President Bush recently submitted a $2.57 trillion budget to Congress for FY2006. Based on a population of 295.5 million, that comes to just a tad under $8700 per person.
The federal government was not always this size (and yes, for purposes of this argument, I’m equating government “size” with spending). While trying to find some figures for this post, I came across this website giving some history of the spending of the federal government over the last century.
Using the facts from that website (which I’ll be the first to admit that I can’t vouch for the accuracy of), the federal government has grown tremendously over the last hundred years. In 1923, fedreal spending was negligible (maybe $20 billion?) in 2003 dollars (i.e. even after indexing for inflation). At the height of World War II, the Feds spent about 900 billion dollars (based on my estimation of the graph) in 2003 dollars, which quickly dropped back down to about $250 billion after the war was over.
Since then, however, spending has increased again over and over. Of course, as we all know, revenue has not kept pace with expenditures, causing the current national debt to rise to over $7 trillion dollars. The debt per person in the U.S. has risen steadily from about $11,000 per person in 1950 (again, as expressed in 2003 dollars) to over $25,000 per person today.
The largest portion of the federal budget today goes to social programs. The spending increases for social programs has far exceeding the spending increases for other types of programs (defense, etc.) over the years.
My questions, are as follows:
- Are we, as a nation, overtaxed?
All of these programs, obviously, cost money. Before 1913, there were no direct income taxes. The government made most of it’s money on tarriffs (If I’m wrong on that, please feel free to correct me) and other such fees. After the passage of the 16th amendment, Congress authorized an income tax which, at first, only affected the top earners and then only at a small percentage. Since then, the tax rate has more or less grown steadily (barring certain aberations). We are now at the point where the top earners pay about a third of their earnings in taxes. In 1953, federal revenues were about $500 billion (2003), whereas today they are about $2 trillion. And yet, we’re still running defecits.
- Do we spend too much?
We have many, many programs in the federal government today, far more than we had before World War II and even more than we had in the 1960s. We enjoy the benefits of these programs today. However, some of them (Social Security, Medicare, etc.) are very expensive with costs that are expected to balloon over the next 50+ years. Education, Veterans affairs, regulatory agencies, various other social programs, pork spending, have all gone up tremendously. Sure, all of these programs provide benefits that we enjoy. But have we promised more to ourselves than we can afford to pay?
- Assuming that we agree that (1) we are overtaxed (and yes, I understand that not everyone may agree on this) and (2) we cannot afford to keep spending what we are spending, what do we do?
Obviously, we would need to cut spending. But the question, of course, is where? What programs could we cut? And how much would we have to cut them in order to bring some order to our financial house?
I understand that everyone has there sacred cows and that no solution will make everyone happy. My personal feeling is that “promised” monies (i.e. Social Security, for example) should be the last things slashed. But can we get away with eliminating a good deal of our discretionary spending?
- If we don’t change our spending habits, and don’t increase taxes, what will happen to the country financially (say 50 to 100 years from now)? How will the debt affect the average everyday man, woman and child?
I know that this is a lot for just one thread, but I wanted to try to lay it all out on the table and see how the discussion goes.
Zev Steinhardt