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Ron Blum Looks at the History of Government Spending and U.S. Economics

In 1992 Rob Blum made an appearance at the Senate Committee due to his expertise as an economist. His knowledge and experience on how government spending works was particularly appreciated and, in fact, the focus of his entire experience. Today, he hopes to shed some more light on how government spending works, and where it comes from.

Ron Blum on Three Types of Government Spending

According to Ronald Blum, there are three key types of government spending:

  1. Final consumption expenditure, which means the government buys services and goods that are consumed by the community.
  2. Gross Capital Formation (GCF), which means the government buys services and goods that could benefit the community, such as infrastructure and research.
  3. Intermediate consumption expenditure, which are all other services and goods the government buys, generally through an intermediary.

As an economist, Ron Blum knows that the government also makes transfer payments. These are money transactions in which no goods or services are purchased. Things like social security and surplus are included in this. Meanwhile, the money itself comes from seignior age, government borrowing, and tax payments.

Ronald Blum also wants to point out the GDP – the Gross Domestic Product. This is the gross capital formation and final consumption expenditures made by the government. Essentially, the GDP shows how much money a country has.

A History of Government Spending

One of the things Ron Blum raised during his appearance at the 1992 Senate Committee was explain where government spending comes from. He pointed out economist John Maynard Keynes, who developed the theory that when the government spends more, demand for aggregate funds will grow, and consumption will grow as well. When that happens, production goes up, too. Indeed, under that theory, the Great Depression ended because the government starting spending, specifically on World War II. If a country is experiencing an economic downturn, the country has to start spending to fix it.

In the USA, the United States Census Bureau publishes all the expenditures of the government. The Statistical Abstract of the United States updates this each year. Of course, it is difficult to properly interpret these cash flow statements. Ronald Blum is arguing, therefore, for more accrual reporting, which provides a clearer picture overall.

Every five years, the Census Bureau updates their records, and the financial census is updated each year. What this shows is that, in 1902, the government’s expenditure stood at 7% of the GDP. Yet, in 2006, it stood at 35%. What this demonstrates, mainly, is that growth is still quite slow. Welfare spending often decreases, whereas military spending often increases. Indeed, war is said to be fantastic for the overall economy.

Understanding the economics of a country as large, varied, diverse, and complex as the United States is almost impossible to do. However, for Ron Blum, it has become a true passion. Himself and several others focus specifically on gaining a greater understanding of this country’s finances, and on determining whether or not Keynes was right.


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