1. Journal #11 What are the cost of government? Think of any thing that our government has to pay for? This could be something directly or indirectly. ½ page min. response.

2. Unit 1.4 Role of Government Lesson 15 – 9b – The Cost of Government

3. Cost of Government Like everything else govt. services have a cost Ex. Law has an indirect cost to those who break it – a direct cost to the public who pays for its enforcement Someone must pay for the govt. services

4. Financing Govt. Services Until the 1930’s the U.S. had a small federal government In 1929 - Great Depression led to increased spending approx. $10 billion or 10% of GDP GDP – Gross Domestic Product – market value of all final goods & services produced within the nation during a given time period 2009 – spending approx. $3 trillion or 20% of GDP

5. Why has Govt. Spending Risen? Govt. spending has increased due to the increased demand for govt. services As standard of living has risen, citizens have asked for more public goods and services Most of this increase is in the form of Transfer payments – transfers of income from taxpayers to recipients who do not provide any goods or services in return for these payments Include retirees, low-income families w/children, disabled people, farmers, and veterans

6. Paying the Cost of Govt. 3 sources of funds for govt. 1. User charges – highway tolls, water service fees, parking tickets 2. Tax is a compulsory payment to the govt., based on variables such as income, property value, & sales prices Individuals pay income, property, & sales tax Business pay on their profits, property, and employee’s salaries Other taxes include taxes on gas, or sin taxes on items like cigarettes or alcohol

7. Paying the Cost of Govt. continued 3. Borrowing money – U.S. Treasury Dept. collects taxes, manufactures coins & currency, & issues certificates of govt. debt - can be purchased by the public Treasury bill (12 months), Notes (1–10 years), Bonds (20-30 years) State & local govt. can also issue bonds to raise money Govt. borrowing – cost to the public – must pay bills, notes, & bonds back w/interest Other countries can purchases these as well - China Approx. 85%=taxes, 11%=borrowing, 4%=other sources