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Hello everyone, welcome back! As we continue our journey into the secretive world of federal budgeting. That same federal budget that is available to all in painstaking detail on the internet for all to see (or download). If you’re like me, just having thousands of pages containing more numbers than imaginable is absolutely heaven, and it’s FREE!

 So as we move further into the budget I wanted to refresh everyone on just one chart from last week. Below is the budget at its highest level; receipts or revenues, and outlays or spending.

Let’s move to both sides of this chart and fill in a bit more detail starting on the right side, with receipts. I selected to start here because receipts come mainly from you and me in the form of income taxes. Here is the breakdown of the government’s receipts for 2011.

Looking at the top, you can see it contains the total 2,304B for 2011 receipts. This number is made up of all the below breakouts. Notice one labeled EEGt&CD, what is that you ask?  I wanted to condense the categories so that later they will fit better on some charts you will see further down. I took; Excise tax, Estate & Gift tax, and Customs Duties and made a new category labeled EEGt&CD = Estate Excise Gift Tax & Custom Duties. Why did I call it that, well because I can, it’s my chart. The category Social Insurance is broken into two categories; “Social Insurance" On-Budget, and “Social Security" Off –Budget. This will come in handy when we discuss Social Security, a request brought up by MarshWiggle.

Briefly, Social Security is an “Off Budget” trust fund, refers to transactions of the Federal
Government that would be treated as budgetary had the Congress not designated them by statute as “off-budget”. Since 1990 and the enactment of Omnibus Budget Reconciliation Act (OBRA) and a subsection of that called the Budget Enforcement Act (BEA) stipulated that the two Social Security Trust Funds (which make up Social Security) and Postal Operations are formally considered “Off-Budget”.

One interesting fact is that all the administrative costs for running the Social Security program come from the discretionary part of outlays. In 2011 the Govt. spent 5.9B administrating the program. For our purposes it is included in our totals and I will expand on Social security in the future. (I can’t wait!)

Here are our 2011 Government receipts in one chart.


Let’s move on to our outlays.

I decided to make these figures negative as I wanted to present the receipts and outlays in the form of a checkbook. Displaying them this way is much more eye pleasing than gigantic accounting spreadsheets. Of course I love those sheets but I realize most people shudder at the sight of them.

You will also notice a dotted line with the terms discretionary and mandatory at the bottom. These are terms that describe two forms of government spending, they are defined as follows.

Discretionary spending - means budgetary resources (except those provided to fund mandatory spending programs) provided in appropriations acts. (From the OMB)

Mandatory spending - means spending controlled by laws other than appropriations acts (including spending for entitlement programs) and spending for the food stamp program. (From the OMB)

To put this in normal speak, when you hear Congress arguing about spending every year (Defense, NPR, EPA, etc…) these discretionary spending amounts are set yearly. Mandatory programs – for the most part – are on auto pilot. Meaning spending levels are set forever -- and depending on how good the original law was – may only need to be tweaked every so often. The Republicans dislike mandatory spending and would prefer everything was under the discretionary label. Could you imagine the gridlock if Congress had to agree on spending levels for mandatory programs (Medicare, Medicaid, Unemployment Insurance, etc…) every year? It would chaos.

So under discretionary we have Defense and Other, what’s in “Other”? Well everything the Government does is in there.

Some subcategories are;

•    Agriculture                                           6.4B
•    Transportation (water, air, ground)        91.0B
•    Education                                           91.9B
•    Veterans Services                                56.7B
•    Administration of Justice                       54.3B
•    General Government                             19.8B
•    Natural resources and Environment        43.6B
•    General Science, Space and Technology   29.4B

Just to break out a few.

On the mandatory side you see all the categories are pretty self-explanatory. I have broken them out a little showing unemployment insurance, veteran retirement, and federal retirement.
You see Veteran benefits on both sides above. One is veterans retirement benefits (Mandatory) and the other is Veteran services (under Discretionary Other) such as medical, employment assistance, and housing that all our Veterans have earned and most definitely deserve.
I’m going to simplify the outlays a bit by putting Veteran retirement, unemployment, and federal retirement back into the “Other mandatory category.

