Federal government (and tax bills)
keep on growing
MONEY & INVESTING
jeannetteSHOWALTER, CFA
http://fortmyers.floridaweekly.com/news/2014-03-05/Business_News/Federal_government_and_tax_bills_keep_on_growing.html
A common complaint is that the size and scope of federal government agencies and departments are far too large — both bloated, on paths of unrestrained growth, and too large to be properly managed. Is this true?
A common complaint is that the size and scope of federal government agencies and departments are far too large — both bloated, on paths of unrestrained growth, and too large to be properly managed. Is this true?
According to the Cato Institute,
the size of the U.S.
federal budget has grown from $1.9 trillion in 2001 to $3.7 trillion in 2013.
The biggest increase during that time was from 2008 to 2009; the spending
increase was largely in response to the economic contraction associated with
the great recession. Unfortunately, the increase in spending to spur the
economy has turned out to be ongoing spending and not a one time splurge to
jump start the economy.
As for government sectors
receiving funds, the largest amount of federal money spent is: to Social
Security (22 percent); Defense (18 percent); Medicare (14 percent); Medicaid (7
percent); and interest (6 percent.) The balance of “all other” spending is 33
percent but none of the “all other” sub-components individually exceed 6
percent.
What scares many taxpaying
citizens is the runaway growth in entitlement spending. As the second chart
shows, there has been rapid growth in entitlement spending compared to down
trendingt di in defense and nondefense discretionary spending. (And there is
more defense downsizingd on the horizon.)
There is value to a growing GDPG
far beyond the employment m opportunities it brings to our citizenry. A GDP
growing faster than the growth in the U.S. budget allows a growing tax
base to pay for larger government. Per projections by the Cato Institute, the
2000 budget was 18 percent of GDP; the 2010 budget was 24 percent. But brace
yourselves for 2030 and 2040. They come in at 32 percent and 37 percent,
respectively. What kind of tax rate will that imply for our next generation?
Here is a closer financial
snapshot of several (but not all) federal agencies according to www.Downsizinggovernment.org:
• The Department of Agriculture
will spend $156 billion in 2013, or $1,300 per household; operates about 240
subsidy programs; and employs
93,000 workers in about 7,000
offices across the country.
• The Department of Defense will
spend about $633 billion in fiscal 2013, or $5,200 per household; employs 1.5
million uniformed employees and about 780,000 civilian employees.
• The Department of Education will
spend about $48 billion in 2013, or $400 per household; employs 4,300 workers;
and operates 153 different subsidy programs.
• The Department of Health and
Human Services will spend $908 billion in 2013 (Medicare totals $504 billion
and Medicaid totals $266 billion), or $7,500 per household; employs 70,000
workers.
• The Department of Social
Security Administration will spend $873 billion in 2013, or $7,300 per
household in the nation.
Some of the federal budget
expenses have increased due to a growing number of federal staff and hefty
compensation and benefits packages. According to Cato, the average U.S. federal
government employee makes $14,632 more in direct cash income than his or her
private sector counterparts (i.e., at $74,436 in federal government versus
$59,804 in the private sector. The extremely generous benefits given to federal
employees boosts their real income by $26,632, putting total average federal
employee compensation at $114,436 versus the private sector’s average at
$87,804.)
Unless the federal government’s
size is limited financially, the next generations will face huge tax burdens
and loss of their benefits under a variety of social programs. Another argument
against the federal government’s growth is that it crowds out capitalism and
squelches private enterprise’s function and spirit. By the way, who is capable
of managing annual expenditures of some $15 trillion annually?
For those not paying taxes, the
scope and size of federal government is not worrisome. For those paying
escalating tax bills, it is a constant concern. ¦
— Jeannette Showalter, CFA is a
commodities broker with Worldwide Futures Systems. Find her on Facebook at
Jeannette Showalter, CFA.
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