Federal Grants to State and Local Governments


In fiscal year 2011, the federal government provided $607 billion in grants to state and local governments, accounting for 17 percent of federal outlays and a quarter of spending by states and localities. Nearly half of that amount was for Medicaid.

Federal choices about how to implement grant programs have different implications for federal spending and the amount of flexibility that states and localities have over the use of grant funds.

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Federal Spending on Various Categories of Means-Tested Programs and Tax Credits

Growth in Means-Tested Programs and Tax Credits for Low-Income Households


During the past 40 years, federal spending for major means-tested programs and tax credits for low-income households more than tripled as a share of gross domestic product. In 2012, such spending totaled $588 billion, one-sixth of all federal outlays.

Over the next decade, spending on those programs will continue to rise under current law, CBO projects, driven mainly by growth in Medicaid and other means-tested health care programs.

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Federal Debt Held by the Public

The Budget and Economic Outlook: Fiscal Years 2013 to 2023


Although the federal deficit will drop below $1 trillion in 2013 for the first time since 2008, under current law annual deficits and federal debt will stay at historically high levels relative to the economy through 2023, CBO projects.

Economic growth will remain slow this year but is expected to speed up next year. Even so, CBO projects that the unemployment rate will remain above 7.5 percent through 2014.

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Debt Held by the Public Under Current Law and Alternative Paths

Macroeconomic Effects of Alternative Budgetary Paths


To help lawmakers assess the economic effects of broad changes to tax and spending policies, CBO examined three alternative budgetary paths that would increase or reduce budget deficits relative to current law.

Through 2023, those paths would result in considerably different trajectories of federal debt and the nation’s output and income.

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Refundable Tax Credits


In 1975, the first refundable tax credit—the earned income tax credit (EITC)—took effect. Since then, the number and cost of refundable tax credits—credits that can result in net payments from the government—have grown considerably.

Those credits will cost $149 billion in 2013, CBO estimates, mostly for the EITC and the child tax credit.

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