Looking at the total outlays, and to borrow from Paul Krugman (one of my idols), the government is basically a large health insurance/retirement fund, that just happens to have an Army.

Let’s look at the Whole Ball of Wax (as they say) whoever they are…  
Now let’s add in one more piece of eye candy, a figure called the deficit. As explained last week, the deficit is the yearly shortfall not like the Debt, which is made from all years.
There it all is!! Now where would you cut or add?? Remember you can reduce the deficit in two ways on the above chart, by increasing receipts (increase taxes) and/or by reducing outlays (decrease spending). Couple of reminders, Social Security is a separate self-funding trust that is not adding one penny to the deficit. Also, you have to pay yearly interest on all those past debt obligations, so mandatory interest payments are off the table. This one chart shows just how irresponsible the previous administration was. Wow! Look at the size of that yearly deficit, it amazes me everytime I see it.

If we were going to fix this through congressional annual appropriations -- which are the only spending they can change on a yearly basis – all they have is the discretionary items. That means defense and other categories; I showed you some of what makes up the “other” items above. The Republicans refuse to cut defense spending, even though in 2001 the defense spending was 306B. That means it has more than doubled in ten years, granted there are inflation calculations that need to be added in, but roughly doubled. So they can’t really fix this by decreasing the discretionary other spending, can they?’

President Obama wants to add revenues and subtract spending for a balanced approach. I think that is the most sensible solution.

The Republicans refuse to raise anything on the receipt side (Grover’s Pledge) and will not touch defense spending, what does that leave. Well the chart below shows what they are willing to sacrifice.

That pretty much is all the outlays that help the poor, the elderly, the sick, children, and our veterans. They have got quite a soft spot, don’t they?

Thanx for playing “Fun with numbers” today! In the future we will continue our journey by going through our Debt and the Social Security Trusts.

Correct answer of last weeks poll is Mandatory Spending. I think after the above you all can clearly see that.

Originally posted to simple serf on Sat Dec 08, 2012 at 01:42 PM PST.

Also republished by Community Spotlight.


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Comment Preferences

  •  Budgets are plans. Most often they are not (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    carried out. Public corporations have developed them as a strategy to distract the populace. On the federal level, the real decisions are made in appropriations bills. On the state level, the chief executive does have the final say on what is actually spent.
    The balanced budget kerfuffle is a farce. Everyone that's been involved with local government knows that balance is meaningless not just because it's all conjecture, but because various sources of income or revenue can be plugged in to make it come out right.
    Besides, nobody ever checks after the fact to see whether projections were matched by experience. A balanced budget is sort of like marriage vows to be faithful and consort with no-one else.

    We organize governments to deliver services and prevent abuse.

    by hannah on Sat Dec 08, 2012 at 02:02:26 PM PST

  •  Nice! (4+ / 0-)

    I had tried to put together some numbers, but putting it in a dkos diary was beyond me, even putting it in my blog, properly formatted was tough.

    In case you are interested here it is:

    The main notes are that after the fiscal crash, federal government receipts fell from its usual 18% of GDP to 15% and expenditures rose from their usual 21% of GDP to 24%.  Both are trending back to their usual values, but the 9% of GDP deficits drew attention where the perennial 3% of GDP deficits drew yawns.

    Under best projections, in the long run (2040 or so) if we keep defense and discretionary spending at their current levels the trends in social security & medicare spending are such that federal government expenditures will be 23-24% of GDP.  If receipts remain at 18% of GDP, this is unsustainable.

  •  Thanks for the great work simple (8+ / 0-)

    serf.  When I try to rec your post I get an exclamation point.  I'm traveling on Amtrak and using their WiFi, maybe I'm partially in RSS mode?

