Banks come first, then the poor, then maybe the economy

As I mentioned before the giant increase in the 2009 budget deficit that everybody is acting so freaked out about was  caused by a 400$  billion loss in tax revenue as well as an almost 562$ billion increase  in outlays.  Where did all that money go?  A lot of that extra spending was made directly as a result of the Great Recession.  Of the 562$ billion extra spending, 397$ billion of it was a direct result of the recession and  most of that was just bailing out the banks.  Here's how I arrived at these numbers.

The 397$ billion doesn't include money meant to stimulate the economy.  I included all the money spent to bailout the banks as well as unemployment and increases in domestic spending on the poor.    While I didn't include most stimulus money, however, I did include unemployment and other income security programs that may have been extended as part of the American Recovery and Reinvestment Act.

So here's how it all broke down(The individual accounts can be found here):  (Numbers are in millions of dollars)

1. TARP - 151252
2. GSE Bailout(FannieFreddie) - 86830
3. FDICNCUA - 3813
4. First time buyer Mortgage Credit - 9386
5. Medicaid - 49498
6. Unemployment - 77545
7. Food and Nutrition - 18407

I know I've talked about the spending increases in2009 before and  already graphed the biggest increases.  This time I wanted to break down the spending a little differently to demonstrate a couple different points.  First, the graph:

(Click on the Chart of a larger view)

So two points.  First of all, after adding up TARP, the GSE bailouts, and the increase in Deposit insurance it adds up to be more than the increased costs of Unemployment, Food and Nutrition(food for the poor), and Medicaid.  So that means of that extra 562$ billion that our government spent in 2009, significantly more of it went to help the bankers and "investors"-the ones that helped get us into this mess, than those that are now poor or unemployed because of the recession.  That's messed up!

Now to the second point.  Look how little actual stimulus spending actually occurred in 2009 over 2008.  Once you take out all the spending to bail out the banks and the money that's meant to keep people afloat, that only leaves 165$ billion left in the budget plus another 9.3$ billion for the housing credit.  That's assuming all of it when to stimulus spending and not just natural increase of government cost.   That remaining money was spread out amongst various departments and block grants to states and local governments.  I'm not sure how that bit of money was meant to jump start a 14 trillion dollar economy that is in it's worse recession in over 70 years.  I think I'm starting to understand why the recovery is starting to sputter and why so many people are calling for a "jobs bill."  The first stimulus just wasn't enough.

Vice President Joe Biden once said in a debate, "Don't tell me what you value, show me your budget, and I'll tell you what you value."  If that is true here's what our government valued in 2009:

1. Rescue the Bankers and investors.
2. Help the Unemployedpoor barely get by
3. Stimulate the Economy

I don't know about you, but that's perverse values.  Hopefully Fiscal Year 2010 will look a bit better.

There is no correlation between "Mandates" and Budget Deficits

So often I will read deficit hawks rail against "Mandatory Spending" programs.  This completely perplexes me.  When looking at government spending, what is the point of looking only at Mandatory or just Discretionary.   The only difference between the two is if congress has to re-approve the spending every year.  That's it.  So why do groups and politicians talk about them as if they are so different?

Here's and example of what I mean.  The Free Republic and the Heritage Foundation reported this year that "Mandatory Spending has increased 5 times faster than Discretionary Spending".  To this, I say so what?  If your problem is with increased spending, why does it matter if the increase is Mandatory or Discretionary.  It might matter if there was a correlation between the percentage of the budget that's mandatory and an increased budget deficit, but there isn't.

For those who might claim otherwise, they might show a graph that shows how spending increases along with total spending.

(Click chart for larger image.  Click here for the numbers)

The only thing that can be said is the obvious: total spending goes up as mandatory spending goes up.  Of course, that's like saying customers to my store go up when more brown-haired customers show up... duh!  Here's a more interesting observation about mandatory spending.  Mandatory and discretionary spending almost always go up and down together.

