Is there just some big bank account, and do they just write a check/ is there some sort of government wire transfer system? Every time I hear something like “US approves $55 million in spending” how do they actually spend it? Where does that money come from and who gets it?
In: Economics
>Is there just some big bank account, and do they just write a check/ is there some sort of government wire transfer system?
The Federal Reserve (AKA The Fed) is the closest thing to a “big bank account” for the government. It’s super complicated, but that is one of the Federal Reserves many functions. It’s a pretty big organization and its general role is to maintain oversight of the country’s economy and make sure that it stays as healthy as possible.
>Every time I hear something like “US approves $55 million in spending” how do they actually spend it?
Generally congress will approve spending on certain things. For example, they will allocate a certain amount of money to be spent on the military, Social Security, Etc. So this funding is what literally funds federal and (some portions of) state organizations.
> Where does that money come from and who gets it?
That’s a complicated question. Actual money comes from the Treasury Department (who prints it) and collecting taxes. Since the Federal Reserve is where all the money is reserved, it functions somewhat similarly to a bank, in that other parts of the governement (and other organizations in general) will take out money to fund themselves. Where does the money in the Federal Reserve come from? Well, the main way is by selling debt (known as bonds or treasuries) to other organizations. Basically, they will offer these bonds to investors with pretty low interest rates (~2% is pretty normal), so if you buy a $1000 dollar bond, in 10 years you can redeem it with 2% accumulated interest. The Fed will tweak these rates in general to regulate the economy and maintain a target inflation rate.
I like the analogy with the human body. Just like the body has organs that do specific jobs, the government is divided into specific parts that do specific stuff. You can see currency as ‘blood for the body’. Money is universal, and so is blood for the body. Blood contains different stuff which works differently depending on where it is absorbed, and so does money. The government money flows in specific ways, just like blood does in our bodies.
It’s a very delicate balance really. Not sure if that made you understand it any better…
The federal government’s “Bank Account” is at the federal reserve. All revenues go into that account and all spending comes out of there. The federal reserve is also the agency that sells government debt whenever there isn’t enough money in the account, which is always.
The other posters are missing the mark. While the Federal Reserve is indeed the US’s central bank, [there is literally a bank account held by the US Treasury](https://www.investopedia.com/terms/t/treasury-general-account.asp) that’s used for income and expenses. When the government makes a payment to someone, it comes out of that account. Treasury keeps track of “balances” for individual programs by using the [Treasury Account Symbol](https://www.fsd.gov/fsd-gov/answer.do?sysparm_kbid=68b2e6f76f25a10003be658fae3ee4dd&sysparm_search=) – which is kind of like a sub-bank-account for the individual agency subdivisions – but there’s a single main account that the money ultimately comes from.
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