4. Government at All Levels
The United States has 89,500 governments. One federal. Fifty state. The rest---over 89,000---are local: counties, cities, townships, school districts, fire districts, water authorities, transit agencies. Each levies taxes. Each employs workers. Each writes rules. Americans talk about "the government" as if it were a single actor. It isn't.
89,000+ Governments
The Census Bureau counts 89,500 government units: 1 federal, 50 state, 3,031 counties, 19,502 municipalities, 16,097 townships, 12,957 school districts, and 37,683 special districts. Each has taxing authority, a budget, and employees. No other developed nation fragments public authority so extensively.
Together these governments spend $10 trillion annually---40% of GDP. They employ 23 million workers, more than manufacturing and construction combined. The federal government alone commands $6.5 trillion, exceeding Japan's entire economic output. State and local governments add another $3.5 trillion (net of federal transfers).
The division of labor follows a rough pattern. Washington handles defense, Social Security, Medicare, and macroeconomic stabilization. States run universities, prisons, highways, and Medicaid. Local governments educate children, patrol streets, fight fires, and pump water. But the layers overlap constantly. Federal grants fund state programs. State mandates constrain local budgets. Shared programs blur accountability.
The result: a system that is simultaneously massive and fragmented, powerful and incoherent.
How Government Works as an Economic Actor
Revenue: Where the Money Comes From
Federal Revenue (roughly $4.5 trillion, FY 2024):
Individual income tax
$2.2T
49%
Payroll taxes (Social Security, Medicare)
$1.5T
33%
Corporate income tax
$420B
9%
Excise taxes
$75B
2%
Other (customs, estate, fees)
$305B
7%
Source: Office of Management and Budget, FY 2024
The federal government runs persistent deficits---spending exceeding revenue by $1-2 trillion annually since 2020. The difference is financed by borrowing (Treasury bonds), adding to the $35+ trillion national debt.
State and Local Revenue (roughly $4 trillion):
Federal grants
$900B
23%
Property taxes
$600B
15%
Sales taxes
$500B
13%
Individual income taxes
$500B
13%
Charges and fees
$700B
18%
Other (corporate tax, lottery, etc.)
$800B
18%
Source: Census Bureau, State and Local Government Finances, 2022
State and local governments are generally required to balance their operating budgets (most state constitutions prohibit operating deficits), though they can borrow for capital projects.
Spending: What Government Buys
Federal Spending by Function (roughly $6.5 trillion):
Social Security
$1.4T
22%
Mandatory
Medicare
$900B
14%
Mandatory
Medicaid/CHIP
$600B
9%
Mandatory (grants to states)
Defense
$850B
13%
Discretionary
Interest on debt
$700B
11%
Mandatory
Other mandatory
$700B
11%
SNAP, UI, veterans, etc.
Non-defense discretionary
$800B
12%
Education, transportation, R&D, etc.
Other
$550B
8%
Source: Office of Management and Budget, FY 2024
The critical distinction: mandatory spending (Social Security, Medicare, Medicaid, interest) happens automatically based on eligibility laws. Discretionary spending requires annual appropriations. Mandatory spending is roughly 70% of the budget and growing; discretionary is roughly 30% and squeezed.
State and Local Spending by Function (roughly $3.5 trillion net):
Education (K-12 and higher)
35%
Local/State
Public welfare (Medicaid)
20%
State
Health and hospitals
10%
State/Local
Police and corrections
8%
State/Local
Transportation
8%
State
Other
19%
Various
Source: Census Bureau, State and Local Government Finances, 2022
Education is by far the largest state/local function, accounting for over a third of spending and employing the largest share of state/local workers.
Government as Employer
Government directly employs 23 million Americans---about 14% of total employment. The composition matters:
Federal Civilian Workforce (2.2 million):
Defense (civilian)
750,000
Largest civilian employer
Veterans Affairs
410,000
Healthcare system
Homeland Security
240,000
Includes TSA, CBP, ICE, Coast Guard
Justice
115,000
FBI, prisons, prosecutors
Treasury
95,000
IRS is bulk
Agriculture
90,000
USDA programs, Forest Service
Interior
65,000
Parks, land management
HHS
80,000
FDA, CDC, NIH
All other
355,000
Source: Office of Personnel Management, FedScope, 2023
The federal civilian workforce has been roughly flat for 50 years despite enormous growth in federal spending---a result of contracting out, automation, and grants to states rather than direct federal employment.
