This short video clip conveys a useful summary of how the Federal government gets its money, and where that money goes. We can’t even begin to work on the problem of our self-destructive financial practices without understanding this framework.
Here are some key points. In the 2011 (non-)budget:
Spending was $3.8 trillion, of which only 57% was matched by revenue; the rest was borrowed.
Uncle Sam collects 57 cents and spends a dollar. Don’t you wish you could do that? Obviously this is vastly unsustainable.
Personal income tax gave the Feds $956 billion.
That’s a lot of money, and it came out of your pocket (assuming you’re not in the half of America that doesn’t pay any income tax). But it’s only a quarter of what the Feds spend.
The interest on the debt was $207 billion.
We’re spending more and more just to service the debt from yesterday’s reckless spending. How long until we can’t do a thing to meet today’s responsibilities, because our resources are completely allocated before we spend a cent?
60% of Federal expenditures go to entitlements (Social Security, Medicare, Medicaid, food stamps, unemployment, etc.)
So the biggest function of modern Washington is to take money from some people and give it to other people. How did our government transform from an entity that once served the people and the nation into a monstrous engine of redistribution?
If balance is ever to be restored, then the entitlements must go on the table. The truth that no politician dares acknowledge is that promises have been made that can’t be kept. Seize the assets of all the millionaires and billionaires and there will still be a shortfall. God does not have enough money to fund the Federal outlays. It’s that simple.
(As a technical point, I should note that programs such as Social Security and Medicare have their own taxes and budgets, and should in theory be separated out from the graphs depicted. But as a practical matter, all the money goes into and comes out of the same big pot. You’ll recall that during the most recent debt ceiling crisis, Obama said that Social Security checks might not go out if Congress didn’t extend his credit. Thus he unintentionally acknowledged what some of us had been saying all along: That the Social Security Trust Fund was nothing more than an accounting fiction.)
The imbalances are not being addressed in the current debates, because the president and most politicians speak only of discretionary finances while avoiding the structural issues that are the real problem. The entitlement programs are on autopilot, and they’re untouchable. So the much-discussed tweaks in spending and taxes would not alter the picture in any significant way.
“Today I am pledging to cut the deficit we inherited by half by the end of my first term in office.”
— Barrack Obama, 2/23/09 (see YouTube)
We see how well that pledge worked out. With Obama, as with Bush before him, fiscal responsibility is a low priority. It’s safe to assume that’s not going to change if he gets a second term.
If we were concerned about our survival, our primary discussion, as we go into this election cycle, would be on the question of economic sustainability. But who is giving this challenge to our existence the priority it deserves? Ron Paul gets it, and I think Newt does too. Mitt says the right words, but is he just another Obama, telling us whatever we want to hear?
It will be difficult to solve any of this until we become flush with energy. What’s the administration’s fair share of responsibility?
I will be forwarding this posting Maynard. Thanks!
Maynard,
This is very instructive. But how can we get the Dems/RINO’s to see this post? (I *do* have an idea, but it involves duct tape and a basement with no windows 🙂 )
Wow! Thanks Maynard. This video is great, and the link to the website is great too. Keep up the good work.
Almost half of those who pay no taxes are elderly people with limited fixed income. An additional 30% are working poor with families. If you did tax those people it wouldn’t amount to the proverbial drop in the bucket in addressing the country’s money problems. If they have some sort of patriotic or moral obligation to pay something, then so do those making over $200,000 who pay no taxes because of losses from partnerships or S Corporations, mostly small businesses.
Conservatives who praise family values are very quick to protect the opulently wealthy while portraying the elderly and poor families as deadbeats and leeches. It’s wearing thin. Human beings are not cogs in a machine who can be dropped by the wayside when they are no longer of use to the machine.
Today’s conservative solutions are naively facile. Let the rich get richer and everything else will improve as a result. If anyone remains poor, it’s their own fault for not trying hard enough to take advantage of the opportunities. We tried that system. The result was the Gilded Age. A few wore diamonds, the rest wore rags. The consequences of that era are labor unions and the Progressive movement. Conservative policies are essential to keep society in balance and prevent the horrors of collectivism. They are not a complete answer.
