The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Monday, April 21, 2014

Connect the Dots USA: National Priorities?

The Federal Spending chart (see post of April 3rd below) not only clarifies how we spend our money, it also reflects our national priorities. “Don’t tell me what your priorities are. Show me where you spend your money and I’ll tell you what they are.” 

In other words, talk is cheap. We can say we care about children and education, but is that where we invest our money?

So let’s break down the Federal budget. Here’s 2013 Federal spending all in one beautiful pie chart. If you master this, you’ll understand way more than most. The “fiscal year” actually begins October 1st of the year preceding, so we are already halfway through Fiscal Year (FY) 2014.

When Congress and the President cannot agree on a full-year budget, we often keep the government open using a series of Continuing Resolutions (CRs), which are temporary agreements to continue spending at pretty much existing levels. Last fall, the Republicans refused to agree on an FY 2014 budget or temporary CR that did not repeal the Affordable Care Act — hostage-taking the Democrats and President Obama would not allow — so the government shutdown on Oct 1st 2013 for sixteen days until public pressure caused Republicans to cave.

Back to the chart... Everything shown in red is Mandatory spending, meaning it is dictated by existing law and very difficult to change without a battle royale. This makes up about 2/3 of the entire budget and includes benefit programs like Social Security (23%), Medicare (14%), Medicaid (8%), and other Income Security safety net programs (10%). Interest on the long-term debt (6%) is dictated by prevailing interest rates.

Note that Social Security and Medicare each have a dedicated revenue stream through the payroll tax. Social Security’s 12.4% dedicated payroll tax currently covers its entire costs, so it is a 100% “earned benefit.” Medicare’s 2.9% dedicated payroll tax, however, was only designed to cover the Part A hospital portion. Because Medicare draws over $200 Billion per year from general tax revenues — for Part B (doctor/outpatient) and Part D (prescription drugs) — it can only be considered about 50% an earned benefit.

Everything shown in yellow is Discretionary spending, which is hammered out each year between Congress and the President. What I found most surprising is that almost all Military spending ($625 Billion), including war activities, is negotiated each year. And it makes up more than half of our Discretionary spending.

That leaves only about 16% of the entire budget — the little bitty 1% and 2% slivers in the lower right — that comprise the “non-defense discretionary” spending. It includes important investments like Education, Environment, Science and Transportation. And that’s where Republicans love to hack away. A $100 billion cut is less than 3% of the entire budget, but it’s a gigantic chunk out of just these little slivers.

Note that Foreign Aid is only about 1% of the budget (part of the Int’l Affairs sliver). In a recent poll, most people mistakenly believe it is a whopping 27% and that just eliminating foreign aid will solve our budget woes.

Learn more here:
CBO Budget Outlook 2014-2024

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