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By: Wayne Brown
The United States of America is in the worst financial condition it has ever been in since our inception as a nation. Amazingly, to a large segment of the American public, that is not an alarming realization. There seems to be many reasons for that mindset ranging from outright apathy and ignorance to frustration in attempting to understand something so massive and complex as the operating budget of the federal government. In truth, it is really not that complex unless you drill down into the detail…that dark place where things can easily be hidden in a document so large…much like the legislation outlining Obama-Care. To understand conceptually, we, as a public do not have to drill into the details. All we need to know is right there on the surface of the document.
Obama proposed a budget for 2013 which never cleared the legislative process. For now, our country operates without a budget at the present, basically an open checkbook which is spending lots of borrowed money…approximately 42 cents of every dollar spent. Senator Harry Reid sees no problem with a lack of budget and apparently the President is of the same mind as neither of them has shown any real leadership in establishing one since Obama took office in early 2008.
Using the President’s proposed 2013 budget as the basis for our understanding, we can consult the Summary pages of the budget and see that the federal government is projecting to take in total revenue of $2.59 trillion dollars mainly from income tax, Social Security taxes, Medicare taxes, and unemployment taxes and a few smaller incidentals. On the outlay side…the spending side of the books, the government breaks things down into two main areas: Appropriated Programs and Mandatory Programs. Appropriated Programs break down into two main divisions: Defense and Non-Defense spending. In 2013, Defense spending was projected at $700 billion dollars; Non-Defense Spending (basically, the operation of the federal government other than the military) was projected at $565 billion totals with the two categories (Defense & Non-Defense) totaling $1.265 trillion dollars. This number is what is required for the government to stay in business without consideration of the Mandatory Spending Programs. No doubt, Defense should be a big concern of the American public and it amounts to a little over half of the total amount. The remainder, the $565 billion dollars, is the amount necessary to feed the monster of a federal government which has grown by almost 20% under Obama’s watch through expansion of federal jobs, government positions, and departmental spending.
Mandatory Programs are the reverse of part of the incoming revenue stream. This area is made up mainly of Social Security, Medicare, Unemployment, TARP, and numerous other programs which, by law, the government must fund. The 2013 payouts in the area of Mandatory Programs project to a total of $2.213 trillion dollars in spending. 74% of that payout is projected for Social Security, Medicare, and Medicaid Programs. The remaining 26% covers the other mandatory programs.
A few other things are included under the Mandatory Programs heading and include items such as interest on debt, disaster payouts, and joint committee enforcement. For 2013, the payouts combined over these areas amounted to an additional $179 billion dollars. This is a net figure as interest on debt ($246 billion dollars) was actually offset by a $71 billion dollar credit in the joint committee column.
Totaling up the payouts for all Programs in both of categories (Appropriated, Mandatory), spending for 2013 is projected at $3.655 trillion dollars. As noted above, total revenue taken in for 2013 was projected at $2.59 trillion dollars leaving the government with a revenue shortfall of $1.065 trillion dollars. Any way you write that, it is red ink on the books and adds to that every growing national debt which is approaching $16 trillion dollars at the present.
Conceptually, that is really all the average citizen needs for an understanding of our critical situation as a country. From there, most folks can see what the problem really is for us and have some idea as to what we can do about it. Amazingly, those we elect to go to Washington have too many “child-like” tendencies to show any real leadership in doing anything about it so they just continue to kick the can down the road as we borrow, and borrow, and borrow our way into oblivion as a nation.
The thing one must understand conceptually in this spending model is that the “Mandatory Program” spending amounts to a figure that almost matches that of the incoming revenue stream….$2.213 trillion dollars versus $2.59 trillion dollars. What this says is that once we pay the Mandatory Programs, the government is actually almost broke yet still projects to spend another $1.265 trillion dollars for Appropriated Programs….basically Defense and the operation of the physical federal government. This is the underlining reason why some elected officials in Washington are pointing to Mandatory Programs and suggesting that something must be done to fix those programs. At present, programs like Social Security and Medicare have, since inception, brought in more revenue than was paid out under those headings. The surplus initially went into treasury bonds but then some creative elected officials in the 1960’s decided it would be better if that money were applied to other debt shortfalls in the government rather than the government actually “borrowing” the money from outside. Then a simple “IOU” was placed on the books to show the government owed the American public for spending those funds. This was an outgrowth of Lyndon Johnson’s Great Society. It was the true point at which the problem we have today financially took root and has continued to grow like a cancer eroding our financial strength as a country.
