NOTE.--This report was prepared by Karl Galbraith.
IN government budgets, expenditures are classified according to their purpose--that is, their function--so that comparisons of major activities over time can be made even as underlying programs and agencies change. These functional presentations reveal trends, enable comparisons with the expenditures by other governments, and summarize significant expenditures of government in terms of continuing, common purposes. The national income and product accounts (NIPA's) present government by function tables in an economic framework that is an alternative to the accounting used in government budgets.
As part of the comprehensive revision of the NIPA's, government spending is now presented by 9 functions and 25 subfunctions in a new format in NIPA tables 3.15, 3.16, and 3.17 at the end of this article.(1) These tables replace the previously published functional tables .(2) The estimates presented in the new tables incorporate the results of the most recent comprehensive revision of the NIPA's.
Changes in presentation
The reformatted tables incorporate four major changes in presentation. First, the presentation is changed by consolidating the previous 21 functions into 9 more useful functions. The function "education" was augmented by adding the subfunction "education" from the function "veterans benefits and services." Most of the new functions, such as health, were derived from combinations of the previous subfunctions. Law courts, a new subfunction in the function "public order and safety," was created from parts of the previous subfunctions that made up general public services.
Second, the 9 new functions were crafted so that they would be comparable with the 10 divisions of the international classifications of the functions of government (COFOG) (see the box "Comparison of Classifications of Government Functions" on page 20).(3)
The Bureau of Economic Analysis (BEA) is among those agencies in the United States and in other countries that have supported, developed, and adopted many international economic guidelines in the 1993 System of National Accounts.
Third, NIPA tables 3.15, 3.16, and 3.17 have been changed so that they are organized first by type of expenditure and then by level of government. For example, the new table 3.15 shows consumption expenditures and gross investment for the three levels of government--total government, Federal Government, and State and local government--and all functions; the former table 3.15 showed current expenditures and gross investment, current expenditures, and gross investment for total government.(4)
The new tables are simpler, with only a single column for each year, compared with multiple columns for each year for different types of expenditures in the previously published format.
Fourth, government consumption expenditures and gross investment, a component of GDP, is now presented in table 3.15. Quarterly estimates for the three levels of government are shown in NIPA tables 1.1 and 3.7.
The estimates beginning with 1952 for the new NIPA tables 3.15, 3.16, 3.17 are available from BEA's Web site at www.bea.doc.gov; click on "GDP and related data" and look under "Annual Only NIPA Tables." They are also available from STAT-USA's Web site at www.stat-usa.gov.
Shares of government spending by function
In 1998, the largest shares of total government consumption expenditures and gross investment spending were for education, at 28.6 percent, and for national defense, at 22.8 percent (chart 1). National defense accounts for 64.7 percent of Federal Government spending, and education accounts for 43.6 percent of State and local government spending.
The average annual rates of growth of total government spending have generally decelerated since the 1970's (table A). Federal Government spending decelerated in the 1980's, despite a pickup in national defense spending that turned down in the 1990's. State and local government spending grew faster on average than Federal Government spending in the 1990's.
In 1998, the largest shares of government current expenditures were income security (23.4 percent) and health (17.9 percent) (chart 2). Current expenditures for income security are large because they include transfer payments, such as those for social security. Current expenditures for health are large because they include Federal transfer payments for medicare and State-and-local transfer payments for medicaid.
In 1998, education (16.5 percent), general public service (16.1 percent), and national defense (11.9 percent) also accounted for sizable shares of current expenditures. Current expenditures for general public service includes net interest paid and sizable unallocable expenditures for State and local governments.
1. Contained largely in the housing and community services function and economic affairs function.
2. Contained largely in the natural resources and environment function and community and regional development function.
3. Contained largely in the environment and housing function.
4. Contained largely in the social services and income maintenance function.
5. Contained largely in the natural resources and environment function.
1.See Brent R. Moulton and David F. Sullivan, "A Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: New and Redesigned Tables," Survey of Current Business 79 (September 1999): 15-28. See also Brent R. Moulton, "Improved Estimates of National Income and Product Accounts for 1929-99: Results of the Comprehensive Revision," Survey 80 (April 2000): 11-16; and Brent R. Moulton, Robert P Parker, and Eugene P. Seskin, "A Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: Definitional and Classificational Changes," Survey 79 (August 1999): 7-20. For estimates of the effects of these changes, see Eugene P. Seskin, "Improved Estimates of the National Income and Product Accounts for 1959-98: Results of the Comprehensive Revision," Survey 79 (December 1999): 29-30.
2. In order to assist data users in the transition to the new formats, the estimates of government current expenditures and gross investment by function in the previously published formats of tables 3.15, 3.16, and 3.17 are available on request; write to Government Division (BE-57), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230, or E-mail email@example.com. The tables were last published in "Annual Revision: Newly Available Tables," Survey 78 (October 1998): 5-9.
3. A final version of COFOG was approved by the United Nations Statistical Commission in March 1999 and published in Classification of Expenditures According to Purpose, Statistical Papers, Series M, No. 84 (New York: United Nations). COFOG is one of four functional classifications in the System of National Accounts, 1993 that were prepared under the auspices of the Inter-Secretariat Working Group on National Accounts, Commission of the European Communities, the Organisation for Economic Co-operation and Development, the International Monetary Fund, the United Nations, and the World Bank.
4. Consumption expenditures and gross investment consists of net purchases of goods, services, and structures from business and from the rest of the world by general government; payments by general government to households in the form of compensation of employees, the consumption of general government fixed capital, which represents the value of current services of fixed assets of general government; net purchases of fixed assets of general government; net purchases of fixed assets by government enterprises; inventory change of government enterprises; and a deduction for general government sales, primarily tuition payments for higher education and charges for medical care.