Source: Taxpolicycenter.org, “Why Some Tax Units Pay No Income Tax”
Sure, the political solutions tend to degenerate into bumper stickers. Would be nice if it were as simple as “Cut taxes, regulate less” or “Raise taxes, regulate more”. Of course I prefer the former, but I have no illusion that that’s a magic formula for peace and prosperity. Our political structures can merely play a role in unleashing or hindering our human potential; the rest is up to us. If we’re a collection of jackals, then low taxes and minimal regulations won’t get us far.
You speak of the Gilded Age, which raises a lot of complex questions that we could discuss for hours. Anything I say in a few words will be overly simplistic. Nevertheless…The robber barons indeed ruled the day, and the lot of the working class was miserable; on the other hand, there was a trend of rising industry and rising overall prosperity. Seems that somebody knew what they were doing. Seems to me we’re rebuilding the same structures today, except power have shifted from industrialists (who were crooks but knew how to run stuff) to politicians (who are crooks but ignoramuses). We’ve evolved from corrupt function to corrupt dysfunction. (It’s interesting to note that in ultra-progressive enclaves like New York City, the stratification increases rather than decreases. Good luck building a middle class existence in NYC these days.)
Political philosophy aside, my challenge to conservatives and liberals is the same: Make it balance. Live within your means. That needs to be the goal of the government, of the nation, of individuals.
Taxing lower income people isn’t about increasing revenues. It’s about reducing the conflict of interest inherent in a system that allows some to vote to take from others.
A flat tax/fair tax or 999 system would address the concerns of unequal access to tax loopholes. Those $200,000 people couldn’t avoid the tax.
I don’t believe ANY Conservatives include the elderly in the category of deadbeats and leaches. That’s completely unfair. By every measure, American Conservatives are the most generous and charitable people there are. (ref: Who Really Cares? – Arthur Brooks) When I complain about the lazy welfare bums, and I do, I’m talking about able bodied people who are just too lazy to work. And there are millions that fit that description.
As for our crop of high school dropouts (50%?), most should sleep under a bridge before they get a cent in handouts. There needs to be the FEAR, up front, of certain consequences for slacking when you’re young. There’s no excuse for being poor when you’re young and able bodied. And it’s completely realistic for a GED level person to make a middle class income. I know mechanics and truckers who do fine. So do landscapers and tradesmen and Wal-mart workers. So yes, they are just lazy deadbeats if they don’t try.
By the way. If it isn’t their responsibility, whose is it?
We didn’t have the labor laws or OSHA, etc. back then. Workers are beyond protected from employer abuses. Minimum wage laws are virtually useless because everyone makes more anyway. (Minimum wage is for kids.) They pay more at Wal-mart! I don’t think the Gilded Age reference carries much weight.
As you point out, Chris, government laws and regulations alleviated the plight of the working class in the early days of the Industrial Age. These measures were resisted by businesses just as businesses today cry they can’t afford any further employee benefits or government regulations. It was even more ridiculous in the early days of capitalism. In response to the movement for less work hours, manufacturing associations had the nerve to argue a shorter work week was bad for the souls of the working class, idle hands and all that, while the robber barons lived a decadent lifestyle.
Profit is the foundation of capitalism. Greed is a powerful motive and I agree it is worthwhile to exploit it to the extent it improves society. What is important is to realize without laws and regulations greed becomes ugly and exploitative.
Today businesses circumvent employee safeguards by outsourcing to countries where labor is less protected or to hire illegals who will keep silent about working conditions and pay rates. It is in the nature of the employers/owners to suck the most out of the workers while giving as little as possible in return. It is the mindset of today’s—what I call—Darwinian Conservatives (survival of the fittest) to see it as a good thing for society to enable the rich to become richer and let the rest fend for themselves as best they can. It is a philosophy that exonerates itself from responsibility for the debris of its dark side. It contrives to portray callousness as something wholesome. The care for the truly needy is shunted off to the natural kindness of strangers, if there even are the truly needy in its field of vision. It is too extreme.