(Click chart for larger image.  Click here for the numbers)

While they often rise and fall together, they just don't raise and fall at the same rate.  Again, so what?  In terms of balancing budget, it's all just spending.   Now here's the point.  No matter what percentage of the total spending is Mandatory, it has no correlation to how much of a budget deficit\surplus there is.  Here's the chart that shows what percent of spending every year had to be borrowed, and what what percent of the spending was mandatory spending.

(Click chart for larger image.  Click here for the numbers)

Now I ask you, do you see ANY correlation between those two series of data?  Despite this you will still hear politicians say stupid things like Roy Blunt when he says, “I led the fight in 2005 and 2006 to cut the so-called mandatory spending" or the RNC proclaiming that their plan "slows the average annual growth in mandatory spending".  If you're proud of spending cuts, why call out Mandatory spending?

Republicans aren't the only ones that make this artificial distinction.  President Obama's spending freeze is only on discretionary spending.  It seems like a fairly artificial line to draw on any kind of spending cutfreeze.

At the risk of beating a dead horse I want to make sure everyone gets this.  There is no correlation between how much federal spending is Mandated and the sizeexistence of Budget Deficits.

How much did the government spend last year?(there are 4 correct answers)

How much money did the government spend last year?  You would think that would be an easily answerable question with only 1 correct answer, but there's actually four.    It's important to understand why there are 4 correct answers and the distinction between the different figures.  If you can't, then you can be swindled by pundits and political groups fudging their numbers to make them sound more or less shocking.

Here are the 4 correct answers.

• 4,397,478$ trillion dollars
• 3,727,371$ trillion dollars
• 3,517,681$ trillion dollars
• 3,000,665$ trillion dollars

So how are each of these technically correct?  Let's start from the bottom and go up.

The bottom two numbers are easy to explain.  The bottom number, 3 Trillion, is the total number of on-budget outlays.  Where as the second from the bottom, 3.5 trillion, is the total number of off-budget outlays.  As I've noted before, off-budget accounts are Social Security and the Postal Service.  Each of these things are supposed to fund themselves, therefore, they are considered "off-budget".

To understand the top 2 numbers you have to understand the concept of an "outlay".  An outlay can represent an account either spending or receiving money.  Congress authorizes certain accounts to make money.  Anyway that the government makes money that isn't a tax is called a negative outlay.  Negative outlays can be selling government land, a business-like transaction, like selling stamps, or could even be interest received on a trust-fund or investment.

These accounts that make money are still considered "outlays" even though they are negative.  Therefore, when the government reports it's total spending it adds up all of its outlays and, as you'll remember from algebra class, when you add a negative number you subtract it from the total.  So how much the government spends is offset by these negative outlays.  The top 2 answers are the total government outlays with the negative outlay accounts removed.

In 2009, the total on-budget spending (with negative outlays removed) was 3.7$ trillion dollars - which doesn't include Social Security or the postal service.  The total including both on and off-budget spending(with negative outlays removed) is the top number, 4.4$ trillion dollars.

So now that you see how there's 4 different numbers, you may see how they can be fudged to fit a political agenda.  For instance, let's say you wanted to shock people with how much the government spends, you could tell them that the federal government spent 4.4$ trillion dollars last year, but only brought in 2.1 trillion in tax receipts.  That would be factually correct, but would misinform people making them thing there is a 2.3 trillion dollar deficit.

Another way a pundit could swindle you is, let's say a politician wants to decrease spending in an area.  He might compare it's spending as a percentage of the entire government.  Now that person would put the percentage against the 3 trillion so that it looks like a larger percentage of the budget is going to one particular program.  Of course if the same politician wanted to increase spending on a program he would do the opposite and compare it to 4.4 trillion to make it seem like a minuscule percentage of government spending.

This is something that should be kept in mind anytime a group reports spending as a percentage of total spending.  Try to find which number they are using to figure out the percentage.  When I report my numbers on this site, I'll try to always be clear which figure I'm using.

