Americans differ in their views as to the proper role of the government in our economy. It is generally agreed, however, that government—state, local, and national—has become the most important single factor affecting the level of economic activity. The purpose here is not to discuss the arguments for or against a greater or lesser role to be played by government, but to outline the more significant ways in which this role manifests itself in our daily economic life.

The remarks which follow obviously cannot treat in detail the relationships between government and industry. They are intended rather to set forth in overall terms the importance of various governmental programs to the economy as reflected in governmental budgets at all levels. Examples and illustrations are drawn primarily from the federal budget, although the importance of governmental action upon the economy at the state and local level has been too frequently underestimated.

This paper discusses, first, the overall impact of the budget upon the economy; second, the effect of the changing emphasis in the budget upon national security programs in a peacetime period; and, third, the process through which more effective public understanding and control of governmental expenditure can be achieved.