Ever wonder where all your taxes go? I came across a blog site (https://www.usgovernmentspending.com) that takes budget numbers from official sources and crunches them. You can then use their tools to create pie charts or graphs or tables to clearly show what you’re interested in.
Now, I haven’t gone through it with a fine-tooth comb but the numbers I see are very similar to what I see on the official US CBO site. I don’t believe there’s an ideological bias tilting them. The featured image is from a different source, just to confirm the general “shape” of the budget pie. They divide it more finely with slightly different groupings into their wedges but it is still very similar. Unfortunately, they didn’t have anything for 2020 or for state and local spending
When looking at various budget estimates, what people with an ideological tilt will often do is just show the discretionary budget and wail about how bloated defense is or the mandatory budget and wail about how bloated social welfare programs are. If you aren’t sharp, it doesn’t occur to you that you’re only seeing a part of the Federal budget and that is only a part of the overall government budget.
These charts are deceptive:
Reading just one chart or the other would deceive you. Some programs, like Veterans Affairs, are divided between the two charts and must be added. And ignore the apparent sizes of the slices. That makes Defense “look” bigger than Social Security. The “pie” on the right should have over twice the area because it represents over twice the money.
In 2019 the National GDP was anticipated to be around 21.5 trillion.
A few notes here. The numbers for 2020 (And even 2019!) are still up in the air and coronavirus will have a big impact, so take them with a grain of salt. State and local spending are also approximate. To my knowledge, there is no central clearinghouse for detailed State budgets so you’d have to tunnel into 50+ different state and territory budgets for any kind of precision. Local budgets would be even more difficult so I’d expect only to look at the largest cities.
- Intergovernmental transfers (revenue sharing) mostly cover money sent from the federal government to state and local governments for various purposes. Essentially 3/4 of a trillion dollars of the Federal budget goes directly to the states who spend it. If you don’t subtract it from one side or the other, it would show up as being spent twice.
State + local spending is somewhat lower than Federal spending. (Just how much lower depends on who you subtract those transfer funds from.) It is kind of an invisible budget. The Feds get all the attention because of their big numbers and few even think about the $3+ trillion spent by states, territories, cities, counties, townships, and special assessment districts.
It looks like in 2019 we spent about 35.5% of our GDP in government programs. OTOH, taxes roughly equaled $5.2 trillion. The difference is in borrowing. State and local entities can float bonds to pay for what they cannot afford. The federal government sells bonds as well. Some of these go to private citizens or corporate borrowers or even foreign nations. China, for example, holds over a trillion dollars in US government debt.
Not to worry. The total 2019 Federal debt runs $25 trillion. So the dirty rotten godless Chicoms only hold about 4% of it, about the same as our eternal allies and friends, the Japanese.
Often bonds are bought by the government itself. All the money that is supposed to be sitting in Federal Trust Funds (Social Security Trust Fund is the biggest but there are others) has been used to buy US bonds. Earmarks and lockboxes are so easy to break!
While most states are required to live within a balanced budget by state laws, the Federal government has no such limitation and is allowed to consistently spend more than it takes in. It still has to borrow the difference by selling those bonds. (It could just print more money but that runs the risk of inflation.)
Hence, every year the deficit goes up by a half-trillion or so. And being the government, it only needs to worry about paying the interest on the loan. Imagine if you had a credit card that only charged 1% interest and you could charge as much to it as you wanted as long as you could handle just the interest payments. I see several trillion going onto it this year just for coronavirus. But… back to where your money actually goes.
This is a pie chart for the total government spending for the year 2020, local, state and federal combined. I anticipate some large changes. It is what we expected to spend. When you look at a budget to see where the priorities are a lot of people forget that the Federal government is only a bit over half the equation.
By far the biggest slice is for health care. That is mostly Medicaid, Medicare, and related state programs. Next largest is Pensions. Some of this budget is government pensions but most is Social Security.
The 3rd largest slice is Education. 80+% of the funding for education comes from state and local entities. Third largest slice, coming in at about a trillion, is Defense. This slice is a bit misleading in that a quarter of the defense budget (the way this pie is divided) is actually for veterans’ support, not troops and gear. That leaves $750 billion for soldiers and equipment.
Now we see a half-trillion for servicing various governmental debts. Next down the list is welfare. That includes unemployment, disability, AFDC, housing programs, WIC, SNAP, and various state and local programs. Beyond that, everything is relatively small potatoes.
To paraphrase the late great Sen. Everet Dirkson, “A billion here, a billion there, pretty soon it adds up to real money.”
So, let’s just look at the Federal budget by itself…
What jumps out at me is how much smaller the Education budget is. Not that $210 billion is anything to be sneezed at. Most of the cost of education is borne by the states directly. With roughly 20 million students in higher education and 57 million in primary and secondary schools that yields roughly $2,700 Federal dollars per student or 80K per classroom per year. State and localities spend five times that.
Health care is still the number one expenditure. “Pensions” is still number two.
Defense has moved into number three, as you would expect. The States only contribute a billion or so to the Defense budget. Ever since the Civil War ended, national defense has been an exclusively Federal responsibility. The states still have the authority to set up a state militia and some have. For example, California has the California State Guard for use in the event the National Guard gets federalized and shipped overseas.
As a parting shot, let me present to you the 1962 Kennedy budget. This was during the Cold War but before large scale US involvement in the war in Vietnam and in a time when soldiers were drafted so they could be paid extremely poorly. Think about the changes in priorities since then.