National Defense Spending Is Growing Fast

Yesterday I talked about all government spending related to security. Today I'm looking at the recent rise in National Defense spending.  And I do mean rise.  In the last 10 completed fiscal years, national defense spending has increased by 367$ billion and is expected to increase again by the end of this Fiscal Year.  Here's our Defense spending since 1962.

(Click here for Numbers)

You can see some trends in that spending.  The first trend was a quick rise in the late sixties - presumably caused by escalation in Vietnam.  Then, as U.S. involvement in Vietnam winded down, national defense spending trended slightly downward.  Then it started heading back up in the late seventies.  In the eighties that slight upward trajectory skyrocketed until 1990.  Presumably, it leveled off in the 90s because there was no longer a cold war to fight.

In 2002 the recent sky rocket in National Defense spending started after 9/11 with a renewed interest in HUMINT and the wars in Afghanistan and Iraq started.  The cost of National Defense has continued to rise as Afghanistan, Iraq, and the GWOT, have continued on.

While these numbers might seem large it actually gets worse.  I haven't factored in the cost of VA benefits.  If there was no military, there would be no veterans, and therefore no VA, so it's only fair to factor VA costs into total National Security Spending.

(Click here for Numbers)

While the VA doesn't add a lot of spending, it does add enough that it's going to put Fiscal Year 2010 spending over the 800$ billion mark.  That's all spending, in a single year, just on National Defense - not counting law enforcement.

The recent rise in National Defense spending has been large and steady.  I graphed the percentage increase in National Defense spending for every year singe 1963.  So it will be negative when we spent less defense money and positive when increasing from the year before.  I show this to demonstrate that simple inflation does not explain away the large increases.

(Click image for larger view.  Click here for Numbers)

In the last decade, National Defense spending has risen by 5% or more every year for 9 years in a row.  The closest comparison is the timeframe of late 1970s to early 1980s.  That was a time when National Defense increases stayed above 5% or more for only 8 years.  This has been the most consistent large rise in national defense spending since 1962.

For those interested, I created a similar chart that shows the percentage increase of Defense and VA combined.  The number of years in a row where the increase is above 5% decreases by a year for both the recent increase and the 70s/80s time frame.

Whether you agree with all this national defense spending or not is irrelevant.  It's putting a huge burden on the budget.  This huge increase is a part of the explanation for the rise in our budget deficits.  It's hard to see how any hopes of a balanced budget can exist without reducing the National Defense budget.  It's possible, but one would have to either drastically raise taxes, or drastically cut the rest of our spending.

Some might say that cutting down the rest of our spending is the way to go.  So let's explore how we could maintain this level of national defense spending, balance the budget, and do so without raising taxes.  The last time we balanced the budget was FY2001.  In that year we spent 352$ billion dollars on the VA and National Defense.  In FY2010 we're set to spend 814$ billion.  Let's say that the 2010 estimate is off by 14$ billion and make it 800$ billion even.  Now, let's say that we didn't raise our defense spending at all since 2001, except for adjusting for inflation.  By rounding up (way up), I'm gonna say that the defenseVA spending should've stayed around 400$ billion.  That's half of what we spend today.  So, to avoid raising taxes, balance the budget, and not decrease our military spending, it would take 400$ billion in spending cuts out of the rest of the budget to accommodate this recent rise in military spending.

Total on-budget spending in 2010 is estimated to be 3,164$ billion dollars.  800$ billion of that is National Defense and VA.  That leaves 2,364$ billion for everything else.  We have to find 400$ billion to cut from that.  That's a 17% (across the board) budget cut.  That would be 17% that would have to be made in addition to accommodating the historically low tax rate and the rest of the spending increases since 2001 being cut.  This 17% cut would also have to apply to things like border security, customs, and all the other things that keep us safe. Otherwise, the spending cuts would have to be even higher.

Of course its possible to do all this, however, I can't imagine that there is a political will among the people or the politicians to support the kind of drastic spending cuts this would take.  Bottom line, to balancing the budget is going to require some combination of cutting defense spending, cutting other spending, and higher taxes.

