Apr 9, 2010

Federal Budget Summary

As we go forward with more programs for our economy, there will be increasing rhetoric regarding how we are going to pay for it. Our federal budget is $3.8 trillion, and each 1% share represents $38 billion.

To understand how hard it is to cut federal spending, consider this: About 3/5’s (57.3%) of it goes out in direct payments to individual Americans or is spent on their personal behalf [entitlements].

Health Care: 23.8% (13% seniors, 7.8% poor, 3% veterans)
Pensions: 22.2% (19% for Social Security, 3.2% for federal civilian and military)
Unemployment: 2.8%
Food Stamps: 2.7%
Housing Subsidies for poor: 1.7%
Disabled poor cash: 1.3%
Low-income tax credit: 1.2%
Cash welfare for poor mothers w/ children: 0.8%
College-tuition aid (non-GI bill): 0.5%
Crop subsidies: 0.3%

Do not expect to see cuts in these entitlement payments, especially since this is where an awful lot of the lobbying energy goes.

So what is the biggest area of discretionary spending? Military operations and hardware is almost 1/5 (19.6%) of next year’s budget. As we wind down military operations in Iraq and Afghanistan, expect to see military spending move downward. Cutting of hardware spending will be more difficult since stopping any manufacturing programs will cost jobs and our legislatures are very good at protecting their home turfs.

So that accounts for 76.9% of our spending.

The rest of our government functions account for 16% of our budget and include: transportation, education, alternative-energy research and subsidies, public health, medical research, foreign aid, diplomacy, trade promotion, homeland security, law-enforcement aid, disaster relief, environmental protection, national parks, basic science research, space exploration, the arts, and more. None of these line items exceed 3% by themselves, and many are less than 1%.

That brings us to 92.9%. The remainder of our budget is for interest, half of which is owed to foreign creditors.

So, as we start tackling our economy, you can see that without health care reform and subsequent savings (or increased taxes), changes to social security (change when benefits start or increase taxes), reduction in military spending (focus on manpower versus hardware), and starting to run surpluses instead of deficits, things will only get worse. We have reached the precipice, due to lack of vision and strategy from both parties, and due to placating the loudest whiners in our spoiled and ungrateful country. I know that I am willing to pay 1-2% more in taxes if it will help deal with the mess that we find ourselves in.