Making sense of federal budgeting — expendituresPublished 4:25pm Tuesday, May 25, 2010
In this column I will focus on the Federal Budget expenditures.
It’s very important that Americans begin to understand the budget deficit challenge not through the eyes of some ideological political stance but through reality. It is clear that the political factions making the most noise are not being upfront about the facts and realities. They are more interested in ridiculous rhetorical stances that take advantage of the general public’s ignorance of budgetary facts than in solving one of the most important challenges we have as a society.
Let me begin by saying that when you look at the Federal Budget and where money is spent, it becomes very clear that we can’t “save” our way back to a balanced budget. To accomplish anything close to the claims being made by our latest crop of political opportunists we’d have to eliminate all but the following five categories of spending: Defense, Social Security, Medicare, Medicaid and Interest on the National Debt.
After we eliminate everything but these five categories, we would still have to reduce their costs by approximately 15%. If any of the promised tax cuts are to be provided the money would have to come from the big four programs (i.e., Defense, Social Security, Medicare, Medicaid).
The programs that would go unfunded include the Department of Transportation, Law Enforcement and the Departments of Energy, Commerce, Agriculture and Education. In addition, all entitlement programs and disaster relief would have to disappear.
Before you say anything, there is not a budget for the Health Care Reform Act except under tax credits. It only affects the revenue side of the equation.
Don’t believe me? How can things be this out of control? Let’s look at some specifics.
* The total proposed budget is $3.8 trillion or about 25% of Gross Domestic Product (GDP) with a total deficit of $1.3 trillion (8.3% of GDP). This is a little lower than Bush’s last budget deficit of $1.4 trillion (9.9% of GDP). The trend was set several years ago after we lost our budget surplus going into 2003.
* Defense ($750 billion) and Social Security ($729 billion) are the two biggest expenditures. Defense expenditures should also include $125 billion for Veterans, $124 billion to pay retired military personnel and $55 billion for Homeland Security. This would bring Defense to a total of $1.054 trillion (not including special allocations considered off budget).
There is also another category that fits into Social Security; Supplemental Security Income comes in at $49 billion. Hence, Social Security is really $778 billion not $729 billion.
* Medicare ($497 billion) and Medicaid ($297 billion) are the next biggest expenditures.
* Net interest on debt is number five at $251 billion.
The top five represent $2.87 trillion or 75% of the Federal Budget. So if you eliminated everything else, we could reduce the Federal Budget by 25% or $950 billion. Then we’d need to get $400 billion (a 15% cut) in reductions from Defense, Social Security, Medicare and Medicaid. A 15% reduction doesn’t sound too draconian, if it wasn’t for the fact that you’d have to totally eliminate all other government programs.
Now let’s talk about the things that would disappear totally. This would mean we’d eliminate some long-standing favorites such as:
* Law Enforcement (including the FBI & Federal prisons) – 1.5% of the budget
* Transportation (Highways, Amtrak, FAA)– 2.7% of the budget
* Education – 2.5% of the budget
* Agriculture & Farm subsidies – 0.3% of the budget
* Environmental protection – 0.7 % of the budget
* Science and space research – 0.8% of the budget
* Energy & Commerce — 3.8% of the budget
These programs represent $468 billion or 12.3% of the Federal Budget.
The following programs represent what is often termed entitlements. They represent 12.8% or $484 billion of the annual budget.
* Food Stamps – 2.0% of the budget
* Health research – 1.8% of the budget
* Housing subsidies – 1.7% of the budget
* International aid – 1.4% of the budget
* Unemployment payments – 2.8% of the budget
* Low-income tax credit – 1.2% of the budget
* Family support (welfare) – 0.8% of the budget
* Nutrition programs – 0.7% of the budget
* Disaster relief – 0.4% of the budget
When you stand back and clear the smoke left by the ideologists and opportunists you see a clear picture. There is no way under any scenario you want to imagine that you can reduce the Federal Budget without severely impacting the Big 4 of Defense, Social Security, Medicare and Medicaid because they represent 75% of all the money that is spent. Additionally, there is no way to reduce the Federal Budget without eliminating or crippling the effectiveness of all the other programs. If you’re going to cripple it, you may as well go ahead and shoot it.
Rodney Gibson is the former Mayor of Saluda.