Assignment 1

1. How has the composition of federal, state, and local government spending changed over the past 40 years? What social and economic factors might have contributed to this change in how governments spend their funds?

In the 1960’s 49.5% of federal spending was on national defense. The shift from then until 2007 was mostly comprised of decreasing spending on national defense and an increase on spending of healthcare from 2.9% to 24.9%, also an increase of social security spending from 13.4% to 20.3%. Which is a very large increase in healthcare spending, almost a 100% increase from the year 1960 to 2007; also a very large increase in social security spending. Social security spending is the largest portion of government spending. At the state and local levels most of the spending has remained relatively the same. The only exception is healthcare spending, which has more than doubled from 1960 to 2007. Health spending at state and local levels went from 8.2% to 20.7%. The increases in social security and healthcare costs could be attributed to the aging baby boomer population (approximated at 75 million people). This large portion of the US population has had increasing social security needs and increasing healthcare needs. The decrease in national defense could be attributed to several different things including globalization, diminishing international trade laws, the break up of the Soviet Union and a more efficient/ technologically advanced military. These all may have attributed to the decrease in national defense. There are many more factors that could also attribute to the decrease in national defense spending.

2. Why does redistribution cause efficiency losses? Why might society choose to redistribute resources from one group to another when doing so