    One question. What you have ploted here for "defense spending" appears to be what is often called the "base defense" or "base military spending."  Several groups have added up plot of "total military spending" which adds intelligence, off-books, wars, veterans benefits, and several other categories to obtain a total military spending of $1.2 trillion. And, I believe this category has even more than doubled since 9/11.

    I find it outrageous that anyone is even discussing reductions of social spending to balance this budget when the two primary drivers we should be looking at first, and way before any others are military spending and tax revenue.

    My understanding is that about another third of our current shortfall is due to lower tax revenues due to the stalled economy.  

    Medicare Part D may also have played a smaller role but I favor that and don't want to make an issue of it.

    President Clinton handed a surplus budget and thriving economy which he promptly trashed.

    I have several excellent long-term plots of base defense spending but have found it impossible to find a good one of "total defense spending" perhaps, because these extra amount are spread around other of the more conventional categorizations?

    Thanks.  As soon as I'm near a regular ground broad band connection I'll rec your post.  And, look for the first one as well.

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Sat Dec 08, 2012 at 02:43:14 PM PST

  •  Raise corporate taxes and cut (4+ / 0-)
    Recommended by:
    simple serf, kurt, spacejam, thomask

    War (aka "defense") spending. Problem solved.

    I know you believe you understood what you think I said, but I'm not sure you realize that what you heard is not what I meant. -- S.I. Hayakawa

    by tapu dali on Sat Dec 08, 2012 at 02:59:35 PM PST

  •  Thanks, plain and simple, thanks! (2+ / 0-)
    Recommended by:
    simple serf, thomask
  •  This is wonderful. I just have to ask again... (4+ / 0-)
    Recommended by:
    simple serf, kurt, spacejam, thomask

    why are the quotes on "The News" always that Medicare and Social Security are the largest portions of the budget. Doesn't look that way to me. I see Defense. Some of the worst are the elected officials, the Executive and Legislative, who spout this mantra over and over. Plain wrong.

    And do you ever see charts with self funded items somehow shaded or marked as paid for? SS along with unemployment benefits I believe are set asides paid for directly out of our paychecks.

    Very nice work and good layout of information. Should be mandatory for every congressperson.

    Science is hell bent on consensus. Dr. Michael Crichton said “Let’s be clear: The work of science has nothing to do with consensus... which is the business of politics. Science, on the contrary, requires only one investigator who happens to be right,”

    by Regina in a Sears Kit House on Sat Dec 08, 2012 at 03:52:32 PM PST

    •  Yes I agree with you (1+ / 0-)
      Recommended by:
      Regina in a Sears Kit House

      I think for the most part those air quotes you refer to are when they say Social Security and (medicare+medicaid)=Medicare. Then I believe they are semi-correct. But that is only little ol me trying to figure out some big VSP's brain thoughts....
      Uh I just had a shudder...better stop that

      Thanx for the props


  •  Who's up for a constitutional (3+ / 0-)

    amendment stating that, except in wartime, defense spending cannot be greater than non defense discretionary spending?

    I STILL want to see Mitt's taxes.

    by Van Buren on Sat Dec 08, 2012 at 05:42:12 PM PST

  •  Nice clean looking charts! One thing that doesn't (1+ / 0-)
    Recommended by:
    simple serf

    penetrate my hard head is the part about Social Security being "off the budget."  What you wrote is recognizable to me but it still ends up in the Revenue and Outlays after you explained the legislation that was passed in the 90s.  

    I would cut defense spending and zero in on Overseas Contingency Operations.  Another intriguing category is Foreign Military Sales.  It's not easy to find information on that.  If I were denser I'd wonder why "sales" are an outlay and don't generate revenue.  

    "Those who deny freedom to others, deserve it not for themselves." - Abraham Lincoln

    by leftreborn on Sat Dec 08, 2012 at 06:09:20 PM PST

  •  Couple of comments (3+ / 0-)
    Recommended by:
    simple serf, kurt, Sparhawk

    These relate to issues going forward but are still important.