Military Personnel (1.3 million active duty):
Army
450,000
520,000
Navy
340,000
100,000
Air Force
325,000
180,000
Marine Corps
175,000
95,000
Coast Guard
42,000
10,000
Space Force
10,000
-
Source: Department of Defense, Defense Manpower Data Center, 2023
Plus roughly 800,000 civilian DOD employees and millions of contractor employees.
State Government Employment (5.2 million):
Higher education
40%
Corrections
10%
Highways
8%
Hospitals
12%
Public welfare
5%
Other
25%
Source: Bureau of Labor Statistics, Current Employment Statistics, 2023
State employment is dominated by higher education---public university faculty, staff, and administrators.
Local Government Employment (14.5 million):
K-12 education
55%
Police
7%
Fire
2%
Hospitals
5%
Other
31%
Source: Bureau of Labor Statistics, Current Employment Statistics, 2023
Local government employment is dominated by schools: teachers, administrators, and support staff account for over half of all local government workers.
Government as Purchaser
Beyond payroll, government purchases vast amounts of goods and services from the private sector:
Federal Procurement (roughly $700 billion annually):
Defense contracts
$450B
Civilian agency contracts
$250B
Federal procurement is governed by the Federal Acquisition Regulation (FAR), a dense set of rules covering everything from competitive bidding to small business set-asides to labor standards.
Major Federal Contractors (by contract value):
1
Lockheed Martin
$75B
Aerospace, defense systems
2
RTX (Raytheon)
$35B
Missiles, electronics
3
General Dynamics
$30B
Ships, IT, munitions
4
Boeing
$25B
Aircraft, satellites
5
Northrop Grumman
$20B
Aerospace, cyber
6
Leidos
$12B
IT, engineering
7
Huntington Ingalls
$10B
Shipbuilding
8
L3Harris
$8B
Electronics, communications
9
BAE Systems
$7B
Vehicles, electronics
10
Deloitte
$5B
Consulting, IT
Source: USASpending.gov, FY 2023
The defense industrial base is concentrated: five companies (Lockheed, RTX, General Dynamics, Boeing, Northrop) receive over half of defense contract dollars. Consolidation since the 1990s reduced the number of prime contractors from dozens to a handful.
Geographic Distribution
Federal Employment Geography
Federal civilian employment is concentrated in several clusters:
Washington, DC Metropolitan Area: roughly 400,000 federal civilian employees (excluding military)---the largest concentration. Every cabinet department headquarters, most agencies, and Congress are here. The DC metro has the highest concentration of federal workers of any region.
Military Installations: Major bases shape regional economies:
San Diego (Navy): 120,000+ military and civilian DOD
Hampton Roads, VA (Navy): 100,000+
San Antonio (Air Force, Army): 80,000+
Fayetteville, NC (Fort Bragg/Army): 50,000+
Colorado Springs (Air Force, Army): 50,000+
Other Concentrations:
Sacramento (due to California's large population and federal land)
Atlanta (CDC headquarters, regional offices)
Denver (land management agencies)
Baltimore (Social Security Administration, other agencies)
Federal Presence by State (federal employment per capita):
DC
130
Michigan
4.5
Virginia
25
Wisconsin
4.5
Maryland
22
Ohio
5.0
Hawaii
18
Minnesota
5.0
Alaska
17
Oregon
5.5
States with military bases, federal lands, or proximity to DC have high federal employment; Midwest manufacturing states have low federal presence.
State and Local Employment Geography
State and local employment reflects population and public service needs:
Highest State/Local Employment (per capita):
Wyoming, Alaska, New Mexico: High due to large state roles in education, land management
New York, California: Large state workforces despite private sector dominance
Variation in Local Government Structure:
Fragmented metros (Chicago, St. Louis): Dozens of overlapping local governments
Consolidated metros (Indianapolis, Louisville): City-county merger reduces fragmentation
Special districts: Water, fire, transit, and other districts add complexity
Industry Structure
The Defense Industrial Base
Defense procurement creates a distinct industrial ecosystem:
Prime Contractors: Lockheed Martin, RTX, General Dynamics, Boeing, Northrop Grumman dominate major weapons systems. Each specializes:
Lockheed: F-35 fighter, missiles, space systems
RTX (Raytheon + Collins): Missiles, radar, avionics
General Dynamics: Submarines, tanks, IT systems
Boeing: Aircraft, satellites, tankers
Northrop: Bombers, drones, cyber
Subcontractor Networks: Primes depend on thousands of suppliers. A single F-35 fighter involves 1,500+ suppliers across 46 states---a distribution deliberately structured to create Congressional support.
