Thursday, February 15, 2007

All You Need to Know About the Federal Budget contained in this graph from Robert Samuelson:

You frequently read about the growth entitlement spending, but did you know that in 50 years, it had grown from 22 percent to 60 percent of federal spending? Or that spending on defense had done the reverse? Further, when you hear about the extraordinary increase in cost of debt service, remember that it has increased only slightly (as a share of federal spending) since 1956.

Samuelson says:

The table shows the rise of the American welfare state. In 1956, defense dominated the budget; the Cold War buildup was in full swing. The welfare state, which is what "payments to individuals'' signifies, was modest. Now everything is reversed. Despite the war in Iraq, defense spending is only a fifth of the budget; so-called entitlement payments to individuals are almost 60 percent -- and rising. In fiscal 2006, the federal government spent almost $2.7 trillion. Social Security ($544 billion), Medicare ($374 billion) and Medicaid ($181 billion) dominated. There was $199 billion more for payments to the poor, including the earned-income tax credit and food stamps, among others...

The welfare state has made budgeting an exercise in futility. Both liberals and conservatives, in their own ways, peddle phony solutions. Cut waste, say conservatives. Well, network-TV reports of $20 million federal programs that don't work may seem -- and be -- scandalous, but like Amtrak they're usually mere blips on the total budget. For its 2008 budget, the Bush administration brags it would end or sharply reduce 141 programs. But most are microscopic; total savings would be $12 billion, or 0.4 percent of spending. Worse, Congress has previously rejected some of these cuts.

Liberals have their own cures. Cut defense, some say. OK. In 2006, military spending (including the war in Iraq) totaled $520 billion, slightly less than Social Security. If it had been halved, the savings would have just covered the deficit ($248 billion). Little would be left for new programs. Raise taxes on the richest 1 percent, say some. OK. The richest 1 percent pay about a quarter of all federal taxes. In 2006, that was about $600 billion. To cover the deficit would require about a 40 percent tax increase. Needless to say, neither proposal is politically plausible...

It might help if Americans called welfare programs -- current benefits for select populations, paid for by current taxes -- by their proper name, rather than by the soothing (and misleading) labels of "entitlements'' and "social insurance.'' That way, we might ask ourselves who deserves welfare and why.

The 'good' news is, while entitlement spending is accelerating downhill, it's headed for a wall. The growth in welfare spending will be unsustainable in my lifetime, and these programs will come crashing down. I've said in the past that it argues for the 'defenders' of these programs - largely Democrats - to take their problems seriously and try to solve them, rather than continue demagoguing.

But if they choose not to, the only possible outcome is plain to see.

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