    1. Interest payments are artificially low. They are lower now than they were when the debt was much lower, because of the ultra low rates set (manipulated) by the Fed. If rates were to rise (as would normally happen in a real recovery) this number would automatically start rising quite quickly. This is especially true as more and more debt is of the very short term variety (less than 5 years), so any change in rates would kick in quickly.

    2. The labor participation rate continues to be very low, and will likely stay low even if unemployment drops as baby boomers start retiring. This will make any natural increase in tax receipts tougher to get.

    3. As (if) the deficit comes down this will subtract from economic growth. Most people do not realize how important the deficit has been to keeping the economy afloat ... but at a very high future cost. To give you a bit of perspective ... every day the federal deficit is equal to 4 times the amount of WalMart/Samsclub sales each day. So if the deficit were eliminated it would be like taking 4 times WalMart/SamsClub out of the economy. It would have an impact. By the same token the deficit is providing stimulus to the economy equal to 4 times WalMart/SamsCklub.

    4. There is no easy way out. We are in for at least 5-10 years of slow times ... barring some new technical invention like free energy.

    5. We are still talking about adjusting the dials on the economy machine (and as a reminder the economy machine before the recession was running at unsustainable rates fueled by debt) instead of trying to rebuild the machine. In many sense 4 years have already been wasted (as in almost no real reform to the economy)

    There's room at the top they're telling you still But first you must learn how to smile as you kill If you want to be like the folks on the hill

    by taonow on Sat Dec 08, 2012 at 06:11:35 PM PST

    •  I agree with all your points... (0+ / 0-)

      I am by no means saying eliminate the deficit right now! No that would be very bad, and would most definitely throw us back in a recession. (Look at Europe). Lets start the ball rolling towards a balanced slow deficit reduction plan.

      Rates are at a historic low...seems to me to be a good time to invest in our infrastructure, and that would be another nice kick to our economy.

      Why are rates are at a historic low? Because the world wants to by US bonds, why? because they are safe.

      Thanx for the post!


      •  Nope (3+ / 0-)
        Recommended by:
        simple serf, kurt, Sparhawk
        Why are rates are at a historic low? Because the world wants to by US bonds, why? because th
        ey are safe.
        Unfortunately that is not correct. Rates are low because the Fed is buying all the bonds (printing money). It is responsible for about 90% of the buying ... far from healthy.

        My key concern is that arguing over this or that cut or tax hike ignores the key issue ... the economic structure requires reform.
        1. The US has run trade deficits for .... basically a leak of wealth from the economy.
        2. The US spends double what any other nation spends on health care (even with obamacare) ... and gets less.
        3. The US spends 1/2 of global defense expenditures.
        4. The US incarcerates a higher percentage of its citizens than almost any other country.

        No matter what advantages the US starts with versus its global competitors it can not keep doing these things and still expect to win.

        Unfortunately there is no simple path that provides a slow deficit reduction plan. The numbers don't work. Except I can make it look like the numbers will work (official future budget projections are usually horribly wrong)... until eventually they don't.

        There's room at the top they're telling you still But first you must learn how to smile as you kill If you want to be like the folks on the hill

        by taonow on Sat Dec 08, 2012 at 06:49:54 PM PST

        [ Parent ]

        •  I see your point... (1+ / 0-)
          Recommended by:

          And do agree with 1,2,3,and 4....

          Yes a structural change is needed, but if they can't agree on a little revenue or spending change what chance do we have for a total economic re-frame??

        •  In reading that article (0+ / 0-)

          Yes! the fed is buying up short term bonds to try and get the greedy corp's to stop parking their cash in easy guaranteed gov bonds. The bonds are dropping because everyone wants them...
          easy safe money...

          enjoyed the article
          And thanx for the prop's...below

      •  Forgot (4+ / 0-)

        Forgot to say how I really enjoyed the way you presented the data. It is not easy to do this in a simple easy to understand way. Kudos.

