THE PUBLIC ECONOMY A major consequence of two world wars, continuing international tension, and a great depression is big government. Solomon Fabricant describes and explains the growth of government in the United States in Government in Economic Life.
The budget is the instrument employed by government to record its expenditures and revenues. It is also employed for the purpose of planning the government's role in the economy. The magnitude of government operations in the present-day American economy is reflected in the complexity of modern budget-making procedures. Arthur Smithies of Harvard University, in "Federal Budgeting and Fiscal Policy," describes the historical background of budget-making procedures at the federal level of government. In particular, he examines the development of executive budgets, which are prepared by the executive branch of the government and submitted to the legislative branch, and legislative budgets, which originate in the Congress. The latter portion of the selection from Smithies discusses various budgetary arrangements in terms of their contribution to the effectiveness of compensatory fiscal policy.
Since the administrative budget, the one customarily referred to as "the budget," does not include certain important cash receipts and cash expenditures of the federal government, such as payments in and out of trust funds like Old Age and Survivors Insurance and Unemployment Insurance, it is vital that we note the origin and nature of the cash budget. In so doing we obtain a complete picture of the flow of funds to and from the federal government. Paul Studenski, Professor Emeritus of Economics at New York University, and Herman E. Krooss, Professor of Economics at New York University, describe the "Introduction of the Cash Budget" in their book Financial History of the United States.
The extracts from The Federal Budget in Brief, fiscal year 1959, provide summary information on federal expenditures and revenues, as well as excerpts from President Eisenhower's 1959 budget message to the Congress. They also reveal the flow of funds into and out of federal trust funds, which serves to emphasize once again the fact that these trust funds are separate from the federal budget.
Government expansion has been financed by taxation and borrowing. The latter has resulted in the creation of a large public debt. W. Randolph Burgess, former Undersecretary of the Treasury, discusses the size, burden, ownership, and structure of the national debt. Significant extracts from his discussion are herein included.