Our Budget Problem is Worse Than You Think

This is my third post in a series about our federal government spending too much money.  Part 1 covered the problem.  Part 2 covered where I think that spending should be cut (everything, everywhere).  And this, part 3, will look at where the spending problem is specifically.

First I'd like to point out that there are lots of places that outright waste our money. Cranky John made a list of some on my earlier post:

#1 Cut Foreign aid
#2 END Congressional Pensions plus all benifits they get long after they are out of office. Like expenses to run an office. WTF?
#3 EPA
#4 Dept of Education.
#5 ATF
#6 TSA
#7 Homeland security.
#8 Withdraw troops from Europe and asia, put them on the border.
#9 Abolish the IRS. go to a flat tax
#10 Prosecute and execute congress members who hide hidden pork in bills.
#11 Sell off all federal properties that are not in current use.
#12 Cut the size of the federal government in half, for a start. Except the military.
#13 NO Presidential vacations. Go to camp David or pay for it yourself.

Those are all terrible wastes of money, but the total spent on all of those is trivial nothingness, as you shall see...

Republicans claim that our spending problems come from entitlements and pork.  Democrats claim that our spending problem comes from the rich not paying "their fair share" and the military.

Let's forget about what federal money is spent on, and weather it is good or bad, and instead look at how the big overall numbers look. Where can we balance the budget?

(I shall be using 2011 numbers because it is the last year for which the numbers are not estimated.)

The source for the numbers:

Revenue source data: Historical Tables: The White House (table 2.1)
Outlays source data: Historical Tables: The White House (table 3.1)

Summary of Data:

Revenues:
Individual Income Taxes: $1,091,473,000,000
Corporate Income Taxes: $181,085,000,000
Social Security Taxes: $818,892,000,000
Excise Taxes: $72,381,000,000
Other taxes: $139,735,000,000

Total Revenues: $2,303,466,000,000

Expenditures:
National Defense: $705,625,000,000
Human resources (includes:Social Security Medicare, unemployment, etc): $2,414,738,000,000
Physical Resources (includes: energy subsidies, roads, etc.): $161,850,000,000
Net Interest: $229,968,000,000
Other: $177,374,000,000
"Undistributed offsetting receipts": -$86,494,000,000

Total Expenditures: $3,603,361,000,000

Budget deficit: $1,299,895,000,000

(The highest the deficit ever was under George W Bush was around $400 billion, about 1/3 of every year's deficit since Obama became president. table 1)

We can learn many things from these numbers.  Firstly, our government gets its revenue from income taxes and Social Security taxes.  So no matter how much I might like to see both of those taxes disappear they won't be going anywhere, because that's where the money is.

Secondly, national defense spending is nearly 3/4 of a trillion dollars.  That is quite a bit, and I would not be opposed to it being cut.  If the spending on National defense was 1/2 a trillion dollars, then maybe that wouldn't be too much. $200 billion saved

Thirdly, It seems to me that all subsidies are bad and should be ended.  And transportation (roads and bridges) all exist within individual states which should be able build their own roads. The other parts in "physical resources" include things like: "Community and Regional Development."  Which is obviously stupid and we shouldn't be paying for it, especially at the national level. Stop paying for it all. $162 billion saved

Fourthly, ideally we wouldn't have any debt and would then not have a quarter of a trillion in interest to pay each year.  But we cannot stop paying for interest without being irresponsible and having awful side effects.  If we can balance the budget we can begin to pay this number down.

Fifthly, the "Other" category includes things like: general government and space technology.  I say keep funding the operation of the government (I'm trying to be reasonable) and maintain the international affairs (which I'll assume means embassies, even if it isn't).  Get rid of the rest. $50 billion saved

Lets say that we cut where I just said that we should cut.  We would then have our expenditures reduced from $3,603 billion to about $3,200 billion.  The savings are good but don't really make any meaningful difference.  I cut huge amounts of spending, nearly half a trillion dollars, but all that cutting is near meaningless and tiny.  The problem is "human resources" spending.

The "human resources" heading covers things like: Social Security, Medicare, Medicaid, and unemployment benefits.

The federal spending on "human resources" exceeds the total revenues of the federal government.

Total revenues: $2,303,466,000,000
Human resources expenditures: $2,414,738,000,000

Even if we eliminated all non human resources spending we would still have an unbalanced budget.

It is inarguable that if we want to have anything resembling a balanced budget (we do), then we need to reduce Social Security, Medicare, Medicaid, unemployment, etc spending.

The only ways to balance the budget are, some combination of: double all taxes paid and/or cut into Social Security, Medicare, etc.  There is no other way.

Or is there?

Let's look at Cranky John's proposed cuts (table 4.1):

(I'm only looking for the large department sized places that he would like to see cut.  Presidential vacations on the taxpayer's dollar are a fine place to cut, but the numbers involved are too comparably small.  Only Department sized cuts will do.)

Total expenditures: $3,603,361,000,000

Eliminate the EPA: $10,772,000,000
Eliminate the Dept. of Education: $65,484,000,000
Eliminate the ATF (couldn't find it, eliminate the whole Dept. of Justice instead): $30,519,000,000
Eliminate the TSA (couldn't find it, eliminate the whole Dept. of Transportation instead): $77,301,000,000
Eliminate Dept. of Homeland Security: $45,741,000,000

Total expenditures before Cranky John's proposed cuts:  $3,603,361,000,000
Total expenditures after proposed cuts: $3,373,544,000,000

Total deficit before proposed cuts: $1,299,895,000,000
Total deficit after proposed cuts: $1,070,078,000,000

If we eliminate the whole departments that Cranky John suggested that we eliminate, we would reduce our deficit from $1.3 trillion to $1.1 trillion.

I like his proposed cuts.  Two hundred billion in savings is a huge number.  But we would still have a $1.1 trillion dollar deficit.

What if we cut a few more Departments (Agriculture, Commerce, Energy, Housing and Urban Development, Interior, Labor):

Total expenditures before proposed cuts: $3,603,361,000,000
Total expenditures after all proposed cuts: $2,990,391,000,000

Total deficit before proposed cuts: $1,299,895,000,000
Total deficit after all proposed cuts: $686,885,000,000

Cranky John and I have cut the deficit in half by eliminating the departments of: Education, Justice, Transportation, Homeland Security, Agriculture, Commerce, Energy, Housing and Urban Development, Interior, Labor and the EPA.  

That's halved the deficit! Not total spending!

(BTW, the departments of Agriculture and Labor are the big ones.  The Dept. of Agriculture pays farmers not to farm and then we give money to the poor to buy food that is more expensive.  Dept. Labor?  Why it helps people find jobs! And a fine job they've been doing!)

Where else can we cut?

I cannot imagine how we can not cut entitlements if they alone cost more than the government's total revenue.

$2.3 trillion in total revenue
$2.4 trillion spent on entitlements

I don't see Social Security or Medicaid ever getting meaningfully reduced spending.  I had some hope that the reason we had an unbalanced budget, before I looked at this data, was because our politicians didn't want to cut pork or defense spending or education spending, etc.  But after looking at the numbers, I can't see how we will ever have a balanced budget without dramatic changes to Social Security, Medicare, and Medicaid.  And now Obamacare.

***

You've now seen all the numbers for government spending.  When "human resource" spending alone exceeds all federal revenues, what way is there to balance the budget?  If a politician is talking about anything other than changing Social Security, etc, then understand that they are arguing for U.S. bankruptcy and default on our debt.

Some day the bills will come due, and I see absolutely no way to balance the budget.  We just re-elected a president who made things worse by creating Obamacare.  There is no way a decline is not coming.