Everything You Need To Know About Federal Spending In Five Charts

By Daniel J. Mitchell

I write constantly (some would say incessantly and annoyingly) about entitlement spending. And I occasionally write about discretionary spending.

It’s time to address the budget in a comprehensive fashion. Let’s look at five charts to put everything in context and to show how we got into our current mess.

Our first chart (based on Table 8.2 from the Office of Management and Budget’s Historical Tables) shows what has happened to major spending categories from 1962 to 2017. And all the data is in inflation-adjusted dollars (2009 benchmark) to accurately gauge how and why the burden of federal spending has grown.

This next chart shows the actual percentage increases in the major spending categories during this time period. The two big takeaways are that 1) the defense budget is not the cause of our long-run fiscal problems (though that doesn’t mean it should be exempt from cuts), and 2) entitlement expenditures have exploded.

And if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same trends will prevail for the next three decades.

In other words, our fiscal problems start with entitlements and end with entitlements.

If you want to look at the problem with a broader lens, this next chart shows that the problem is domestic spending (i.e., the combination of entitlement and domestic discretionary outlays).

If you’re pressed for time, you can stop reading now. You have the key information already.

But if you want to get a bit wonky, here are two other charts that help explain the intricacies of how budgets work (or don’t work!) in Washington.

The first thing to realize is that there are two budget processes in Washington. There are entitlement programs, which basically operate on autopilot. For all intents and purposes, the President and Congress could go on vacation for the next three years and programs such as Social Security, Medicare, Medicaid, and Obamacare would mechanically continue. But there is also “discretionary” spending for the Pentagon and various domestic programs, all of which is determined through an annual “appropriations” process. Whenever you read about a government shutdown, it’s because politicians can’t agree on the level of funding for the discretionary part of the budget.

Now let’s get to my favorite part, which is figuring out how to limit the size of the federal leviathan.

This last chart shows that net interest spending is genuinely untouchable (unless one wants a Greek-style or Argentine-style default). The rest of the budget, however, can be addressed. Entitlements can be changed through “reconciliation”, which is a legislative process designed to minimize procedural roadblocks (in general, tax bills also use reconciliation legislation). And discretionary programs can be changed via annual appropriations legislation.

I should add that net interest may not be directly touchable, but interest payments can be reduced by controlling spending and thus reducing red ink.

Another thing to understand is that the budget caps (yes, the ones that were weakened in 2013, 2015, and earlier this year) only apply to discretionary spending.

And the most important thing to realize is that the only solution to our budget mess is genuine entitlement reform. Which is why we need constitutional (and comprehensive) limits on total outlays. Politicians will only do what’s right if every other option is off the table.

Originally published at International Liberty

Daniel J. Mitchell is a top expert on fiscal policy issues such as tax reform, the economic impact of government spending, and supply-side tax policy. Mitchell a former senior fellow with The Cato Institute and The Heritage Foundation, and served as an economist for Senator Bob Packwood and the Senate Finance Committee. His articles can be found in such publications as the Wall Street Journal, New York Times, Investor’s Business Daily, and Washington Times. He is a frequent guest on radio and television and a popular speaker on the lecture circuit. Mitchell holds bachelor’s and master’s degrees in economics from the University of Georgia and a Ph.D. in economics from George Mason University. His blog is Liberty – Restraining Government in America and Around the World.

This article was sourced from Mises.org

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7 Comments on "Everything You Need To Know About Federal Spending In Five Charts"

  1. They are essentially the same charts showing the biggest increases are in Medicare and other “social support” programs. We can also see that social security itself has remained at roughly the same percentage of overall spending which makes us have to face the hard fact that Medicare and social support services are the real challenge (aside from government waste and fraud in general). Obviously that means getting a grip on the cost of health care and all the corrupt practices inherent in that system.

    • Actually if we cut military spending by 25%, we would still be spending more than the entire rest of the planet on things that murder, and we’d have enough to give everyone a college education (or send them to a trade school) AND feed the homeless.

      • No question the military budget is bloated. The Pentagon can’t account for 6 TRILLION DOLLARS. It is absolute madness to give them a single penny more.

  2. WEREFEAT 106. | March 3, 2018 at 6:32 am | Reply

    Abolish the government and problem solved.

  3. The debt society that the unholy goat worshipers have wrought upon the public should be reset to 0.
    Usury is unChristian.
    Suggested reads.
    The Creature of Jekyll Island, by G. Edward Griffin …”can you say the biggest scam in the history of the United States….” as he summed up his book under a hot D.C. sun on the capitol lawn.
    The Committee of 300, by John D. Coleman.
    Hope and Tragedy , Quigley.
    End The Fed, by Ron Paul

  4. Sorry but this is an improper financial analysis.

    SS/Medicare have a payroll tax associated with it, so you should show the expenditures as a net spending number (payroll tax less spending).

    Entitlements (SS/Medicare) are a future problem indeed. There is no dispute on that. The program has been significantly mismanaged by both parties since the inception. And Bush did much damage by adding prescription drug benefits to Medicare with NO corresponding increase to payroll rates – thus creating an approx $7 trillion unfunded liability.

    Another point – did the writer use the governments bogus inflation numbers for constant dollar calculations?

    Not buying the defense numbers either. When I looked at the historical tables back in 2010 – well defense was running approx #200B a year before the Afghanistan/Iraq wars and then ran up to average of $600B after.

  5. “Improper numbers”? The scumbag is flat out lying and attacking the social safety nets for his synagogue of satan money changers slavemasters. How about first admitting America is ILLEGALLY bombing at least 7 different countries based on the israeli inside job false flag attack of 9/11 and other flimsy LIES and GREED. The social safety nets save American lives while the illegal wars of aggression cost lives, money, security, etc…
    Break it down here you obviously want the money spent on killing people, including and especially AMERICANS, how very Bolshevist of you…

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