Trying to make sense of economics, the dismal science, is a pretty thankless task, especially with the sharp political divide in Washington and the myriad ways of expressing statistics. Nevertheless, with the Great Recession and stubbornly high unemployment, economics is at the core of our national budget deficit problem.
Recently I did a new search on Wikipedia while trying to answer a comment on another blog and I found some new clarity. The entry on the 2010 U.S. federal budget has been updated, and it contains a couple of good charts. The first is a pie chart showing categories of spending for the year. But the more interesting one is a bar chart showing broad categories of spending, as a percent of GDP, against the expected receipts.
With this chart, you don’t even need numbers to make sense of the problem, you can do it by eye or print it and then cut it out. Let me explain.
The light yellow area marks discretionary spending while the peach-color marks mandatory spending. “Mandatory” means the funds are already committed by law. The dark blue of course is the money expected to come in, and you can see that it is only a little above the peach-colored mandatory category. This means the money coming in only slightly exceeds what Congress has irrevocably committed us to spend. This “mandatory spending” is mainly entitlements.
Please note that the largest single item is Social Security (about 20%), down at the bottom. While it makes sense to modify that program modestly (unless you are Rick Perry), I believe no one wants to change it significantly.
The next largest item is Defense (about 19%). While that is large, nobody in either party has suggested doing away entirely with the Army, Navy, Air Force and Marine Corps, and defense expenditures are in fact fairly low by historic standards, so I don’t see much opportunity for significant cuts there either. Some hawks are already screaming over the low level of forces available, with N. Korea, China and Iran as potential threats. (The president’s new plan proposes to save $1 Trillion over 10 years by ending the wars in Iraq and Afghanistan, which amounts to an average of $100 Billion per year.)
Now please look at “other” in the “mandatory” peach section. This is mostly unemployment and welfare (about16%). This money has also been committed, and it is what is keeping about 15% of Americans from living like Somali’s at the present time.
Notice that the next largest slice is interest on the national debt at 4.63% – that is increasing as the debt grows – no savings possible there. And the remaining stuff is small potatoes in comparison to the big ones, even though it includes running the whole government and all “discretionary” spending other than Defense.
So that leaves the remaining big two, both in the yellow “discretionary”: Medicare and Medicaid at a combined 21%. I chose those as the only hope of balancing the books because, as we have discussed, America pays double what socialized countries pay for comparable medical care. I think you can tell by eye that if you were to cut each of those in half, and cut Defense as the President plans, and if the economy improves some, then we at least have a fighting chance at a balanced budget. That is why I say, fixing Medical by adopting a single-payer system is indispensable to solving the budget/debt dilemma. QED.