        There's room at the top they're telling you still But first you must learn how to smile as you kill If you want to be like the folks on the hill

        by taonow on Sat Dec 08, 2012 at 06:56:10 PM PST

        [ Parent ]

  •  A problem with Social Security (0+ / 0-)

    as presented.

    Social Security is not fine because we spent all the annual social security surpluses. All we have are IOUs. There is no lock box.

    To pay future benefits, those IOUs will need to be cashed in. Doing so will require real money. So, if the SS trust fund needs to cash in $100 billion of its IOUs in 2016, there will need to be $100 billion in additional spending, spending without corresponding income.

    The attempts by Republicans to 'reform' social security is nothing short of a corporate raid of the pension fund; they spent the pension dollars on operating expenses and now want to make sure the top incomes and "shareholders" don't have to repay the pension fund.

  •  I firmly believe, that given honest information, (1+ / 0-)
    Recommended by:
    simple serf

    the average 6th grader could create a balanced budget.   It seems to me the Defense is way over budget because of the comparison with other nations plus the fact we don’t really have an enemy.   Oh the Taliban, yeah I forgot.  Tell me about their Navy, Air Force and how many Divisions they can field.  
        My 6th grade math at work.  If you increase the age of Social Security beneficiaries but do not decrease the amount of input tax, doesn’t that increase the debt since it swells the amount in the trust fund and they are required to buy U.S. debt with the surplus?
       One more question – sort of a tongue in cheek one.  Should subsidies be means tested?  

    •  I will delve deeper into SS (1+ / 0-)
      Recommended by:
      This old man

      Briefly if SS had more money they would buy more Treasuries. That would not increase the Debt on its own.
      Our Debt is made up of marketable and private bonds. Marketable are offered to anyone to buy (banks, pension funds, and yes, foreign countries). Private Bonds are only sold to other Govt Orgs. like the SS trust.
      The Debt folks would just offer fewer marketable securities.

      On Subsidies (to business mainly) Yes absolutely. A slippery sloop on some of those because the business sectors say they'll just pass on the cost to customers, that's us.

      I believe that's OK in most cases. but I would need to look at each on a case by case basis to determine who would get hurt the most by doing this.


      •  Let me get this straight Simple Surf. (0+ / 0-)

         Are you saying that the 2.7 trillion that Social Security owns in Treasuries is NOT part of the National Debt?  Treasuries are U.S. debt are they not?  If all the trust funds simply forgave the U.S. debt (Treasuries) they own and just burnt them, would that amount not be reflected in the amount of the National Debt?  If this is true – the system is indeed way more complex than I will ever able to comprehend.    

        •  Sorry for the confusion... (1+ / 0-)
          Recommended by:
          This old man

          I am saying their are two forms of treasuries issued.
          One on the open market for anyone to buy and subsequently sell to anyone else. The others are private that are only for inter govt use (SS, defense, etc...).

          Both are fully accounted for in the budget and the Debt. Interest is calculated the same on both.

          I think this is a good thing because we don't want these private Govt. funds to end up in one entities hands...

          Your scenario is correct
          If the trust funds burnt them, our Debt would go down by that amount and our yearly interest payments (currently at 230B) would also decrease.


  •  thanks for the great chart (1+ / 0-)
    Recommended by:
    simple serf

    i was wondering if you can break the category down even further. can you give a little more detail to all the columns. thanks.

  •  I Wonder When Democrats in Congress (1+ / 0-)
    Recommended by:
    This old man

    are going to do something about corporate tax evasion?

    Here's $100 Billion we're losing per year in revenue:

    "A civilization which does not provide young people with a way to earn a living is pretty poor". Eleanor Roosevelt

    by Superpole on Sun Dec 09, 2012 at 06:01:33 AM PST

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