Concentration Concerns: Post-Cold War consolidation reduced competition. Some weapon categories have only one or two potential suppliers (nuclear submarines: Huntington Ingalls and General Dynamics; stealth bombers: Northrop). This reduces cost pressure and complicates acquisition.
Foreign Dependence: Some critical components (rare earth minerals, microchips, certain alloys) come from foreign sources, including potential adversaries. "Supply chain security" has become a major policy focus.
Healthcare as Government Business
Government is the largest payer for healthcare:
Medicare: $900 billion
Medicaid (federal share): $600 billion
Veterans Affairs healthcare: $100 billion
Military healthcare (TRICARE): $50 billion
Other (Indian Health Service, CHIP, etc.): $50 billion
Combined, government pays for roughly 45% of US healthcare spending. This makes HHS, CMS, and VA major economic actors whose payment rates shape provider behavior across the system.
Education as Government Business
Public education spending (roughly $900 billion K-12, roughly $500 billion higher ed) creates enormous demand for:
Construction (school buildings)
Textbooks and curriculum (Pearson, McGraw-Hill)
Technology (laptops, software, internet infrastructure)
Transportation (school buses)
Food service (school lunch programs)
The Regulatory State
Beyond spending and employment, government shapes the economy through regulation:
Major Regulatory Agencies
SEC
Securities markets
$2.2B
5,000
EPA
Environmental protection
$10B
14,000
FDA
Food and drug safety
$7B
18,000
FTC
Competition, consumer protection
$400M
1,200
FCC
Communications
$400M
1,400
OSHA
Workplace safety
$600M
2,200
CFPB
Consumer finance
$700M
1,700
FAA
Aviation
$20B
45,000
FERC
Energy
$500M
1,500
Source: Agency budget justifications and Office of Management and Budget, 2023
Regulatory agencies are small relative to their economic impact. The SEC's 5,000 employees oversee capital markets with $50+ trillion in assets. The EPA's 14,000 employees enforce rules affecting virtually every manufacturer.
Regulatory Cost and Benefit
Regulation imposes compliance costs on businesses---estimated at $2-3 trillion annually by some counts, though estimates vary wildly. Benefits (cleaner air, safer workplaces, financial stability) are harder to quantify but real.
The regulatory process is governed by the Administrative Procedure Act (1946), requiring notice-and-comment rulemaking, and by executive orders requiring cost-benefit analysis. Major rules face review by the Office of Information and Regulatory Affairs (OIRA) within OMB.
The Budget Process (Abridged)
The Annual Cycle
The federal budget follows a nominal cycle:
President's Budget (February): The administration's proposal
Budget Resolution (April target): Congress sets spending limits
Appropriations (before October 1): 12 bills fund agencies
Fiscal Year begins October 1
In practice, Congress rarely completes appropriations on time. Government operates on continuing resolutions (temporary extensions) and omnibus bills (giant packages passed at deadline). Government shutdowns occur when funding lapses.
Mandatory vs. Discretionary
The crucial distinction:
Mandatory (Social Security, Medicare, Medicaid, interest): Spending determined by eligibility rules, not annual appropriations. roughly 70% of budget.
Discretionary (defense, education, transportation, R&D): Requires annual appropriations. roughly 30% of budget.
Mandatory spending grows automatically as the population ages and healthcare costs rise. Discretionary spending is squeezed---Congress can only appropriate what's left after mandatory obligations.
Deficits and Debt
The federal government has run deficits in most years since 1970. Annual deficits of $1-2 trillion since 2020 have pushed the national debt above $35 trillion (roughly 120% of GDP). Interest costs (roughly $700 billion annually) are now larger than defense spending.
Debt sustainability depends on the relationship between interest rates (r) and economic growth (g):
If r < g: Debt-to-GDP ratio can stabilize even with deficits
If r > g: Primary surpluses required to stabilize debt
Rising interest rates since 2022 have shifted this calculus unfavorably.
Recent Trends
1. The Contractor State
Direct federal employment has been flat for decades, but government's economic footprint has grown through contractors. Federal contract spending has doubled since 2000. Contractors perform functions once done by government employees---IT, logistics, security, even policy analysis.
