The Obama administration has now released detailed numbers for its proposed Fiscal Year 2010 budget, which totals $3.6 trillion. The poor economy, our relatively low tax rates (especially on the wealthy), and huge spending on the bloated military and healthcare system will likely produce a massive deficit next year.
Below is a stacked bar chart that shows the expected income and proposed spending for the unified federal budget for FY2010 (which starts next October 1). Click on the chart to see a larger version and click here to see a table with the same numbers.
Below the fold are details about this chart and a comparison to the actual income and expenditures in FY2008 (which ended last September 30).
Final Values for FY2008
To see how the proposed FY2010 budget compares to previous years, the chart below shows the actual numbers for FY2008 -- the year that ended last September 30. Click on the chart to see a larger version and click here to see a table with the same numbers.
Notes on Income
As you can see, the main sources of income for the federal government are individual and corporate income taxes and selling Treasury Bonds to cover the deficit. Smaller sources are estate and gift taxes, excise taxes, custom duties, interest on federal insurance deposits, and a few others. In addition, the government collects "payroll" taxes for the Social Security trust fund (Old Age, Survivors, and Disability (OASD)), "Hospital" taxes for the Medicare trust fund, unemployment taxes for the Unemployment Insurance fund, and some other taxes. For many years, Social Security taxes have far exceeded the amount paid out in benefits. This yearly surplus has been used to pay for other parts of the federal government and thereby reduce the net deficit.
Because the economy is in bad shape and companies have laid off millions of workers, President Obama assumes that the amount collected from all of these taxes in FY2010 will be much smaller than usual, so net borrowing to cover the deficit will rise from $459 billion in FY2008 to $1,258 billion in FY2010. When the economy begins to grow again, then tax income will also grow and the need for borrowing will shrink.
Notes on Spending
Spending is divided into two main categories: discretionary spending that Congress allocates each year through 15 spending bills and mandatory spending that various laws require to be disbursed.
Mandatory spending includes Social Security benefits, Unemployment Compensation, Medicare benefits, and pensions for retired federal workers as well as means-tested entitlements such as Medicaid payments to states, benefits to disabled Veterans, Supplemental Security Income (SSI) payments to disabled people, the Earned Income Tax Credit (EITC) for poor working people, and Food and Nutrition Assistance (food stamps). Interest on Treasury Bonds (the national debt) must also be paid.
The bad economy means that in FY2010 many more people will be entitled to Unemployment Compensation, Medicaid, food stamps, etc. But because interest rates are so low, the expected interest to be paid on the debt in FY2010 ($136 billion) is much less than the $253 billion actually spent in FY2008 even though the overall federal debt is likely to grow a lot.
Discretionary spending is allocated by 15 spending bills passed by Congress between June and October 1 (when the fiscal year starts). To stimulate the economy, almost every category in the proposed FY2010 budget is significantly larger than in FY2008. In particular, to stimulate alternative energy sources (and cut back our dependency on foreign oil), the Energy category jumps from $4 billion in FY2008 to $24 billion in FY2010.
Casual Wednesday has prepared a detailed description of the Appropriations committees and how this process works.
About half of discretionary spending goes to pay for the military -- active duty armed service personnel, civilian employees, defense contractors, etc. President Obama has included the expected costs of the Iraq and Afghanistan wars in the budget (rather than asking for supplemental funds as Bush did). Obama's request is for $707 billion for FY2010, up from the $612 billion actually spent (including supplemental funds) in FY2008. This represents 50% of the FY2010 discretionary budget.
In an earlier diary, Our Taxes are Off to War - 2009 Edition, I analyzed preliminary budget data and showed that an enormous and unnecessary amount of our tax dollars are spent on the military.
The federal government also spends massive amounts of money on healthcare. In FY2010, the Obama administration expects Medicare, Medicaid, other Mandatory Healthcare, plus discretionary Health Care to cost the federal government $841 billion. A single-payer healthcare system that bypassed the health insurance companies would cover everyone and be far cheaper.
Additional resources: The Center on Budget and Policy Priorities (CBPP) provides extensive analysis of the budget.
Why Doesn't the Government Prepare a Chart like This and Why Don't Newspapers Print It?
A final note: It is very frustrating that I have to put together this chart. One of the most important things that the President and Congress do each year is put together a budget. As citizens of this country, we should have a clear presentation of how the government plans to spend our money so that we can provide meaningful input. Instead, the basic budget documents for FY2010 are long, complex documents filled with jargon and tables of numbers, many of them seemingly inconsistent.
Admittedly, the federal government budget is very large, includes many kinds of receipts (taxes, fees, interest, rents and royalties, and sales of land, natural resources, radio frequencies) and many kinds of expenditures (payroll, contracts, payments to individuals, grants to states, trust funds, loans, etc.). There are multi-year budget authorizations and then the actual yearly spending allocations. There are funds considered "off-budget" and "on-budget," receipts (from fees or sales) that offset spending, taxes not collected that are considered spending, allowances for future disasters, and lots of other oddities that make it difficult to provide a comprehensive and comprehensible overview.
Still, for legislators and the public to understand the budget, there should be a simple presentation of the overall figures. This is the only overall chart from the government I could find and it is so simplified as to be almost meaningless.
To fill this gap, I've put together the charts on this page using numbers from multiple tables in the FY2010 Historical Tables document. But I am not a budget expert by any means and may have made errors. It would be better for the people who are experts to create this chart.