Question

In each of the past few years, the federal government has regularly borrowed funds to pay for at least one-third of expenditures that tax revenues were insufficient to cover. More than$60$percent

of all federal expenditures now go for entitlement spending. What does this fact imply about how the government is paying for most of its discretionary expenditures?

Short answer

As an outcome, the government is forced to borrow to fund the bulk of its consumption expenditure.

Step-by-step solution

Introduction

With entitlement expenditures accounting for more than$60\%$ of federal spending, discretionary spending accounts for only around$40\%$ of total spending. At the same time, the income generated is only enough to cover about $2/3^{rd}$ of federal spending, or about $67$ percent.

Explanation

If we assume that the government allocates tax revenue to discretionary spending after funding entitlement spending.

Then tax revenue can only fund around $67$percent of federal expenditure and entitlement spending is around $60$percent, leaving very little tax revenue (in terms of percentage) for discretionary spending.

As a result, the government has little choice except to borrow to cover the majority of its discretionary spending.