This creates accountability challenges: contractors are less visible than employees, and the revolving door between government and contractors raises conflict-of-interest concerns.
2. State and Local Fiscal Stress
The 2020-2022 period saw unprecedented federal aid to state and local governments (American Rescue Plan provided $350 billion). As this aid exhausts, many jurisdictions face structural deficits---revenues that can't sustain pre-pandemic service levels plus inflation-driven cost increases.
Pension obligations are a particular concern: many states and cities have unfunded pension liabilities in the hundreds of billions, representing promises to retired workers that will strain budgets for decades.
3. The IRS Transformation
The Inflation Reduction Act (2022) provided $80 billion for IRS modernization over 10 years---the largest investment in tax administration in decades. Goals include improving taxpayer service, updating ancient IT systems, and increasing enforcement against high-income tax evaders.
This is the rare example of investment in government capacity, countering decades of erosion in administrative capability.
4. Climate and Industrial Policy
Recent legislation (Infrastructure Investment and Jobs Act, CHIPS Act, Inflation Reduction Act) represents a major expansion of federal industrial policy---government directing investment toward preferred sectors (semiconductors, clean energy, infrastructure).
This marks a shift from the post-Reagan consensus against "picking winners." Whether it succeeds will shape debates about government's economic role for decades.
5. Defense Spending Trajectory
After a post-Cold War "peace dividend" and sequestration cuts in the 2010s, defense spending has resumed growth. Great power competition (China, Russia) drives demand for military modernization. The defense budget is projected to reach $1 trillion within a decade.
Profiles
Department of Defense
Quick Facts
Headquarters: The Pentagon, Arlington, VA
Budget: roughly $850 billion (FY 2024)
Employees: 2.9 million (1.3M active military, 750K civilian, 800K+ reserves/guard)
Secretary: Civilian, Cabinet rank
The Department of Defense is the largest employer in the world. Its budget exceeds the next several countries' defense spending combined. DOD manages:
Four military departments (Army, Navy, Air Force, Marines) plus Space Force
Nine unified combatant commands covering geographic regions and functions
Defense agencies (DIA, NGA, DARPA, DISA, and many more)
4,800+ sites worldwide, including 750+ overseas bases
DOD procurement shapes entire industries. The F-35 program ($1.7 trillion lifetime cost) is the most expensive weapons program in history. Nuclear modernization will cost $1.5 trillion over 30 years. Shipbuilding sustains specialized yards that would otherwise not exist.
The department's size creates management challenges. GAO has kept DOD on its "high risk" list for financial management since 1995. DOD has never passed a clean financial audit.
California State Government
Quick Facts
Capital: Sacramento
Budget: roughly $310 billion (including federal funds)
Employees: roughly 240,000 state workers
Governor: Elected, 4-year term
California's state government, the largest of the 50 states, provides a window into state operations:
Major functions:
Healthcare (Medi-Cal/Medicaid): roughly $150 billion, covering 15 million Californians
Education (K-12 state aid + higher ed): roughly $100 billion
Corrections: roughly $15 billion (operating the nation's largest state prison system)
Transportation: roughly $15 billion
The UC and CSU systems employ roughly 200,000 people across 33 campuses, making higher education the largest state function by employment.
Fiscal structure: California relies heavily on income tax (especially capital gains), creating volatile revenues that surge in booms and crash in recessions. Proposition 13 (1978) capped property taxes, shifting school funding to the state and making revenue more dependent on income tax.
Policy laboratory: California often leads on policy---environmental regulation (CARB sets de facto national vehicle standards), minimum wage, climate policy, marijuana legalization. Its size means California policy affects national markets.
New York City Government
Quick Facts
Budget: roughly $110 billion
Employees: roughly 330,000
Mayor: Elected, 4-year term
Population: 8.3 million
New York City operates the largest municipal government in the United States, with a budget larger than most states:
Major functions:
Public schools (NYC DOE): 1 million students, 75,000 teachers
Police (NYPD): 35,000 officers---largest police force in the US
Fire (FDNY): 11,000 firefighters
Public hospitals (NYC Health + Hospitals): 11 hospitals, 70+ clinics
Public housing (NYCHA): 175,000 units, 400,000 residents
Revenue: NYC has unusual taxing authority for a city---its own income tax, commercial rent tax, and hotel tax supplement property and sales taxes.