How much we spend to keep us safe

The U.S. spends a lot of money keeping us safe from threats foreign and domestic. 100s of billions are spent by our government on national defense activities to protect us from foreign threats.  Tens of billions are spent on law enforcement activities protecting us from foreign and domestic threats.  Putting it all together, I count 820$ billion spent in 2009 to keep us safe.  That's over 27% of all federal on-budget spending.

Here's the pie chart of all the things we do to keep us safe. To be clear, this isn't just what we spend on national defense, this is all the money the federal government spends to keep us "safe".

(Click chart for Larger Image. Click here for numbers the chart is based on)

Here's the various functions, subfunctions and accounts that deal with keeping us safe.

1. 661$ billion for National defense.  This is the entire National Defense (function "050").  By far the largest expense coming in at a staggering 661 billion dollars.  It is the total of all accounts that OMB labels as "National Defense"
2. 95$ billion for VA benefits. The second biggest expense is the VA benefits and expenses(function "700").  It is the total cost of all accounts that OMB labels as "VA benefits".  It's not really the cost of immediate security, but the cost of security provided in the past.
3. 27.5$ billion for Law Enforcement. The third biggest cost is law enforcement activities at 27.5$ billion(subfunction 751) This is the police, FBI, DEA, etc...  This doesn't count court costs.
4. 15$ billion for Dept. of Homeland Security. This covers all the accounts of the Department of Homeland Security minus the accounts categorized as "National Defense" and "Law Enforcement" so as not to double-count.  I also subtracted the accounts having to do with natural disaster recovery.  What's left is things like TSA, Customs & Border Control, and much of the U.S. Coast Guard.
5. 7.3$ billion for Prisons. The cost of Federal Correctional activities(subfunction 753) is recorded as a separate subfunction from Law Enforcement.
6. 6.3$ billion for International Security Assistance. This is Helping our allies, nonproliferation work, and ongoing Peacekeeping operations.
7. 4.6$ billion for criminal justice assistance. Criminal Justice assistance (subfunction 754) represents several special projects of the Dept of Justice.  It can be things like increased community patrol to sepcial narcotics control programs.
8. 1.3$ billion for Foreign information. This is, among other things, broadcasting pro-American messages to other countries as well as joint operations between countries.
9. 470$ million for Andean Counterdrug Programs. I think the purpose of this account that was hiding under the "Humanitarian assistance" subfunction is self-evident.
10. 392$ million for Iraq Relief and Reconstruction Fund. I think the purpose of this account that was hiding under the "Humanitarian assistance" subfunction is also self-evident.

If you think that spending only 27% of our tax dollars keeping us safe is too little, don't worry.  I totaled up the numbers from previous years and found out that's actually a pretty low percentage.  In 2008 it was 30%, and, according to the current budget estimates, it is set to go back up to 29% in the next fiscal year.

How much do we REALLY spend on Welfare?

Whenever you see a pie graph that is meant to represent all government spending.  You will probably see a graph like the one at US Government Spending or the one at Wikipedia which shows that "Welfare" spending is 12% of the federal budget.  The problem with that is that the government has no spending category called "Welfare".   Therefore, what somebody calls "Welfare" is somewhat subjective and undefinable.

The Office of Management and Budget(OMB) does have a spending category called "Income Security".  The two pie graphs I linked to in the introduction just take that entire category and divides it by total spending to get 12%.  In 2009 accounts categorized as "income security" accounted for 533$ billion in spending.  According to the government printing offices' historical tables, table 3.2: Oulays by Function and Subfunction, that spending is broken down into 6 distinct subfunctions.

1. General retirement and disability insurance
2. Federal employee retirement and disability
3. Unemployment compensation
4. Housing assistance
5. Food and nutrition assistance
6. Other income security

But as I described in a previous post, 3 out of the 6 income security subfunctions go to pensions and unemployment - things that must be earned by working and paying into.

The 3 remaining subfunctions cost a combined 284$ billion dollars, but even that doesn't tell the whole story.  Over the last week I've taken a more detailed look at each of these subfunctions to get an idea of how that money is spent.  What I found was that even in the remaining subfunctions, Food and Nutrition, Housing Assistance, and Other that not all of that spending was spent on the poor.

