Monday, April 19, 2010

The Historical Complexity of Federal Public Finance

For whatever reason, this morning I found myself looking at this old handout from Russ Sobel's public choice course that compares government receipts and expenditures in the late 18th century with that of the mid-1870's. I thought I'd share it here, not so much to make any broader point, but rather as some eye candy.

Looking at it in piecemeal, starting with the 1790's:

What is interesting is just how simple it all is. Expenditures are primarily devoted towards expenditures on military/national defense, as well as interest on debt. There are 3 categories for revenue (customs, excise, and direct). Now, looking at 1866-1879 expenditures:
The expenditure categories are still very basic and focus on military and interest on debt. The category "Indians" now appears, and my guess is that this is basically a military expense as well. The "Miscellaneous" category is further broken down, and it appears to mostly consist of administrative expenses in taxation, "postal deficiency" (?? Too good to be true, there must be a different meaning here), the provision of lighthouses, printing money, and public buildings (to some extent, another administrative expense).

Now, the revenue side:
So, revenue sources appear to have grown in categories, but my guess is that this reflects changes in the economy over the ensuing century and improved administrative infrastructure more than anything else. It does appear, however, that revenue collection became more complex at a faster rate than expenditure patterns over the inaugural century. Is there a reason we should expect this? My guess is that this reversed after the Great Depression, but I wonder what it would have looked like in the 1920's.

Here is the webpage devoted to modern government revenue and expenditure categorization.


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