GOVERNMENT SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES: The difference between transfer payments from the government sector to the business sector and "profit" received by government-operated "firms." This composite item is one of several differences between national income (the resource cost of production) and gross (and net) domestic product (the market value of production) in the National Income and Product Accounts maintained by the Bureau of Economic Analysis. This item tends to be relatively small, invariably less than 1 percent of gross domestic product. This entry in the National Income and Product Accounts actually combines two related, but distinct items. The first is government subsidies to the business sector. The second is surplus of government enterprises. Government Subsidies Government subsidies are transfer payments from the government sector to the business sector, payments that do not involve current production. Much like government makes transfers to the household sector to assist (presumably needy) individuals, government makes transfers to the business sector to assist (presumably needy) firms. Household transfer payments include welfare to the poor, unemployment compensation to the unemployed, and Social Security payments to the elderly and disabled. Business transfer payments (occasionally referred to as corporate welfare) include direct payments or tax deductions to business firms for a variety of reasons. Specific Activity: Firms are often given subsidies to encourage particular actions, such as training employees, reducing pollution, implementing specific production techniques, or developing new technologies. Farmers receive federal subsidies to reduce the problems caused by unstable agricultural markets. Local Growth: State and local governments have a long history of inducing firms that employ a number of workers to locate in their areas through generous subsidies. Public Utilities: Privately-owned public utilities or quasi-public transportation systems are often subsidized by the government because they provide valuable production that cannot be profitably exchanged through markets. Bankrupt Firms: On occasion, a nationally prominent firm on the verge of bankruptcy is subsidized to help it through difficult times. Friends of Government: And more than a few special "breaks" have been inserted into tax laws by members of Congress on behalf of a particular firm that may or may not be the direct result of a hefty campaign contribution. From a national income perspective, government subsidies are added to the pool of revenue that the business sector has available for making factor payments (which also makes it part of national income). But because the business sector does NOT receive this revenue as payment for producing goods, it is not part of gross domestic product. Surplus of Government Enterprises Government enterprises are productive activities that operate much like private-sector firms. They hire resources and purchase inputs (intermediate goods and raw materials), then produce goods that are sold through markets. In some cases, government enterprises compete directly with private firms. One common example of a government enterprise is a city-operated electrical generation and distribution system. In some cities, this service is provided by private, for-profit, businesses. In other cities it is provided by government. Other examples of government enterprises include urban transportation systems, parks and recreational facilities, and communication systems. The primary difference between private firms and government enterprises, especially in the National Income and Product Accounts, is the treatment of profit. In a private firm, any profit generated (the difference between revenue and cost) is claimed by the owners, or the entrepreneurs. A government enterprise, in contrast, has NO specific owners to claim the profit. In essence the enterprise is owned by ALL citizens. As such, the "profit" of government enterprises is not earned by any specific factor of production. It is not considered part of national income. From a practical standpoint, the excess of revenue over cost for a government enterprise, which is termed "surplus" rather than profit, is merely returned to the appropriate government treasury. Should the city's electric utility "turn a profit" in a given year, this surplus is given back to the city. This is fitting because should the electric utility incur a loss, then the city makes up the difference. From a national income perspective, the surplus of government enterprises is important because, unlike private business profit, it is NOT officially earned by any factors of production. Rather than being paid out as national income to any productive factors, this surplus is returned the government treasuries. It is part of gross domestic product, but not part of national income. Check Out These Related Terms...      | national income and gross domestic product | national income and net domestic product | government subsidies | current surplus of government enterprises | government enterprises | capital consumption adjustment | indirect business taxes | net foreign factor income | business transfer payments | statistical discrepancy | Or For A Little Background...      | national income | gross domestic product | gross domestic product, income | production | product markets | National Income and Product Accounts | Bureau of Economic Analysis | National Bureau of Economic Research | And For Further Study...      | factor payments | circular flow | business cycles | gross domestic product, expenditures | gross domestic product, ins and outs | gross domestic product, welfare | gross national product | real gross domestic product | government functions | net domestic product | personal income | disposable income | gross domestic income | profit | Recommended Citation:      GOVERNMENT SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: December 16, 2025].

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