Monday, January 20, 2014

'Blessed Are The Young... For They Shall Inherit The National Debt!'--Herbert Hoover

'Blessed are the young for they shall inherit
 the  national debt'
-Herbert Hoover
Sometimes the best way to make very complicated things, such as the US federal budget, more comprehensible is to try to compare it to something you might be more comfortable with such as 'spending per capita'.

Or more precisely: 'How much is being spent for every man, woman and child in America today?'

Note this is not spending on you in particular. In fact, you may never receive one dollar of any of this federal spending directly in a check sent to your mailbox until you qualify for Social Security...if you live to be eligible that is.

This is the average amount of money being spent as if every single person in America was responsible for paying the bills.  Which, in essence, you are since you keep electing the same people who go to Washington and keep spending more and more money every single year.

You hate to say it is 'your fault'. So let's just say it is the collective 'our fault' for allowing it to happen for too long on both sides of the ideological spectrum.

There are 310 million+ people now living in the United States. What these enterprising reporters from the New York Times did was to take the most recent budget deal just passed by Congress (maybe the only significant budget deal we will see under the entire Obama Presidency) and divide the final appropriated numbers of selected federal programs by 310 million people to get these per head numbers below.

Here's the article by Wilson Andrews and Alicia Parlapiano:  The Federal Budget Per Person

Remember this is just for the $1.1 trillion bill just passed by Congress, plus they added Social Security and Medicare for reference purposes. The entire federal budget is about $3.8 trillion annually now so a complete list of spending per capita by each federal program would make your eyes glaze over before they pop out of their sockets.

The one glaring omission from this list? Interest on the national debt. It currently is in the range of $223 billion per year or about $720 per person, more than what we spend on veterans retirement and veterans health care and food stamps...combined.

Think about that for a moment. The amount of money we spend each year purely on interest to satisfy past consumption of government services, dating back to perhaps at least 1984 (if there are still any 30-year bonds still left from back then), is greater than the entire amount of money we spend on all of the veterans who served their country bravely for their retirement and health costs plus the cost of all the food stamps we issue to people for food.

Interest on the national debt is an 'entitlement' mandatory function, make no mistake about it at all. We are forced to pay all of the interest on time every time it is due or else our credit rating will take a far greater hit than it has already been hit earlier in the Obama Administration when it was downgraded for the first time in recent history.

The fear we have is that all of the monetary policy stimulus undertaken by the Fed over the past 4 years is going to rear its ugly head in the form of rapid interest rates once the economy gets going again, if it does before the end of the Obama Presidency that is. When it does rear its ugly head, interest rates on the then existent debt could go back to 'normal' rates of which case interest costs could at least triple or even perhaps reach $1 trillion annually.

That would be a very nasty outcome that benefits no one personally but it does benefit the government which can then pay its debt with devalued dollars over the next 30-50 years. Paying debt back with dollars that are worth 10 cents of what they are worth today is the time-honored way that every government has used to inflate their way out of debt crises in the past.

We will probably be no different, given that we have already done that several times in our history.

We wanted to make the point that even though many to most people, especially seniors today and soon-to-be senior Boomers, want to believe that somehow, some way the money being spent on Social Security and Medicare is 'their' money that has been locked up in a vault somewhere, sprinkled with fairy dust and allowed to grow in value in some mysterious way, it just simply is not true when you really look at it closely.

But we don't have the time tonight to go into that again so maybe at another time we will try to set the record straight on that score.

As we said, 'federal budgets and federal spending and federal taxes are confusing'. Maybe these comparisons below will help you educate your friends, neighbors and more importantly, people who have no idea of how much we are spending on anything in the federal government any more.


 $259 Food stamps ($82 billion MANDATORY SPENDING)
   $61 Child school lunch program ($19.5 billion MANDATORY SPENDING)
   $40 Loans and direct payments to farmers ($12.5 billion MANDATORY SPENDING)
   $30 Crop insurance ($9.5 billion MANDATORY SPENDING)
     $8 Food and Drug Administration ($2.5 billion)
     $3 Food and Safety Inspection Service ($1 billion)

$3 National Weather Service ($954 million)
$3 Census Bureau ($945 million)

$72 Pell grants ($23 billion)

$2,672  Social Security ($848 billion MANDATORY SPENDING)
(Social Security is financed through other legislation and was not addressed in this bill)

$1,591 Medicare ($505 billion MANDATORY SPENDING)
(This is the total cost of Medicare for 2014, but only a portion of it was provided through the bill).

$36    Internal Revenue Service ($11.5 billion)
$0.27 Supreme Court ($86 million)
$0.001 Compensation of the president ($450,000 MANDATORY SPENDING)

$94 National Institutes of Health ($30 billion)
$27 Head Start ($8.5 billion)
$22 Centers for Disease Control and Prevention ($7 billion)

$33 Customs and Border Protection ($10.5 billion)
$31 Federal Emergency Management Agency (FEMA) ($10 billion)
$31 Coast Guard ($10 billion)
$17 U.S. Immigration and Customs Enforcement ($5.5 billion)
$16 Transportation Security Administration (TSA) ($5 billion)
  $5 United States Secret Service ($1.5 billion)

$26 Environmental Protection Agency (EPA) ($8 billion)
  $8 National Park Service ($2.5 billion)
  $3 Smithsonian Institution ($805 million)

$26 Federal Bureau of Investigation ($8.5 billion)
$22 Federal prison system ($7 billion)
  $6 Drug Enforcement Administration ($2 billion)

$4 House of Representatives ($1 billion)
$3 Senate ($859.5 million)

$1,802 Total, including war spending ($572 billion)

$56 NASA ($17.5 billion)
$23 National Science Foundation ($7 billion)

$27 Global health programs ($8.5 billion)
$10 Military assistance to Israel ($3 billion)
  $5 Assistance to Egypt ($1.5 billion)
  $1 Peace Corps ($379 million)

$129 Federal Highway Administration ($41 billion)
(Through limits on obligations from the Highway Trust Fund and exempt contract authority)

$49 Federal Aviation Administration ($15.5 billion)
(Through appropriations and obligations from the Airport and Airway Trust Fund.

$4 Amtrak grants ($1.5 billion)

$267 Veterans compensation, pensions and benefits ($85 billion MANDATORY SPENDING)
$174 Veterans health care funding ($55 billion)

Most of the appropriation for fiscal 2014 was provided in the fiscal 2013 bill.

Sources: Congressional Quarterly; Congressional Budget Office; Office of Management and Budget; Source: The Committee for a Responsible Federal Budget; U.S. Census population clock

© 2014 The New York Times Company

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