A Federal Government Whose Only Purpose Is To Write Checks

The world is an asylum made up of players and payers. The players are few and insane, but have all the power.

The only payers that resist the players are those that cherish their God-given right to live free.

**********

I love it when smart people make complicated things easy to understand. Veronique de Rugy is one of those smart people. She often writes articles for the Wall Street Journal and her articles have been linked here several times. Thanks to Bruce McCain at Questions and Observations, I came across an article she co-authored with another smart person, Jason J. Fichtner published by the Mercatus Center at George Mason University.

In this very short paper the authors used data from the Office of Management and Budget, the Government Accountability Office, and the Congressional Budget Office to analyze the trend in how our federal government spends the money they are budgeted to spend. They used that data to create three simple pie charts (shown below) that tell an amazing story of the insanity taking place our government players, elected or not, execise their power, Washington D.C. Two of the pie charts are show actual spending by category for the years 1970 and 2012. The third pie chart is what the year 2040 would look like if present trends continue.

The authors broke government spending by percentage of total spending into three broad categories.

One category they named Mandatory and appears in the pie charts in the color green. They include in this category the percentage of government  spending on what are popularly called entitlement programs like Social Security, Medicare, Medicade, and others. The term “mandatory” as well as the term “entitlement” are technically misnomers. The programs on which the money is being spent were created by laws passed by congress. Congress has the right to rescind those laws at any time. But, we use use the terms because the chances of congress rescinding the programs is slim and none.

A second category of spending is Net Interest and appears in Red. This is the interest payment on the debt the government has accumulated. It must be paid or the nation would go into default and would be declared bankrupt.

They named the third spending category Discretionary ans it appears in the charts ad the areas colored Blue. Congress has virtually no choice over the spending on the other two categories. The only things the congress can debate over spending, the only areas of spending where they some discretion are things like National Defense, Foreign Aid, Federal Highways and Bridges, Environmental Protection, and etc.

So, lets look at the pie charts and see what the trends tell us.

So. let’s compare the first two pie charts and see what has changed in the way the federal government spends money from 1970 to 2012. The first thing that jumps out at us that total spending increased from $900 billion to $3.4 trillion.  The percentage on servicing the national debt (Red)  changed very little as a percentage of total spending but total amount of dollars spent increased dramatically.. It went from 7% of $900 billion in 1970 to 6% of $3.4 trillion in 2012. In the same 42 years, Mandatory (Green) spending went from 31% of $900 billion to 58% of $3.4 trillion. That is a huge in crease both as a percentage of total spending and in total dollars spent. As a result, the percentage of total spending on discretionary spending went  from 62% in 1970 to 36% in 2012. But, because of the huge difference in total spending, the were many more dollars spent in 2012 on Discretionary spending than in 1970.

This trend can not continue. However, the authors produced a third oie chart to show us what the spending pattern would look like it the trend were to continue until the year 2040. So, please take a good look at the third pie chart.

If current trends continue, by 2040 the federal government would be spending a total of $12.3 trillion. That should take your breath away. Sadly, the authors don’t tell us what the total national debt would be, bust it must be astronomical because the percentage of spending on Net Interest (Red) would be 35% of all spending. How could that be? Because servicing our debt is the fasting growing segment of federal government spending  That is what will/would happen by continuing borrow over a trillion dollars per year out to 2040. It is insane! How insane is it? Consider this. Once upon a time a pie chart on federal government spending would be totally blue or the spending would be all discretionary in nature. But, if this trend continues, and it can not, the pie chart would be almost entirely Red except for a little Green; that is, Net Interest on our national debt and Mandatory spending on entitlements would be 99.9% of all spending. In other words, our Congress Critters would be reduced to writing checks to pay for entitlements and interest on the debt. The budget would produce it self’.

Our nation was put on this insane path by the insane people who run our government. They refuse to address the biggest problem of all; spending. None is more insane than our current president, Barack Obama. He has no intention of attacking the spending problem. He told Speaker Boehner during the so-called Fiscal Cliff negotiations that there is no spending problem. Obama said much the dame thing in his recent inaugeral address. I didn’t listen to the address, but I did read some excerpts on other blogs, Two sentences he spoke reveal just how insane he is.

We must make the hard choices to reduce the cost of health care and the size of our deficit.

But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.

I call that talking in circles. Insane people like to talk in circles. It makes sense to them.

Well, now you know what I’m thinking. What are your thoughts?

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24 thoughts on “A Federal Government Whose Only Purpose Is To Write Checks

  1. Sad. Unfortunately as the last election has shown the majority of Americans agree with President Obama. There is no spending problem. Let’s just tax the fat cats some more!

    Yeah, that always works.

    We are doomed.

    1. The majority of Americans don’t agree with Obama, but he fixed that through shooting down voter ID requirements in key locations. Lots of non-citizens in Ohio voted multiple times on multiple days because in Ohio a utility bill (which you neither have to be a resident of Ohio nor a citizen of the US to have utilities in your name) was acceptable as “ID.”

      We are only stuck with Obama because of the creative use of voter fraud. Remember that Obama lost in every single state with stringent photo ID requirements. That’s more than a little telling.