Complexity: The city government interacts with numerous independent authorities (MTA, Port Authority, CUNY), state mandates, and federal programs. The MTA (which runs subways and buses) is technically a state agency, not city-controlled, creating persistent governance tensions.
The Nonprofit Sector: Government's Shadow Economy
Any account of government's economic footprint that stops at official government budgets and payrolls understates reality by a wide margin. The nonprofit sector---about 1.8 million organizations registered with the IRS---functions as a parallel delivery system for public-purpose spending, blurring the line between government and private enterprise. Section 501(c)(3) organizations alone account for approximately $2.6 trillion in annual revenue and employ 12.5 million workers, about 10% of the private workforce. That makes nonprofits the third-largest employer category in the United States, behind only retail trade and accommodation/food service.
The sector's scale is driven overwhelmingly by two industries that also dominate government budgets: healthcare and education. Healthcare organizations---hospitals, nursing facilities, health systems---generate about 60% of all nonprofit revenue. Many of the nation's largest "nonprofits" are hospital systems with revenues that rival Fortune 500 companies: Kaiser Permanente, Ascension, and Providence each operate sprawling networks with annual revenue in the tens of billions. Education institutions account for the next major share. Harvard University's endowment exceeds $50 billion, larger than the GDP of over half the world's countries. Human services organizations---food banks, homeless shelters, job training programs---are far more numerous but individually smaller. And religious congregations, numbering about 380,000 churches alone, form the most visible layer of the sector in most communities, though they account for a modest share of total nonprofit revenue.
The nonprofit business model rests on a specific bargain with government: organizations receive tax-exempt status---no federal income tax, state and local property tax exemptions, and the ability to receive tax-deductible donations---in exchange for a constraint on ownership. Nonprofits may not distribute surplus revenue to owners or shareholders. They must reinvest. In practice, this constraint is less binding than it appears. Nonprofit hospital CEOs earn multimillion-dollar compensation packages. Nonprofit universities accumulate endowments they are under no obligation to spend. The largest nonprofit health systems cross-subsidize internally, using profitable service lines (cardiac surgery, orthopedics) to fund mission-driven but money-losing ones (psychiatric care, community clinics). The boundary between nonprofit and for-profit has blurred to the point where nonprofit hospital systems frequently operate in ways indistinguishable from their for-profit counterparts---a tension explored further in the healthcare chapter (Chapter 6).
The most important fact about nonprofit finance is the degree of government dependence. Approximately one-third of all nonprofit revenue---some $850 billion---flows directly from government through grants, contracts, and program payments. Medicare and Medicaid payments sustain nonprofit hospitals. Pell Grants and federal research funding flow through nonprofit universities (Chapter 15). State and county governments contract with nonprofit agencies to deliver foster care, addiction treatment, refugee resettlement, and dozens of other social services. In these domains, nonprofits are not independent charitable actors; they are government subcontractors, executing public policy with public funds but operating under private governance with limited public accountability.
The geographic significance of nonprofits is acute in smaller cities and college towns, where "eds and meds"---universities and hospitals---often serve as anchor institutions and the largest employers. In cities like Ann Arbor, New Haven, Rochester, and Providence, the local nonprofit hospital or university employs more people than any private firm and owns more real estate than any other entity. Workers in the nonprofit sector accept a wage penalty of about 10–15% compared to equivalent for-profit positions, partially offset by benefit packages and the intangible compensation of mission-driven work. But this wage gap also means the sector's growth exerts downward pressure on local wages in the communities it dominates.
PILOT Programs: The Property Tax Tension
Large nonprofits---especially hospitals and universities---own vast tracts of tax-exempt real estate, depriving municipal governments of property tax revenue even as those institutions generate demand for city services (roads, police, fire protection). Some cities negotiate Payment In Lieu Of Taxes (PILOT) agreements, voluntary contributions from nonprofits to partially offset lost revenue. Boston's PILOT program, one of the most prominent, asks institutions to contribute 25% of what their property tax bill would be. Compliance is uneven. The fundamental tension remains: cities need the revenue, but nonprofits argue their community benefits---employment, charity care, education---already exceed what any tax payment would provide.
Taken together, the nonprofit sector represents a distinctive feature of American economic organization: a vast quasi-public economy that delivers services other countries assign to government ministries, funded substantially by taxpayers but governed by private boards, and operating under tax privileges that amount to an enormous implicit public subsidy. Understanding government's true economic footprint requires counting this shadow economy alongside the official budget figures documented earlier in this chapter.