When I analyzed the "Other" income security subfunction, I  graphed how that money was spent by categorizing that spending into 4 different categories:

1. Not Directed at PoorEarned: Welfare not targeted to poor.  The poor may use these programs, but just being poor will not qualify you for these programs.
2. Direct:  Welfare that's Direct money to the poor
3. In-direct: Money paid to 3rd parties on behalf of the poor
4. Poor & Middle Class: These are tax rebates that poor and most middle class people qualify for and use.

I would now like to extend that analysis to the entire 533$ billion that the U.S. government spent on "income security".  Here's how the numbers break down.

(Click chart for Larger Image. See The Numbers for  this Chart)

As you can see the vast majority of the money spent in the "Income Security" function of the government is spent on programs not directed at the poor or programs where the income must be earned.  If you want to know how I categorized everything, here's how I did it:

• Unemployment and Pensions are classified as not-directed at poorEarned.
• For Food & Nutrition, WIC & SNAP(Food Stamps) are "Direct", School lunches are "non-direct", the rest are "not-directed at poor"
• For Housing Assistance, I categorized the temporary "new homeowner" credit as "Poor & Middle Class" and the rest as non-direct
• For the rest you can read my previous post on how I broke down "Other Income Security"

If you would like more details on why I categorized the programs as such, I suggest you read my previous posts: Income Security, Food and Nutrition, Housing Assistance, and Other Income Security.

If you total up the direct and non-direct spending categories which are all the programs that are meant to help the poor, you will see that the federal government only spent 191$ billion on "welfare" for the poor.  That would be 5.5% of the unified budget.  I counted off-budget programs since the pie graphs in the beginning counted social security and other "off-budget" accounts.  If you only want to go with on-budget expenditures it's 6.4%, still a far cry from the 12% that most internet graphs will show you.  Just for fun I decided to graph those numbers.  Feel free to copy these graphs to show anyone who thinks we actually spend 12% of the federal budget helping the poor.

 

(Click charts for Larger Images.)

Source for all numbers is the Public Budget Database

Other Income Security Programs

The federal budget has a Subfunction of the "Income Security" function called "Other Income Security". It is for all the programs that don't fit one of the other 5 subcategories.  These "other programs" cost 154.3 billion dollars.  Here's a look at what these programs are and what they cost.

(Click chart for Larger Image. See The Numbers for  this Chart)

Here's a brief description of each of the sections:

• TANF is the Temporary Assistance for Needy Family program(18$ billion).  Before 1996 this was known as "AFDC".  It's probably the program that most people think of when they think of "Welfare".  It gives money directly to people to spend.
• SSI Disability is the collection of all SSI accounts(44.5$ billion).  It is disability insurance paid to people who cannot work and have no other income
• Foster Care covers both Foster Care and Adoption services(7$ billion)
• Child Care Enforcement is only the cost of enforcing Child Support minus the Federal Share of Child Support Collections(3$ billion)
• The biggest expense is Tax Rebates.  There are a number of tax credits mostly targeting the poor(70$).
• Other Non-Direct Welfare are programs that help the poor, but unlike TANF they do not give money directly to its recipients(12$ billion).

There's a lot of different programs in those last 2 categories so let's look at them individually.

Here's how the 70$ billion in returned tax credits break down:

(Click chart for Larger Image. See The Numbers for this Chart)

The biggest expense is the Earned Income tax credit which is a tax rebate for people who work, but don't earn enough to get out of poverty.  Same with Making work pay.  The other tax credits are all credits that you don't necessarily have to be poor to receive.

As for the "Other non-direct welfare" programs, here's how that 12$ billion in spending broke down in 2009.

