The composition of the U.S. Federal government’s spending has shifted in the last five decades, away from providing goods and services to the public and towards becoming a conduit for payments to households” (Taylor). According to Taylor, the U.S. government’s spending on investments in 1962 was 2.5 times that of entitlements. However, today, the U.S. government spends three times on entitlements than investments.
Investment is spending on goods or services whose value is not used up in the current period. Taylor explains that federal investment is money spent to yield long-term benefits for the country’s economy, including grants to State and local governments, investing in physical capital, and investing in research and development, education, or training. Such investments increase the economy’s capacity to produce in the future. On the other hand, consumption is spending on goods and services whose value is used up in the current period. The federal government’s spending on entitlements such as Social Security, Medicare, Medicaid, payments to federal retirees, unemployment insurance, and food assistance programs all qualify as consumption spending.
The changing pattern of the U.S government’s spending creates a real economic burden of the national debt. Government borrowing to finance entitlement spending rather than investments increases the burden of repaying the debt because it does not cultivate future economic growth. (cite) argues that increased spending on entitlements reduces investment in the productivity of the workforce, which lowers economic growth projections of the future. The government’s current allocation of federal funds, which comprises of more entitlement spending than investments, does not provide sufficient support for sustainable, long-term growth