      1. No doubt there was plenty of voter fraud. But, this is what worries me as well. Obama got eight million votes less in 2012 than he got in 2008. Romney didn’t even get as many votes as McCain in 2008. So, many people stay home on the Republican side. We need to find out why.

  2. Agreed, Obama is certifiable. If he actually thinks he is doing anything of benefit to the American people, he needs to be committed. However, I think destroying this country is his goal, and he’s being quite successful at it.

    I do think it curious that the only two things mandated in the Constitution (national defense and infrastructure) are categorized as “discretionary.” I don’t think the Framers intended for the Federal government to provide entitlements. I understand that Social Security is a program that people have paid into so it shouldn’t be considered a “freebie” but when Medicare pays for vacuum pumps so little old geezers can still go at it in the sack, and we have generations of people who have never paid taxes or made a contribution to society and have made Welfare a way of life, it’s gone a bit too far. I think we should be more worried about protecting ourselves against terrorist entities that would love to see us all dead in the name of their false god.

    Even so, the health care issue is a very sore spot for those of us who can’t afford the scripts we need to live (try being an insulin dependent diabetic…) and it is very grating to know I am paying for free birth control for others, while I struggle to pay for the insulin I need to live.

    One major factor in the cost of health care is the cost of frivolous lawsuits and the insurance that healthcare providers must have to keep from being bankrupted by them.

    If Obama really gave a hang about reducing health care costs, he’d be screaming for tort reform. (As well as he would be screaming for de-regulation, for consumers being able to make free-market choices, and getting the government the flying thunder OUT of the health care biz!)

    But I’ve heard nary a peep about such a concept from B.O., his henchmen or any of the other so-called powers that be. Maybe we should look at some of Obama’s fine associates and campaign contributors and we will find out just why. Follow the money trail.

    1. Elysiabhunter, thanks for the thoughtful comment.

      “I do think it curious that the only two things mandated in the Constitution (national defense and infrastructure) are categorized as “discretionary.”

      They are discretionary in the sense that congression decides how much to spend. For everything else, there is no decision to makes. The Congressional Budget Office tells Congress what the spending must be to cover the estimated costs.

      Obama and the Democrats believe they can borrow and spend us to prosperity (unless your rich, of courde). They can’t be bothered by facts.

  3. They don’t tell us what the National Debt would be by 2040, but I will:
    For the last four years of Obama the National debt has increased at 14% annually.
    Giving our present government the benefit of the doubt, and considering likely intermittent political changes before 1940, we calculated an increase of only 10% annually, at an average interest rate of 3% (also conservative).
    ( Let me remind you that historically the national debt increases around 14% more per year than the annual deficit. Not space here to explain)
    Our national debt by 2040 will be: . . . . ready? . . . . $108.3 Trillion
    (At the present case scenario – last 4 years – with the national debt is increasing at 14%, the national debt by 2040 will be $139.2 Trillion)

    The sons and daughters of all the dumb people that voted for Obama will live under this debt. But these voters either don’t have a clue or they give a damn about their sons and daughters.

  4. I really enjoyed this piece, Jim. Those pie charts, and their evolution, tell the story.

    Those who understand compounding interest, charge it. Those who don’t understand it, pay it.

  5. An astounding statistic is that the Interest cost of the national debt was 7% of the budget in 1970, but dropped to 6% by 2012.

    Yet, during that same time the national debt itself grew by 44.2 times while the budget grew by only 3.7 times.

    The U.S. has got a bargain servicing its debt up until now. But interest costs rising to 35% of the total budget in the next 28 years is gonna be a killer!

  6. I am sure that it is a lot worse than what Jason and Veronique are painting.

    The figures and extrapolations of the CBO and the OMB cannot be taken seriously and the probability that they will fall short is very high. Why? Because they always do.

    It is hard to believe that entitlements and mandatory programs will fall from 56% in 2012 to 47% in 2040 as they show in their pie chart. I would make a bet that entitlements and mandatory expenditures will be higher than 60% by 2040. Therefore, the estimated total spending of $12.3 trillion by 2040 is probably way short.

  7. Um… teach your kids to hunt and fish and which plants are edible.

    In all this talk about spending, the issue that is the crux doesn’t come up: What does the economy look like that supports it? Doomsday comes quicker when there is less and less wealth produced, or just when the economy grows far more slowly than it needs to in order to pay for everything. But, paying for everything slows the economy. Disincentives for investment and risk, waste of human capital through welfare programs, general lack of wealth driving innovation and invention… All so the government can provide a “safety net” that isn’t a last resort, it’s a first (and only) bed that people live in, because there’s nothing for them to do but suckle the government teet. When there’s no wealth being generated to pay for it (or not enough… cronyism can only net you so much wealth)… Kaboom. And it won’t take until 2040 because the tipping point will happen far earlier than that.

  8. Sooner or later, the reality of the math is going to hit our country. It can not be ignored and kicked down the road forever. When that reality hits, it’s going to hurt everyone, conservative and liberal, Republican and Democrat, alike.

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