(Click chart for Larger Image. See The Numbers for this Chart)

Except for the Refugee Entrant program all of these programs are targeted only at the poor.  Contingency was part of the ARRA(Stimilus package) money to help bolster some of the welfare programs.  Child care and Energy Assistance help pay for child care and home heating for the poor, but that money goes directly to the providers.  Finally, CRTA is a program that monitors several of the child welfare programs for improvement(including child care and Child Support Enforcement)

There's a lot of programs here.  So let's regroup these programs into the type of help they provide and who they are intended to help.

1. Not Directed at PoorEarned: Welfare not targeted to poor(foster careadoption, SSI Disability, Child Care Enforcement, Refugee assistance, and other family programs charged to the Child Care Enforcement account).  The poor may use these programs, but just being poor will not qualify you for these programs and non-poor use as well.
2. Direct:  Welfare that's Direct money to the poor (TANF)
3. In-direct: Money paid to 3rd parties on behalf of the poor(Energy Assistance, free child care, CRTA, the stimulus expansion(contingency), and the two tax credits "Making Work Pay" and "Earned Income")
4. Poor & Middle Class: These are tax rebates that poor and middle class people qualify for and use.

Here's how much we spend on each type of welfare programs in the"other income security" subfunction.

(Click chart for Larger Image. See The Numbers for this Chart)

In my next post I'm going to combine these numbers with what I found in the other sub categories of "Income Security"(Nutrition and Housing) to get a true picture of the U.S. welfare system.

The Cost of Dead-Beat Dads on the Federal Budget

Here's an innovative way to reduce the federal deficit.  Make sure you and everyone you know pays their child support on time.  It sounds crazy, but listen to this.

I was looking at some of the accounts that the OMB labels as "Other income security".  One of the accounts that stuck out was "Payments to States for Child Support Enforcement and Family Support Programs" which cost 4.35 billion dollars in 2009.

Just by reading the title you can probably guess one of the main functions of this account.  It makes sure that people pay their child support.  I was surprised by how much the fed spends to enforce child support payments.  However, what about that "and Family Support Programs?".  How much of that 4.35 billion dollars is spent on Child Support Enforcement, and how much is spent on "Family Support Programs"?

Fortunately, the Administration for Children and families has a breakdown of that.  Page 8 of the Congressional Justification of the  Child Support Enforcement/Family Support Programs(pdf) has the info.

There are 2 other programs that the account covers that combined are a legacy Social Security program to territories(33$ million)  and a "Repatriation" program that covers sick or disabled Americans coming back to America (1$ million).  The rest of the outlays go towards Child Support Enforcement.  The federal government spends 4.3 billion dollars making sure people pay their child support.  With that money...

CSE agencies locate non-custodial parents, establish paternity when necessary, and establish and enforce orders for support.

So, to all you dads (and moms!) out there who might not be paying your child support.  Not only are you hurting your child, you're costing the rest of us tax payers money too.  So start paying your child support, ya deadbeats!

Six Food and Nutrition Assistance Programs

The federal budget has a Subfunction of the "Income Security" called "Food & Nutrition Assistance". This subfunction costs 79 billion dollars. What is that money being used for? Despite there being 15 accounts listed under the subfunction "Food & Nutrition Assistance", there are actually only 6 total programs taking up a combined total of 79 billion dollars. The six programs and their relative cost are below.

As you can see the Supplemental Nutrition Assistance Program(SNAP) makes up almost 70% of the spending. This is what most people know as food stamps. The next biggest categories are Child Nutrition Programs and WIC. The former is basically the school lunch program, and WIC is basically SNAP, but specialized for women and infant children. All three of these programs are designed to help feed the poor and combined account for 98% of the spending in this category.

Of the remaining programs, here's a brief overview of each of them.

Section 32, the "Funds for Strengthening Markets, Income, and Supply" is a program used by the Secretary of Agriculture was a program form the depression. It was the program the government used to buy excesses in agricultural output to stabilize prices. It's purchases normally went to shelters and food banks. 80 years later not much has changed. The reason it's labeled as "Nutrition Assistance" is because the food it buys normally goes to support the other 5 food programs.