Maynard, I know we can’t say everything all at once in a discussion. The way Darwinian Conservatives repeatedly and consistently distinguish their arguments comes across as brutal and antiquated. If that impression is misleading then it is imperative to explain it better. If it is what it appears to be, it will not be well received at large. The world has moved on.
As to taxing the working poor, taking an additional 15% from their meager incomes will have the opposite effect of what you suggest Chris. That will create all the more incentive for the working poor to elect politicians who promise more in welfare.
Since the beginning of the Industrial Age the trend has been toward a greater government interventionist role. That has gone too far and must be corrected. We need a reasonable response and a reasonable program. I considered myself a conservative all my life. My conservatism was born and nurtured in the Cold War era where the contrast between government solutions and private sector solutions was stark and sides easy to pick. We are in a more nuanced situation today. We have to achieve a balance. There is no going back to the wild days of capitalism which is where the Darwinian Conservatives sound like they long to be.
To Pat S. & Maynard….As the song goes: a little bit of this-a and a little bit of that-a : I agree with both of you and have so enjoyed your input.
Have to get back to listening to Mark now.
Thanks Tammy for all you do, especially in getting us all together to mix it all up.
Here’s an idea: Let people who work their asses off keep more of what they have so they may actually be able to help less fortunate family members and others. People are inherently good and if given the chance will employ people and help people. Constitutionally and morally, it is not the place of the government to choose who gets other’s money whether they are poor or elderly. Where does personal responsibility enter the equation or the families responsibility? The United States can ill-afford to take care of poor families from other countries who live here illegally or take care of the elderly whose families are perfectly capable of taking care of them. Sure, some people do need help, and they should be helped, but only those truly in need. It has nothing to do with the conservative or liberal/progressive movements. It’s strictly a finanacial issue and to quote the current occupant of The White House: “We’re out of money now.” We can either cut back and take care of only those truly in need or sometime soon we can take care of no one. Let those who produce take care of business and take care of others. Americans are good and great. We will get it done not the government.
Towards the end of this video, he makes the implication that we need to reduce the size of the welfare state to its intended purpose. Excuse me? What everyone seems to forget, even those in favor of “safety nets” is this–someone’s liberty has to still be violated to even provide the “safety nets.”
There is a moral principle here which everyone keeps dodging. Is your life your own or not? Does the government have the right to force you into being a slave for the welfare of someone else? No. It does not. That is a moral principle upon which individual liberty rests. It cannot be violated–because it’s philosohpically true and verifiable.
That is precisely the principle, a principle consistent with reality, which has been violated by degrees, decimals and bit by bit for generations, slowly worming it’s way into the psychology of the population that you are evil if you don’t allow your life to be forcibly confiscated. The law being violated is the Law of Identity. A is A. Reality cannot be avoided, cheated, or “remade” or wished into being what we want it to be. It can only be dealt with on its own terms. We can all pretend “safety nets”–are “compassionate” as much as we want. When the government forces people, by law, to have their wealth redistributed, whether or not they so choose–it ceases to become charitable and enters the realm of evil.
We have allowed ourselves to be convinced reality can be cheated long enough. It will catch up to us whether we choose to acknowlege it or not–reality always does in one way or another. It may just be a matter of how long it takes. Reality catches up to us in our personal lives if we try to cheat, pretend, lie and pretend A is not A–it will do so in our public lives as well.
It is time for those who are so hell bent on helping others–to be the ones to compromise and find ways which do not violate individual rights (via the confiscation of wealth) to help others. Good will ceases to exist when the cannibalism becomes epidemic. If we don’t drive that home and stop accepting a little compromise on principle here and a little there–principles which everyone knows is true and right–then there won’t be a nation to save. It’s time the collectivists be damned for the irrational fools they are and start compromising the principles they hold which we all know (and can prove via history)–don’t work.