purchases have ranged between 15 and 20% of GDP ever since The Vietnam War, the Persian Gulf War, and the wars in Afghanistan and Iraq did not have the impact on purchases that characterized World War II or even the Korean War A second development, the widening gap between expenditures and purchases, has occurred since the 1960s This reflects the growth of federal transfer programs, principally Social Security, programs to help people pay for health-care costs, and aid to low-income people We will discuss these programs later in this chapter Finally, note the relationship between expenditures and receipts When a government’s revenues equal its expenditures for a particular period, it has a balanced budget A budget surplusoccurs if a government’s revenues exceed its expenditures, while a budget deficit exists if government expenditures exceed revenues Prior to 1980, revenues roughly matched expenditures for the public sector as a whole, except during World War II But expenditures remained consistently higher than revenues between 1980 and 1996 The federal government generated very large deficits during this period, deficits that exceeded surpluses that typically occur at the state and local levels of government The largest increases in spending came from Social Security and increased health-care spending at the federal level Efforts by the federal government to reduce and ultimately eliminate its deficit, together with surpluses among state and local governments, put the combined budget for the public sector in surplus beginning in 1997 As of 1999, the Congressional Budget Office was predicting that increased federal revenues produced by a growing economy would continue to produce budget surpluses well into the twenty-first century Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 785