government,” on Tim Taylor’s blog, Conversable Economist, (This is the blog link: http://conversableeconomist.blogspot.com/2012/08/entitlements-public-investment-and.html) we find that ‘what the government does with the money’ has been changing over time in a consistent manner.
I want you to consider three points related to that article:
1. How has the composition of government spending changed since the 1960’s? Support your answer with examples from the article. (One paragraph)
2. Then explain how the various categories of federal government spending (such as spending on entitlements, or infrastructure or basic research) qualify as either consumption or investment spending. In your answer, be sure to define the terms ‘consumption’ and ‘investment.’ (See the Saving, Investment, and the Trade Balance powerpoint in the menu on the left hand side of this page.) (One paragraph)
3. Explain how the changing pattern of government spending affects the real economic burden of the national debt. (Two paragraphs)