"Emergency Food & Shelter" isn't a welfare program for the poor. It's the only program of the six that isn't. It pays for the food that FEMA delivers to disaster sites. Being that it's only 284 million dollars, (a rounding error by federal government standards) this entire subfunction may as well be considered "Welfare".

The last program, the "Commodity Assistance Program" is the smallest welfare program. It is a collection of funds to deliver buy food for various soup kitchens and emergency stores.

So there you have it, unlike the housing programs, 99.9% of the funds labeled "Food & Nutrition Assistance" in the "income security" function are in fact welfare programs.

Decreased Spending Alone Can’t Fix the Budget Deficit

As we all know the size of the budget deficit has grown enormously in the last couple years. One only has to look at the increasing size of the budget deficit over the last decade to see why there's cause to be concerned about it. Starting in 2008 the deficit has shot up several hundreds of billions of dollars.

(Click Chart for larger view. Click Here for the Numbers )

If you ask most people why this is, they would tell you it's because of an increase in spending. Both pundits and voters will tell you that. They would tell you that for good reason, spending is increasing pretty drastically as you can see below.

(Click Chart for larger view. Click Here for the Numbers )

However, you'll notice that government spending has not increased as sharply as the deficit. Thanks to (presumably) the recession and tax cuts, government revenue has decreased just as drastically as spending has increased.

(Click Chart for larger view. Click Here for the Numbers )

While spending has increased every year since 2000, revenue(tax receipts) is about the same level as it was in 2000. Accounting for inflation, that means that in 2009, people and companies paid fewer taxes than they did in 2000 when the budget was balanced and there were far fewer tax payers.

Looking at these numbers it's hard to see how cutting spending can be the only strategy to cutting the budget deficit. Especially, when decreases in revenue has every bit to do with how we got here. If you don't believe me, let's look at the data another way. See the chart below.

The chart may require a little explaining. The Blue line is how much the budget deficit increases every year or the "rate of increase". For example, in 2001 the "deficit's rate of increase" went up by 119 billion when we went from an 86 billion surplus to a 32 billion deficit.¹ The red line is the amount of increase in spending. The orange is the decrease in tax receipts. Therefore, adding blue and orange together will get you the blue line. If you want to decrease the budget deficit, you want all 3 of these lines to be negative.

(Click Chart for larger view. Click Here for the Numbers )

In 2001 to 2003, the budget deficit was increasing quickly because spending was going up at the same time tax receipts were going down. Then in 2004 through 2007 the deficit started decreasing despite an increase in spending. This was because of an increase in tax receipts. For 3 years the budget deficit was heading in the right direction. In 2007 the amount of government spending increased, but not as dramatically as in previous years.

Then in 2008 when the recession hit, both the rate of spending increase and the rate of lost tax receipts increased rapidly. Once both were positive, the rate of the deficit increase skyrocketed. In 2009, the gigantic increase was caused by a 500 billion in increased spending and 400 billion in lost tax receipts.

It's hard to see how any plan to balance the budget can work if it doesn't somehow recover that 400 billion lost in tax receipts. It might be a tough pill to swallow for many, but increased spending wasn't the only thing that got us here, therefore decreasing spending can't be the only thing that gets us out.

(¹Numbers don't appear to match because of rounding)

(The source for all these numbers is the Public Budget Database)

36 Housing Assistance Programs

I started studying all the accounts listed under the OMB "Housing Assistance" program. Of the 41 accounts it looks like there are 36 different accounts for various housing assistance programs from 2009. That's right, 36 different accounts. And on top of that, one of those accounts is "Other Assisted Housing Programs" meaning that there are even more programs than the 36 listed at the account level.

Of those, most are meant to help the poor get into some type of housing (as you probably would expect). In fact, in 2009 only one program's purpose didn't have something to do with that. That was the temporary first-time home-buyers housing credit. That cost came to just over 9 billion. So of the 51 Billion our government spent on housing assistance, only 42 billion of it actually goes to help the poor.

