The Crux of the Budget

Everyone likes free stuff but it really isn't free.

Having trouble understanding the federal budget? Don't feel too bad. Most politicians don't get it either. And even if they do get it most of them are more worried about the next election than they are about the truth. What truth? The truth is by 2025 Medicaid, Medicare, Social Security and interest payments will be equal to our tax revenue if things go forward as they are today. Here is a quick overview of the budget and key terms. After this you will know which politicians are blowing smoke up our preverbal skirts and that Republicans and Democrats both need to get real.

The federal budget basically breaks down into two types of spending:

• Mandatory (money that has already been committed) which includes Medicare, Medicaid, Social Security (the three together are often referred to as entitlements) and other items such as unemployment compensation and veterans benefits.  Also included in this category is interest on the money we borrow, currently the fastest growing part of the budget.
• Discretionary (money that we have control over, Congress sets the amount we spend on an annual basis) is broken down into two categories – defense and non-defense. Non-defense includes most government programs and departments.  The Department of Energy, Education, Agriculture and Transportation are all included. Another item included in that 13% is the money the government spends to help spur innovation though research and development.

Common Myths about government spending

• Foreign Aid makes up a significant part of the budget. In reality it’s less than 1% which is still too much. The US State Department, who is primarily responsible for administering aid, budget is around $50 billion.
• The government spends most of our money on wasteful programs and departments. While there certainly is waste in the discretionary budget – according to the Government Accountability Office (GAO) there is about $200 billion in duplicative programs, the largest line item is Social Security. 
• We could balance the budget by getting rid of non-defense discretionary spending. From the chart above you can see that discretionary spending only makes up about 13% of the budget or about $477 billion.  This year we will run a deficit around $1.3 trillion.  Cutting all non-defense discretionary spending only gets you about 1/3 of the way there.

The future of the budget

• As mandatory spending programs continue to grow we will see what is commonly referred to as “crowding out.” Where Medicare, Medicaid, Social Security and interest creep into spending on other programs and don’t allow us to spend what we would like to or need to on other programs.
• By 2025 we will be looking at a situation where Medicare + Medicaid + Social Security + interest = Revenues (taxes).  What will we do when these are the only programs we can fund?

Decisions

That should tell you a little about the different kinds of decisions we really need to make. We need to do more than trim a little fat here and downsize a little there. We need to make BIG decisions about where we want to go as a nation. Do we want to increase government revenue (taxes) to pay for entitlements or do we want to cut entitlements and return more responsibility and autonomy to the people? With nearly half the nation not paying any tax I think we will have a nearly even vote on that subject but often times those paying for the party get to say when the party is over and like it or not this party is ending. Republicans are just as guilty as the Democrats when it comes to deficit spending but this year the Republicans are looking to cut the budget drastically with the Romney-Ryan Budget Plan. Does it pay down the deficit? Not really. But weaning off massive deficit spending is better than doubling down on the already bloated debt which is exactly what the Obama administration is looking to do. I'm not suggesting that Democrats are part of a liberal left-wing conspiracy to destroy America but I do suggest that current DNC budgets and programs will further weaken America. 

Taking risk out of the equation ruins the game.

A bankrupt America is a weak America. An America that guarantees everyone everything they need dampens ingenuity, entrepreneurism, frugality, and American exceptionalism. Nothing motivates people more than hunger, poverty, and failure. Simply removing failure from the equation destroys the very reason we excel as a nation and as a people. Removing failure from the equation is like removing death from war. If there were no death involved in war we would be constantly at war. If we remove failure from our equation we have little reason to succed. If we have the confidence to return to the people the responsibility of taking care of themselves we will find that most will rise to the challenge and even help those around them that are in need. As a nation of immigrants we all come from good pioneer stock and we have the ability and drive to tackle any problem. Now we just need the reason to do so. Government needs to exit and the individual needs to step forward once again to steer the course back to fiscal sanity and American prosperity. Vote Romney for President and we will take that first step towards American prosperity. It won't be the last step we need to take but at least it's a step in the right direction. It's been said that the price of freedom is eternal vigilance. We've let politicians control the cash register too long and now we need to remind them just who's money they are pilfering. 

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