There are two things we need to understand at this point and they are as follows. Due to the retirement of the “Baby Boomer” generations and the smaller size of follow-on generations, the American workforce will slowly shrink in size. This will reduce the inflow of revenue to mandatory programs such as Social Security and Medicare eventually forcing them out of the surplus revenue column and into the red ink column where outlay exceeds income. This situation will come to fruition within the next decade. That is a problem to be faced and a plan must be put into place to address methods to create some level of solvency in these programs. At the same time, this is not a “fix all” for the true problems we have in terms of the federal government. This is simply to say that over the past fifty years, the revenue which we paid into these programs as taxpayers has been mismanaged and used by those we elected to office and entrusted with it. Both of those situations require remedy and soon.
On a larger scale, let’s look back at the projected $1.265 trillion dollars which is identified for “Appropriated Program” use in 2013. Approximately 45% of that amount ($565 billion dollars) is projected for use in “operating” those elements of the government which is not defense-related. Within that expense are certainly some necessary services such as the FBI, the FAA, etc., etc., etc. There are also many questionable services which have grown into “monsters” such as the EPA which, by the way, received a 125% increase in its projected operating budget likely aimed at “crucifying” those industries which the Obama Administration deem as bad for America, like fossil fuel-related operations. Questions arise as to how large and how necessary some of these functions are and whether we, as a country, can really afford them anymore. As a country, do we really want to see an elderly person’s Social Security benefit reduced so that we can increase the operating budget of the EPA yet again? Questions such as this must be asked in Washington and those elected to be there must be accountable in answering them. Government, beyond the spectrum of the military, is basically out of control on the federal level and aimed at doing just one thing…grabbing up as much power from the states as possible in the shortest amount of time. This has become the mantra under Obama and will continue as long as his administration is in office. It is an agenda that the American public can ill-afford.
Many years ago, we taught economics in our schools. One of the most basic economic premises was the concept of “guns or butter”. It was an economic theory which acknowledged that our economic system had a finite revenue value in terms of dollars available for our government to spend. Within that value, our elected officials had to decide if we would buy butter, a term used to define the more general purpose aspects of our economy or if we would buy guns, the ability to defend, protect, and wage war as in the expansion of our military. The theory essentially pointed out that a balance must be found between the two in order to maintain a financial health long term. Somewhere along the way, our elected officials have lost sight of that truth and determined that we can have anything we want if we are willing to borrow the money and pile up the debt. Their approach ignores the inevitable day when the bill must be paid…it essentially kicks the can down the road and both sides of the aisle are guilty as charged.
Obama-Care will increase the debt burden even higher and certainly offers no relief in terms of the downstream deficits associated with shortfall revenue from Medicare. It is a program which will simply dig the hole deeper and faster which we will inevitably find ourselves in as a nation. It is a program which ignores the economics of guns and butter as it exceeds the funds available for either one. Just as a household must decide what it can and cannot afford, our elected officials are responsible and accountable to the American public to make the same conscious decisions. Unfortunately, too often, these hard decisions are been laid aside in the interest of getting re-elected…a return to the mindset of guns and butter all from the same wallet.
For now, the federal government must begin to shrink in size. Departments must be cut or reduced in size and scope. Activities which have been “federalized” in the interest of uniformity and power-grabbing such as education must be returned to the state eliminating the federal departments associated with that subject matter. Privatization of various functions like the TSA and the FAA must be considered allowing private industry served by these functions to pick up more of the costs associated with them. Regulatory agencies must be scrutinized in terms of purpose and scope. As a nation, we can no longer afford monster departments like the EPA which are considered “holy” because it plays to the voting block associated with environmental activism. In effect, we must have officials in elected office in Washington that are willing to put the federal government on a diet. This includes looking at payrolls of elected officials, especially the payroll and benefits of the Congress, which is totally out of perspective with the intended job function. There are many, many ways to reduce the over half-trillion dollars in outlays for the operation of our federal government that do not involve taking some little old lady’s social security check or reducing our military to bare bones. Those are easy targets but not the ones any responsible elected official should have on their list. We cannot keep feeding this monster we call the federal government based on the financial diet that it demands year after year. The time has come to trim the fat and face the music.
Responsible American voters and taxpayers cannot afford to ignore the financial dilemma we face as a country. For too many years, we have used accounting principles and theory which have done nothing but squander the future of too many of our citizens who put too much of their hard-earned money into programs like Social Security and Medicare. They deserved a return on that payout and should not see it cut so that some official in Washington can receive higher pay, have more assistants, or ride in a bigger jet. It is time for responsible government at the federal level and that means changing the scope and size of the current government into something we can afford over the long haul. If we can do that, maintain our freedoms and the ability to pursue individual happiness, we will then make the Founding Fathers very proud while insuring that our country still has a future for the younger generations.
© Copyright WBrown2012. All Rights Reserved.
2 May 2012