How Does the Government Work?

The government is a large institution that exists to protect the rights and safety of citizens. It has three main branches: the judicial, executive, and legislative. These three branches enforce laws that govern the government and regulate businesses.

The lawmaking branch of the federal government is called Congress. It interprets laws, creates new ones, and makes changes to existing ones. It also sets tax rates and regulations, which businesses must follow.

Most people think of the government as a huge organization that has been growing bigger and more powerful for decades. This is true, although the proportion of federal spending as a share of GDP has generally fluctuated around 18% to 22% since 1960.

There are many good reasons to work for the government, including excellent pay and benefits, job security, and a variety of career opportunities. But the government’s bureaucracy can be a challenge for some people, particularly those who don’t have technical skills.


The budget process begins a year before the federal budget goes into effect, when agencies submit their requests to the White House Office of Management and Budget (OMB). The OMB then refers those requests to Congress for funding. During the budgeting process, Congress creates funding bills that must be approved by both houses of Congress before they can go to the president for his signature or veto.

When the government spends more money than it receives in taxes, it runs a deficit. When the government spends less money than it receives in taxes, it has a surplus. The government balances its budget by borrowing from the public to cover its shortfalls.

Government spending is divided into mandatory spending and discretionary spending. Mandatory spending includes funding for Social Security, Medicare, veterans benefits, and other programs required by law. It typically uses more than half of the total government budget.

Other types of government spending include taxes, grants and subsidies, interest on the debt, and other spending. The amount of government spending as a share of GDP depends on the country’s economy and culture.

Taxes are money that the government takes from companies and individuals to pay for services and support, such as public schools, health care, highways, and social programs. These taxes are paid by individuals and businesses, either through income or sales taxes.

There are many ways that the government reduces the amount of taxes a company must pay, through tax credits and other special programs. These credits can be designed to encourage a certain type of behavior, such as protecting the environment or helping a family adopt a child.

Some of the most common tax credits include energy savings, education and child and dependent care. Some tax credits are specifically for small business owners.

Regulatory Capture

A major concern with government regulations is that they can allow businesses to gain an advantage over others in their market. This can occur when a government agency creates barriers to entry for competing companies, or when it diverts funds intended for regulation into bailouts for favored firms.