Aug 8, 2011

What's In It For Me?

I happen to believe that the only way to really get serious about our deficit problem is to reform both the tax code and our entitlement programs.  Our overall tax rates are the lowest they have been in decades, and our payments to individuals (entitlements) continue to rise.  I think there should be more means testing for social security and medicare, as well as gradual increasing of the age when benefits kick in, and that our payments to address the poor should be increased.  This will not be fixed without some pain being felt for all.

Over the last month, we've heard endless debates on federal spending, federal spending as a share of GDP, the $14 trillion ever-increasing federal debt, the the federal debt as a share of GDP, spending cuts as a condition to raise the debt limit, possible revenue/tax increases, a possible balanced budget amendment later, etc.  

In 2010, the OMB reports (Table 6.1 Composition of Outlays, 1940-2016) that the federal government spent $3.45 trillion, and made about $2.3 trillion in "payments to individuals," which was about two-thirds (66.13%) of total federal spending last year, the highest ever in history (see top chart above).   And that category was more than three times larger than the share of 2010 federal spending on defense (20.1%) and more than 11 times larger than the share spent on net interest (5.7%).   

Where does all that money go? The bottom chart displays a percentage breakdown of the $2.3 trillion in payments to individuals for 2010, and shows that more than 76% of those payments were for Social Security and Medicare, about 14.4% was for spending on the poor (public assistance, food assistance, and housing assistance), 7% on unemployment insurance payments, and 2.4% on student assistance. 



  1. "Gradual increasing in age for benefits for social security"? Sorry but but have you lost your freaking mind? The last notice I received from Social Security said that I would need to be something like 67 before I could reach full benefits. What? I should be 80?

    Of course one of my uncles stated that Social Security has been making plenty over the years. It's just that the government has been dipping into those funds to balance the rest of the budget. Um like that military spending.

    Instead of talking about individuals as Republicans are prone to do, let's talk about the tax breaks to the wealthy and to corporations. In the first category, fine if your name is Bill Gates or Warren Buffett and truly giving back. On the latter? Sorry but I see a lot more foreign investment going on here than from domestic companies.

    When I read things like your post I ask myself, "Does this person have any understanding of economic theory?" Also that surge in Social Security spending? Could it have something to do with a large portion of our population reaching retirement age? Economists have been saying since at least the 80s that this was going to be a problem. And now people are outraged?

    I'm frankly tired of the American people needed to be slapped in the face with something before they recognize there might just be a problem. Oh yeah. But certain politicians pushed for this crap called No Child Left Behind that might just teach kids how to answer certain questions on a test but ends up giving them no critical thinking skills. So yeah, we're doomed. Because a population that does not know how to think for themselves?

  2. Also I would suggest that you look at spending patterns in Scandinavian countries. Last I saw they had higher life expectancy rates. Oh and they spend a large part of their budget on social programs. Funny thing. Healthy people are more productive. Your model is way over-simplified. People are complex creatures.

  3. It's time to close tax loopholes for millionaires. That will solve this.

  4. Funny thing our Sec Treas said, "S&P does not understand our Government math!"

    Wow, do I ever agree with that, no sound thinking person does. But for some reason we as a world have been taught that living in debt is unavoidable, and normal. IT IS NOT!

    Ha, JMHO

    I wish toon was right, but I am afraid he is wrong.

  5. Boy, Kailyn let you have it, didn't she? I think she was accurate about SS making money for a long time and the gov't borrowing against the reserves...

    The tax cuts for the wealthy along with these two costly wars might have something to do with the deficit... but I am not mad atcha... the thing about SS is that it really doesn't pay for itself, even when you account for the money it is owed by the Federal Gov't.

    Where is Bill Clinton when you need him..?

  6. I've heard the same thing Kailyn did about the government 'borrowing' against SS. I don't mind putting 'entitlements' on the table but -- sheesh -- upping the retirement age when we've been working all our lives to meet a certain target?!? 67 already seems fairly high for full social security benefits, especially given that most companies these days are doing everything possible to quietly show older (more expensive) employees the door. I'm sure there are some ways to trim costs from Social Security without upping the retirement age and I agree with everyone who says it's time to start letting the super rich pay their share of taxes. Personally, I don't mind if we rescind the Bush tax cuts. They weren't supposed to be permanent, anyway, and there's no evidence that their existence spurred any job creation (quite the reverse ...).

  7. Ken and I talk about this quite a bit, and I assure you, we both agree that taxes need to be increased. I won't speak for Ken here, but in my own opinion, I want to see loopholes eliminated and the Bush cuts expire. However, every economic model I've read says that taxes alone will not solve the problem.

    In a perfect world, they would. This is far from a perfect world. I want to see the richest among us start paying what they should and start understanding the pain that average Americans are going through. But I also think that everyone needs to make some concessions. I don't want to see benefits cut, but the hard truth is that maybe we need to give a little for the well-being of the country. The wealthy need to give a LOT...but I feel that others need to give a LITTLE.

    Pure ideology on any side will never get anything done.

  8. Also (and again, just my opinion), other countries that spend more on social programs don't have the defense budget that we do. Until we address that issue, we won't have that money to spend. There are plenty on both sides that dig in their heels about defense spending, especially when it brings the big bucks back to their own districts.

  9. Beth, you are quite right. There has to be a combination of both tax increases and spending cuts. Every economic model I have ever seen that works involves this.

    As you can imagine, I feel passionately about education and healthcare. Provide quality in both of these areas from day one for all citizens and perhaps there is less need for other entitlements down the road. And in my opinion education includes preschool as well as after school programs. Another area for which we've been spending a tidy sums is for prisons. There have been too many studies out there linking the benefits of effective programs in lowering crime rates.


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