$666 Billion in the Hole

News came out this week that the U.S. Budget deficit for fiscal year 2017 came end at 3.5% of GDP or $666 billion.  Sounds like a scary number right before Halloween!  The biggest drivers of spending increases are government programs of Social Security, Medicare, and Medicaid—large entitlement programs that budget watchdogs say will eventually break the budget.  Spending on Obamacare’s subsidies for health plans purchased on the exchanges jumped 27% as taxpayers continue to bail out insurance company losses.  There are also large spikes in loan guarantee costs at Education and HUD.  Interest on the debt jumped 10%.

Increases in defense spending, often a punching bag for some who want to cut the military size, only increased a modest 1%. 

So many will look at this and conclude that we need additional taxes to drive down the deficit and get our fiscal house under control.  But for this fiscal year, the U.S. government took in over $3.3 trillion in tax revenues.  One would expect that should be plenty of money to satisfy all needs of government spending and even have some left over to pay down our over $20 trillion deficit.

I think the largest problem we have is with leaders who have abandoned any shred of personal responsibility and a moral compass to treat public funds with good stewardship.  We have bureaucrats who believe their job is to spend money on whatever just to keep their budget growing each year.  This past year we spent money on items like:  $174,792 in taking pictures of food, $2.4MM in Medicare payments to dead people, $429,220 in tracking eye movements of Latinos at grocery stores, $300,000 for Chinese fighting dog art, $686,350 to pay fat kids to not eat, $200,000 on a study on how meditation improves the lives of older women, and a total of $4.1 billion in improper Medicaid payments.  The Citizens Against Government Waste, believe that the Federal budget can be brought into balance within three years just by cutting all the waste. 

Government spending per capital has risen seven-fold since fiscal year 1941.  In 1941, per capital spending was $1,718 (in inflation adjusted 2017 numbers).  The entire federal budget was only $13.7 billion in 1941 dollars.  Now this was a $4.6 billion increase from 1933 when Roosevelt took office.  At the height of WWII, federal spending hit $92.7 billion with per capita spending at $9,035 in 2017 dollars.  After the war, in 1948, spending had dropped to a per capita of $2,079. 

In fiscal 2017, the federal government spent about $12,239 per capita.  Compared to the last year before our full entry into WWII, this means that our government is now seven times bigger than it was in FDR’s third term.  The question is, are we seven times better today?

In 1940, we spent 43.7% of government spending on human resources—items like education, training, employment, social services, health, social security.  Only 17.5% went to national defense. 

These numbers flipped in 1945 as we spent 89.5% on national defense as we fought WWII and only 2% to human resources. 

In 2016, we spent 15.4% of the budget on national defense and 73.2% on human resources.  FDR’s spending in 1940 on human resources, accounted for 4.2% of GDP.  Obamas 2016 spending on human resources equals 15.3% of GDP. 

So how can this be turned around?  How can we again begin to have financial responsibility in our government, just as we must have in our families and personal budgets?  Many ideas can show marked improvements.  We can eliminate baseline budgeting, the tool that automatically increases the base of each line item on the budget for inflation.  We could tie the salary of Congress and the President to their fiscal performance like many top corporate executives are.  We could do all we can to eliminate all wasteful spending, get rid of agencies that are not needed, stop all duplications, for starters.

But all of this will come from a change in attitude.  We were founded with a limited federal government whose role was to protect the liberty and freedoms of the people.  Our founding fathers had a healthy skepticism toward a large bureaucracy.  Thomas Jefferson once said, “A government big enough to give you everything you want, is strong enough to take everything you have.” 

We have changed to a society where one of the primary activities of the federal government is to make more people dependent upon it.  For as more are reliant, there is more need and power ceded to the state from individuals.  We need people to begin to love liberty, value self-sufficiency, and be unfettered in their pursuit of excellence in their lives.  We need leaders who will adhere to these principles and seek to limit the overarching reach of the state, in exchange for individual freedom.  We also need these leaders to not change their minds once they have tasted the drugs of power and control that is available to them in government, once citizens have entrusted them with this power.