Data Sources and Further Reading
Key Data Sources
USASpending.gov: Federal spending and contract data
BLS Quarterly Census of Employment and Wages: Government employment by level and function
Census Bureau Government Finance Statistics: State and local revenue and spending
Office of Personnel Management: Federal workforce data
Federal Procurement Data System (FPDS): Contract awards
Congressional Budget Office: Budget projections, cost estimates
Further Reading
Accessible
Wessel, David (2012). Red Ink. Accessible introduction to federal budget politics.
Light, Paul (1999). The True Size of Government. Classic on contractor workforce.
Intermediate
Schick, Allen (2007). The Federal Budget: Politics, Policy, Process. Standard budget process text.
Oates, Wallace (1972). Fiscal Federalism. Foundational theory of federal-state-local structure.
Government Reports
Congressional Budget Office. Budget and Economic Outlook (annual). Essential budget reference.
GAO. High Risk List (biennial). Government management challenges.
OMB. Analytical Perspectives (annual). Detailed budget background.
Chapter 4 | Government at All Levels The American Economy: A Structural Geography Draft v1 --- January 2026
Exercises
Review Questions
The United States has 89,500 governments---more than any other developed nation. What are the consequences of this fragmentation for accountability, efficiency, and citizen experience? Give a specific example of how overlapping federal, state, and local authority creates confusion in a policy area discussed in the chapter.
Mandatory spending (Social Security, Medicare, Medicaid, interest on debt) constitutes roughly 70% of the federal budget and grows automatically, while discretionary spending requires annual appropriations. Explain why this structure makes it increasingly difficult for Congress to fund priorities like infrastructure, education, and R&D. What would have to change for discretionary spending to grow?
The federal civilian workforce has been roughly flat at 2.2 million for 50 years, even as federal spending has grown enormously. The chapter attributes this to the rise of the "contractor state." What are the advantages of delivering government services through contractors rather than federal employees? What accountability problems does contracting create?
The F-35 fighter program involves 1,500+ suppliers across 46 states---a distribution the chapter describes as "deliberately structured to create Congressional support." Explain how this geographic dispersion functions as a political strategy. What are the consequences for cost control and program management?
California's state government relies heavily on income tax (especially capital gains), while local governments nationwide depend on property taxes capped in California by Proposition 13. What are the consequences of these different revenue structures for budget stability? Why does California experience more revenue volatility than states that rely on sales or property taxes?
Local government employment is dominated by K-12 education, which accounts for 55% of all local government workers. If the school-age population in a community declines due to demographic shifts, what fiscal pressures does this create? Why might local governments struggle to reduce education spending even as enrollment falls?
The chapter presents the debt sustainability framework: if the interest rate on government debt (r) exceeds the rate of economic growth (g), primary surpluses are required to stabilize debt-to-GDP. With interest costs now exceeding $700 billion annually---larger than defense spending---and rising interest rates since 2022 shifting the r-g calculus unfavorably, what policy options exist to restore fiscal sustainability?
Data Exercises
Go to USASpending.gov and select "Spending Explorer." Choose a state of your choice and examine federal spending by category (contracts, grants, direct payments, loans). What is the largest category of federal spending in that state? Who are the top five federal contractors? How does the composition compare to the national pattern described in the chapter?
Using FRED (fred.stlouisfed.org), pull the series "USGOVT" (All Employees: Government) and compare it with "MANEMP" (All Employees: Manufacturing) from 1990 to the present. In what year did government employment surpass manufacturing employment? What does this crossover tell you about the changing structure of the American economy?
The Congressional Budget Office publishes annual budget projections at cbo.gov. Find the most recent "Budget and Economic Outlook" report. What does CBO project for mandatory spending, discretionary spending, and interest costs as shares of GDP over the next 10 years? How does the projected growth in mandatory spending compare to projected revenue growth?
Deeper Investigation
Select a state or major city facing significant unfunded pension liabilities (examples include Illinois, New Jersey, California, Chicago, or New York City). Research the size of the unfunded liability, the annual required pension contribution as a share of the budget, and the assumptions underlying the pension fund's projected returns. What policy options exist---benefit reductions, contribution increases, investment changes, legal constraints? Assess whether the pension obligations are sustainable and what trade-offs any reform would entail.
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