The purpose of government is to provide services that private individuals and businesses can’t or won’t offer. Examples of these include national defense, police and fire departments, education, roads, and other infrastructure. It’s also the role of governments to protect certain goods that are in limited supply and used by many people, such as fish in the ocean and clean air, so that a few cannot take too much and leave others with nothing. Governments can perform this essential function by taxing and borrowing.
In general, governments collect money by imposing taxes on incomes and property sales. In addition to these revenue streams, they raise funds through fees and charges for services. When they spend more than they collect in these ways, they must borrow money to fund their activities. Government entities borrow money by selling securities to the public, called bonds. Buyers of these securities lend the government money for a specific period of time and an interest rate. Governments then pay back the borrowed money with interest as needed to cover their spending.
There are many different kinds of governments in the world, but there is a common set of responsibilities they all must fulfill. They must create laws to regulate behavior, defend themselves from attacks, and provide for the welfare of their citizens. They must also balance the budget, manage deficits, and control government expenditures. They must make decisions about how to allocate resources between national priorities and regional interests. Finally, they must establish a structure by which people can interact with each other and the natural environment in peace.
Governments must also be proactive about addressing negative externalities, social inequality, and market failures, as well as managing risks like climate change. In the past, most problems were left unaddressed until they were too late, but today there are many organizations that can help solve these issues before they become major problems.
Throughout history, there have been times when governments have focused on making laws and other times when they have focused on taking care of people. The most important job of any government is to protect its people, and in modern times that includes providing jobs and protecting their environment.
The federal government’s annual budget reflects these priorities each year. In 2023, the president and Congress will decide how to spend $6.4 trillion, or about $19,100 for each person in the country. The budget is more than just a tally of numbers, however; it’s an expression of the policy priorities of this administration. It will determine appropriations for annually funded programs and also examine the tax code, entitlements, and other issues that impact federal spending. These budget decisions are critical to the nation’s economic future and will have a significant effect on the lives of all Americans. The table below shows the three main categories of spending in 2023: mandatory, discretionary, and interest. The largest increases are for nondefense discretionary, Social Security, Medicare, Medicaid, and food stamps.