That rather rosy forecast was set aside after September 11, 2001 Terrorist attacks on the United States and later on several other countries led to sharp and sustained increases in federal spending for wars in Afghanistan and Iraq, as well as expenditures for Homeland Security The administration of George W Bush proposed, and Congress approved, a tax cut The combination of increased spending on the abovementioned items and others, as well as tax cuts, produced substantial deficits The evidence presented in Figure 15.1 "Government Expenditures and Revenues as a Percentage of GDP" does not fully capture the rise in demand for public sector services In addition to governments that spend more, people in the United States have clearly chosen governments that more The scope of regulatory activity conducted by governments at all levels, for example, has risen sharply in the last several decades Regulations designed to prevent discrimination, to protect consumers, and to protect the environment are all part of the response to a rising demand for public services, as are federal programs in health care and education Figure 15.2 "Government Revenue Sources and Expenditures: 2007" summarizes the main revenue sources and types of expenditures for the U.S federal government and for the European Union In the United States, most revenues came from personal income taxes and from payroll taxes Most expenditures were for transfer payments to individuals Federal purchases were primarily for national defense; the “other purchases” category includes things such as spending for transportation projects and for the space program Interest payments on the national debt and grants by the federal government to state and local governments were the other major expenditures The situation in the European Union differs Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 786