Economic Explanation of Federal Government Finances-Revenue, Expenditure, and Debt 1789-1939
The total output of a country increases in tandem with the growth of its economy due to an increase in the number of commodities and services consumed and created. In the context of public expenditure, an endeavor sponsored by the government that offers products and services to the general public is defined. Social security, public transportation, and infrastructure improvements are examples of such initiatives, as are ongoing costs such as salaries and wages (John 2006).
Unlike inflation, which is an increase in the cost of goods and services that causes the currency to devalue, tax revenue is money collected by the government from individuals and organizations to spend on the needs of the citizens. Inflation is caused by an increase in the cost of goods and services, which forces the government to spend more and, in some cases, incur debt to pay for the goods and services provided (Hughes 1972). To break the cycle of poverty, the country’s economy must be in good shape.
Comment/Revision needed: What’s the specific data series?
EPI, for example, keeps track of disputes and periods of prosperity and works hard to improve its performance continuously. The company’s origins may be traced back to 1790, when it was created, and the Great Recession followed in the following years. Because of this, statistics from the Economic Performance Index (EPI) were used to determine how the economy has fared over time. The EPI’s components are inflation, the unemployment rate, the budget deficit, and the change in real GDP, which serve as indicators of monetary policy, manufacturing posture, and fiscal outlook.
Comment/Revision needed: Citation for the first sentence? “EPI, for example, keeps track of disputes and periods of prosperity and works hard to improve its performance continuously.” This isn’t a standard statistic.
Economic performance starts at 100 percent, but it fluctuates and declines over time due to inflation and deflation, respectively. Government spending increases due to increasing prices and depreciation of the national currency. Due to a decrease in tax money collected from government institutions and individuals, the government’s revenue decreases when unemployment increases. Because of this, the government’s spending on essentials and services for the general population will have to grow in the future. Government spending more than it receives results in a deficit in the economy caused by spending more than it gets. Because of this, government bodies are forced to take on debt to provide more outstanding service to their constituents. Government revenue increases compared to spending due to increased public engagement and higher returns, resulting in a net rise in government revenue.In an ideal world, the EPI would be 100 percent if the unemployment rate declined by one percentage point, as it would if the economy continued to grow at its current rate.
Comment/Revision needed: What does this mean? “Economics performance starts at 100 percent” You stated this but did not touch on it.
Graph 1 below shows the government finance revenue data between 1789 and 1935.
Table 1: Graph of financial data showing government finance revenue between 1789 & 1935
Tax revenue, tax income, and other sources of taxation make up the majority of the federal government’s total revenue stream. Taxes are the primary source of revenue for the government in most cases. Graph 1 depicted the progressive increase in government revenue from 1880 to 1918, which experienced a dramatic boost. It was established in 1789. During this time span, total income increased from $761,445,000 to $6,648,898,000 dollars. The economy developed steadily for more than a decade throughout this period before revenue began to decline suddenly in the early 1930s. During this period, the Great Depression happened, a global economic calamity that began in the United States and spread worldwide (Grinin et al., 2016).
The Great Recession reduced government revenue, beginning with a long-term decline in stock values. According to the world bank, global GDP declined by 15% between 1929 and 1932 due to the Great Depression. Besides that, personal income, government tax collection, product and service prices, and business margins have all declined steadily and severely over the past decade. A direct outcome of this was a halving of both international trade and revenue. When all of these variables are combined, and given that they represent the government’s primary source of income, financial remuneration is doomed to decline in the long run. Unemployment in the United States peaked at 23 percent during this period, but it reached 33 percent in some parts of the world during this period, Hamilton (1987)
Numerous economic processes were brought to a halt due to the financial strain caused by the Great Depression. Prices of food and agricultural products have plummeted by 60 percent in recent years. As a result of a severe drought, agriculturally productive land was destroyed, resulting in considerable production challenges, which exacerbated the reduction in agricultural product prices. Two of the most vulnerable industries were decimated in the financial crisis: logging and mining. In the opinion of some historians, the rapid and severe decline in stock market prices in the United States co-occurred as the Great Depression. As a result of the Great Depression, consumers cut back on their spending by 10 percent. Apart from that, spending declined as interest rates fell, the public was unwilling to borrow, and the public predicted further declines shortly. Reduced public purchasing patterns have harmed the vehicle manufacturing business. By the middle of the year, the automobile industry’s sales volume had fallen below the previous year. Wages and wages remained stable in 1930, even though prices declined progressively (Richard, 2002). Everything that happened impacted the government’s revenue streams in one way or another. As a result, the growth rate in government revenue has slowed dramatically.
Recent research findings are being called into question. Several factors influence the likelihood that a research claim is correct, including the number of previous studies that have examined the same issue, the study’s power and bias, and, perhaps most importantly, the proportion of relationships discussed that have been determined to have confirmed no connections at all. If there are fewer studies, smaller effect sizes, a more significant number of and less pre-selected relationships, greater flexibility in design, definitions, outcomes, and analytical modes, more critical financial and other conflict of interest and prejudice, and a more significant number of teams involved in a scientific field in pursuit of statistical significance, the findings of the research are less likely to be true. Simulations show that in most study designs and conditions, research claims are more likely to be incorrect than correct. Furthermore, reported study findings in various modern scientific areas may be accurate markers of prevalent bias, implying that my findings and interpretations may be incorrect.
Global trade in 1933 was less than a third of what it had been four years earlier. Graph 1 displays the government’s revenue as a percentage of gross domestic product (GDP) from 1789 to 1935. The last decade of the graph will be given a great deal of consideration during our discussion. During this period, the world experienced the Great Depression, a global economic catastrophe. Government revenue has reduced due to the worldwide economic downturn, particularly in the United States, for this article is appropriate. The effects of economic calamities include increased job insecurity, decreasing stock prices, reduced government spending and borrowing, and broad public worry. The government’s funding streams were eventually impacted, which resulted in a reduction in funding.
Overall comment/revision needed: You need to be clearer on the economic explanation of this paper. Think of the market, demand, and supply. What is changing?
References
Wallis, John Joseph. “Government Finance and Employment.” Historical Statistics of the United States: Millennial Edition Online, https://doi.org/10.1017/isbn-9780511132971.ea.ess.01.
Hughes, J. (1972). American economic growth, an economist’s history of the United States. Explorations in Economic History, 10(1), 119-127. DOI: 10.1016/0014-4983(72)90007-1
Table Ea584-587 – “Federal Government Finances–Revenue, Expenditure, and Debt: 1789–1939.” Historical Statistics of the United States: Millennial Edition Online
Grinin, L., Korotayev, A. and Tausch A. (2016) Economic Cycles, Crises, and the Global
Periphery. Springer International Publishing, Heidelberg, New York, Dordrecht, London, ISBN 978-3-319-17780-9;
Hamilton, James (1987). “Monetary Factors in the Great Depression.” Journal of Monetary
Economics. 19 (2): 145–69. doi:10.1016/0304-3932(87)90045-6.
Richard, Clay Hanes, ed. (July 2002). Historic Events for Students: The Great Depression
(Volume I ed.). Gale. ISBN 978-0-7876-5701-7.
Wallis, John Joseph. “Government Finance and Employment.” Historical Statistics of the United States: Millennial Edition Online, https://doi.org/10.1017/isbn-9780511132971.ea.ess.01.