<p>The government budget constraint is given by:</p>
<p><span class="math-container">$$G=T+\beta+\theta$$</span></p>
<p>Where <span class="math-container">$G$</span> is government spending, <span class="math-container">$T$</span> tax revenue net of interest payments, <span class="math-container">$\beta$</span> represents borrowing and <span class="math-container">$\theta$</span> is monetary financing through creation of new high powered money. So any government spending comes from <span class="math-container">$T, \beta$</span> or <span class="math-container">$\theta$</span> or some combination of the above.</p>
<p>Exact proportions depend on what year and government we are talking about. Virtually every modern government publishes budget reports where you can see how much tax revenue and borrowing government does. The monetary financing <span class="math-container">$\theta$</span> will usually not be directly mentioned because in modern monetary system money is usually created via borrowing as opposed to just physically being created, so <span class="math-container">$\theta$</span> might show up as a debt to central bank which creates the high powered money.</p>

CC BY-SA 4.0
2022-07-27T00:45:15.457Z
2022-07-27T00:45:15.457Z
1muflon1
<p>When we say the budget of the defense department are 600 billions per year, where do the 600 billions comes from, are they just created from nothing by just increasing the money supply or they come from somewhere else ?</p>

CC BY-SA 4.0
2022-07-27T05:53:29.787Z
When you start to work, you'll notice that the government takes part of your income :( This is called "taxation". On the flip side in most countries they also use taxes to pay for nice things.
Giskard
<money-supply><taxation>
Where the budget of USA comes from?
yuyu
# Where the budget of USA comes from?

(Asked by: username_0 on 2022-07-27)

When we say the budget of the defense department are 600 billions per year, where do the 600 billions comes from, are they just created from nothing by just increasing the money supply or they come from somewhere else ?

**Tags:** money-supply, taxation

> **Comments:**
> **username_1**: When you start to work, you'll notice that the government takes part of your income :( This is called "taxation". On the flip side in most countries they also use taxes to pay for nice things.  

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## 1 answers

### Answer by username_2 on 2022-07-27. Score: 1

The government budget constraint is given by:

$$G=T+\beta+\theta$$

Where $G$ is government spending, $T$ tax revenue net of interest payments, $\beta$ represents borrowing and $\theta$ is monetary financing through creation of new high powered money. So any government spending comes from $T, \beta$ or $\theta$ or some combination of the above.

Exact proportions depend on what year and government we are talking about. Virtually every modern government publishes budget reports where you can see how much tax revenue and borrowing government does. The monetary financing $\theta$ will usually not be directly mentioned because in modern monetary system money is usually created via borrowing as opposed to just physically being created, so $\theta$ might show up as a debt to central bank which creates the high powered money.


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