Monday, June 13, 2011

US Budget

The US Budget is a huge and complex animal and I do not intent to do an in depth look at it. Before discussing it though i think it would be good to get a picture of just what the US government spends our money on:

Now that we have an idea of where 3.7 trillion dollars is going, for the 2012 budget, we can start look at some of the specifics. Just to be clear, this is the 2012 budget, the one with the "huge spending cuts" that we faced a near government shutdown over. This "cut" budget still has us spending 1.1 trillion dollars more than we are taking in.

We have heard a lot this past year about the budget and I'm sure as we head into the election year we will hear even more about it. Don't let the fast talking politicians fool you with big numbers slick salesmanship. When they talk about cutting the budget, they don't really mean cutting all programs or line items, only certain ones. First off, Defense spending will probably not be seriously cut for several years and Congress has to be seen "supporting the troops." So that 25% is untouchable. Next, Healthcare is another budget item that cannot be reduced in any measurable amount. The largest portions of this item are Medicare and Medicaid which do not even provide minimal healthcare as it is. Last of the big ticket items is Pensions.
While these are a big portion of the governments spending, they are also self funded and liquid. This means that the payroll deductions of workers are supporting the payments going out, so there is nothing to cut here. So, we have 70% of the budget that cannot or will not be touched by anyone. To put that in dollars that is $2.6 trillion out of $3.7 trillion. Now to apply some grade school math... If we subtract the spending that will not or cannot be cut from the total spending we are left with $1.1 trillion of budget items to reduce spending on. If Defense, Healthcare, and Pensions are not reduced and we want to balance the budget we would have to eliminate ALL other government spending next year.

Now lets look at the remaining 30% of the pie and see if we can find some big savings in here. First off we have Welfare, most of this spending is on Food Stamps, Aid to Families with Dependent Children, and Unemployment. As we are currently in the longest and worst recession(depression?) ever with official unemployment at 9% and unofficially at 15% this is probably not something we would want to cut. As it is, these programs only give the most meager benefits. From my own experience, as a single person with no dependents and no income, I qualify for $200 per month in Food Stamps. Not exactly living high on the hog. Next largest spending is on interest on our National Debt. We have to pay our debt, so that 6% is out. Education and Transportation both come in at 3% of the budget. Both systems are crumbling and in great need of repair, if anything they need to be increased. Protection, at 2%, mostly deals with prisons and courts. I can't think of anyone who would want to cut these programs. And last we have General Government. This cover expenses of the Executive and Legislative branches. Lets get real, none of these people who write the budget are going to cut their own benefits. Realistically, even if we eliminated this entire expense it would not make a dent in the overall budget.

So, what's the answer? Here's the secret that no candidate will mention in the next year: Spending cuts cannot and will not ever balance the budget, only income increases will do it. That means more people paying more taxes. How do we get that? Not by reducing the taxes on the wealthy. They have been getting tax breaks under the Bush tax cuts for 10 years and look how many jobs they have created with all that money. Supply Side Economics, Trickle Down Economics, VooDoo Economics... whatever you like to call it, it is simply a lie and it does not work.


Just on que here is an article on the budget plans from some the the Republican candidates...