A detailed look at the federal budget

Recently there was some debate about the current fiscal deficit. When people talk about balancing the budget, it is important to know what we spend money on. When someone just parrots "We need to cut defense" or "raise taxes" it gets frustrating because those things won't necessarily solve the problem. The real problem is much more complex than that.  In reality, the federal government has slowly morphed into a social program provider.

Bush hasn't helped things either. He has signed budgets that have seen the biggest increases in spending across the board in the past decade. Even spending on the Arts has gone up under Bush. Defense spending is, of course, way up. And he's added a prescription drug benefit to the mix -- one that alienates conservatives while not satisfying the left who say (without evidence) that it's just a big giveaway to drug companies. Where we can agree is that it is a big "giveaway" to someone.

I tend to rely on the Annual Report books by Meredith Bagby. The last one is from 1998's budget but the reason I like it is that it is a non-partisan book. She just goes through the stats and puts them together in tables that are clear and concise. No political BS in there. Amongst the stats are where the government's money comes from and where it goes.

This is the 1998 federal income report. Social Security, unemployment insurance, medicare, etc. come out to $585 billion in taxes. Remember that number.  The other taxes come out to be about $1 trillion.

Now look closely here.  This is what we actually spend the money on.  If you just add up Social Security and Medicare, you can see that the amount exceeds what is being taxed. On top of that, Unemployment insurance is another $27 billion on top of that. That shortfall is made up by money from the general fund. Now, this is 1998 so most of these numbers are lower than they are today (particularly defense). But the categories are still applicable.

People like me would argue that the social programs, other than the veterans benefits and fed retirement, are really not something the federal government should be involved in.  $39 billion in food stamps. Now, AFDC and such are gone because of Welfare Reform. But we still spend $39 billion just on federal food stamps.  We still spent another $30 billion or so on subsidized housing.  And we still spent $138 billion on Medicaid and other programs of that nature.  Some of this is important I'm sure but if we want to trim the deficit, these are all things we need to look at.

Meanwhile, in the services, the much maligned foreign aid is only $15 billion.  But $15 billion is still a good chunk of change when you're borrowing to do it. Agriculture subsidies are largely corporate welfare. Education, which is largely paid for by your local millages and state taxes makes up a whopping $56 billion, much of it is squandered according to reports.

And then we have...the debt. The interest in the debt in 1998 was $250 BILLION.  This is why the deficit not only needs to be reduced but why we need surpluses to pay down the debt. $250 billion on interest is money just wasted. Money we pay today because of the money spent in the past that they couldn't afford. And that wasn't money spent on defense only.  It was a team effort.

In reality, we spend a lot of money on give-aways.  No matter what you want to call it, giving people money and aid that they did not earn is a freebie. Now, you can say we need a social safety net. I'm with you there. I agree. In the United States there is no excuse for anyone to go hungry. But this isn't something the federal government should be involved in. It's too inefficient to send money to the federal government and then back to the states to implement.  It's best left with states and local governments to come up with programs to suit their particular requirements.

At the same time, people who are constantly advocating that we don't spend enough to help the poor need a reality check. In 1998 we spent $150 on every man, woman and child in the United States just in food stamps. Very few people get food stamps so obviously the amount allocated to that program is much higher than $150.  In fact, let's say that only 5% of the American population requires food stamps. The number jumps to $3,000 per food stamp recipient. That's about $300 per month which is about the amount my family spends today on groceries each month for our family of 4. I'm sorry but if you're going hungry in the United States, there's no amount of money that's going to fix it. You either slipped through the cracks or the person is just so incredibly inept that they couldn't figure out how to obtain food.  BTW, keep in mind that this is only federal spending on these programs. Those soup kitchens and the like are usually run by either charities or state or city governments without federal assistance.

Then there's the $77 billion spent on "Misc". I couldn't find out what that is. Just "Misc." Terrific. 

Today the budget is about $2 trillion. We're running a $400 to $500 BILLION deficit. If you want to balance the budget, a lot of programs will need to be cut. Not just defense. When you see so much waste, it's hard to get too excited about having to pay more in taxes for some latest/greatest boondoggle program.

If the federal government focused on doing the things it's supposed to do you would have a budget that looks something like this:

Income: $1 billion

Expenses: $469 billion (services)  + $74 billion (fed retirement) + $41 billion (veterans) = ~$580 billion in expenses.

That is what the general fund should look like.

The social programs would fall under a social tax that could be scrutinized on its own. $585 billion in taxes comes in from Social Insurance Taxes so let the social programs be budgeted based on meeting that criteria. Remember, these other programs are monies taken from one person and given to someone else. Whether you're for or against these programs is irrelevant. That's what they are, they are wealth redistribution programs and shouldn't be part of the general fund. But when you look at things in this way, it becomes easier to see where the shortfalls are coming from.

In other words, if you want to balance the budget, lots of cuts are going to be needed and one thing is for sure, it's mostly going to come from the "entitlements".