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.
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