Something I find curious is the 6 accounts related to the "Rural Housing Service". Not that they exist or that there's 6 of them, but the fact that it's a part of the Dept. of Agriculture instead of HUD. The Bureau cost 1.1 billion dollars on housing assistance and 1.5 billion for everything that it does. While it is a minuscule program, i'd like to know more about it. I'll research it more in the future.

Another curious program is the Affordable Housing Program. It costs 152 million and doesn't really seem to do anything. It's only been on the books since FY1990 when it cost 13 million. It's price tag went up slowly until 2008 when it cost 354 million. Then in FY2009 it went down to 152 million which is the projected cost for the next couple years. I did some googleing and found out that the program is part of the FDIC(Federal Deposit Insurance Corporation). It looks like the program is meant to sell FDIC held properties(presumably taken from a bank liquidation) and sell them to landlords at a reduced rate as long as that landlord promises to have reduced cost rent for some of the properties. Being that the website says there are "no properties for sale", I assume that the 152 million that the program costs is related to making sure that landlords fulfill their part of the bargain. At a cost of 152 million, it is even more minuscule than the "Rural Housing Service", however it still seems like a program that costs more than it's worth. I'll be researching more into this program in the future as well.

One last thing that gets me is not the amount we spend on housing assistance for the poor, but how many housing programs there are. Fortunately, most of the accounts are pretty small(By Federal Government standards, I'm going to say half a billion is "small"). It just seems like there could be some way to consolidate all of them and save a few million or even a billion. After all, save a few hundred million dollars here and a billion dollars there, and pretty soon we're talking some serious cash!

(Click Here to see my Notes on the Housing Assistance Programs)

Income Security

Looking at the Outlays Historical table, I see an expense group labeled "income security". This is what most people would probably (and improperly) label as "Welfare". However, there is a lot more going on in that category than just so-called "Welfare". The six major subfunctions are:

a
• Federal employee retirement and disability
• Food and nutrition assistance
• General retirement and disability insurance (excluding social security)
• Housing assistance
• Other income security
• Unemployment compensation

Of the 533 billion that the government spent on "income security" in FY2009, here is the amount the government spent on each of the 6 subfunctions.

(Click Chart for larger view. Click Here for the Numbers )

As you can see a large portion of "income security" has nothing to do with "Welfare". There are two subfunctions having only to do with pension and disability claims of federal employees and some private sector empoyees(I would like to dive in further on this in a future post). I doubt that many would call "Unemployment" as "Welfare", since you have to first work and pay into it for a certain amount of time to qualify for it. Also, it's meant to only be temporary. So, of the three remaining subfunctions, combined they come up to 284 billion in federal spending. That means that if we got rid of every single welfare program in the federal budget, the budget deficit would still be over a trillion dollars. Wow! What a mess we've gotten ourselves into... In future posts I'd like to examine each of those 3 subfunctions more carefully.

Where our Federal Tax Dollars Go

Looking at the Outlays by Function graph, one can see a high level view of where the money goes that the federal government spends. However, it's always easier to analyze data visual than to just look at raw numbers, so I created some charts for myself to look at.

(Numbers Here)

As you can see Social Security and National defense are the biggest expenses followed by Income Security, Medicare, other Health costs, and the CommerceHousing Credit. One thing I noticed is that Commerce is normally a much smaller percentage of the budget. It was skewed by the Troubled Asset Relief Program(TARP). However, the other 5 categories are about the same size for 2009 as 2008. Despite, the TARP skewing, those 5 categories still cover over 70% of all U.S. spending. Off course, that list is the total expenditures list. What about taking a look at the "on-budget" only. This would be interesting since the "off-budget" items (are supposed to) pay for themselves.

(Numbers Here)

Wow, what a difference taking away off-budget items does to the numbers. All the numbers changed around, but there was only one change in the top 5 most expensive categories. Social Security is towards the bottom and now Net Interest is now the fifth highest expense. I know why Social Security dropped off so much, but what about net interest? When taking away off-budget outlays, it's expenses went up by 120 billion. So much so that interest on past debt is 10% of the budget. I think I'd like to spend some time researching why it shoots up so much.