Washingtons Spending Problems are a Combination of: Population Growth, Low Taxes, and Excessive Defense Spending! ©

 By: Dan Reed - American Citizen

Everyone has heard GOP conservatives claim “Washington doesn’t have a revenue problem, it has a spending problem”! Over the past decade, the United States national debt exploded from $5.6 trillion in 2001 to $15 trillion today! In 2001, the United States had a Balanced Budget: what happened?

10 Year – U.S. Population Growth, Tax Revenues, and Spending:	Fiscal Year 2001	Fiscal Year 2011	Difference
1. U.S. Population Growth	281 million	308 million	+27 million
2. Total Tax Revenues	$1,990 trillion	$2,300 trillion	+$310 billion
3. Total Spending	$1,860 trillion	$3,600 trillion	+$1,740 trillion
Spending as a % of Revenue	93%	157%	561%

http://www.usgovernmentrevenue.com

I. Washington Spends too much, OK on What? After doing a little research, I was able to identify the major areas of federal spending. Federal spending is divided into two major categories: Mandatory and Discretionary. Mandatory is spending required by law, while Discretionary is annual spending appropriated by congress. The following chart outlines federal spending for the fiscal year, October 2010 through September 2011:

2011 FEDERAL SPENDING TOTALED $3,600 TRILLION

MANDATORY – 65% $2,330 Trillion		DISCRETIONARY – 35% $1,270 Trillion
1. Social Security- $780 B	22%	1. Defense Spending - $818 B	23%
		-Foreign Affairs - $62 B	2%
2. Medicare/Medicaid - $860 B	24%	2. Domestic Spending:
		- Government Branch’s - $30 B	1%
3. Other Mandatory:		- Education - $110 B	3%
-Unemployment - $120 B	3%	- Transportation - $90 B	2%
-Welfare - $350 B	10%	3. Other Domestic Spending - $160 B	4%
4. Interest on Debt - $220 B	6%

http://www.usgovernmentspending.com

Seventy-One percent of 2011 spending was divided between Social Security, Medicare, Medicaid, Defense, Homeland Security, and Foreign Affairs. Twenty-nine percent is split between a multitude of other mandatory and discretionary spending: Interest on the National Debt, Unemployment, Welfare, Food Stamps, Technology, Immigration, National Resources, and responses to Natural Disasters.

II. What caused spending too double in ten years? The answers are staring the American people in the face: First, the U.S. population has significantly increased and grown older. Second, when compared to other industrialized countries, Americans have enjoyed low taxes for thirty-years. Third, the American people are paying to police the world:

1. U.S. Population Growth and Ageing - It is mind-boggling that conservatives and our elected representatives rarely mention America’s growing and ageing population! Since Reagan’s election in 1980, the population of the United States has grown 35%, from 229 million people in 1980 to 309 million people today! Furthermore, a large portion of the U.S. population was in their mid-thirties in 1980. Today, those people have begun to retire and collect their “prepaid” Social Security and Medicare benefits!

2. Americans have enjoyed low taxes for thirty years - Fact, GOP conservatives have owned the presidency and held majorities in the U.S. Senate for twenty of the past thirty-years! This supremacy allowed conservatives too fully implement their “supply-side economic policies”, which included enacting massive tax-cuts in 1981, 1986, and 2001. Well, thirty years have pasted, and the accumulative impact of these three massive tax cuts has effectively redistributed trillions of tax revenue to corporations and super rich Americans! During this thirty year period:

• The top income tax rates on wealthy individuals have been reduced from 70% to 35%,
• The top Capital Gains tax rate has been reduced from 38% to 15%,
• Tax rates on high value estates have been reduced by over 60%,
• Tariff Taxes on foreign products imported into the USA have been nearly eliminated,
• The top U.S. Corporate tax rate has been reduced from 70% to 35%,
• The U.S. tax code has expanded to over 60,000 pages of preferred tax loopholes. 
• REF: Major tax cuts from 1981-2008: Public laws: 97-34, 99-514, 101-508, and 107-16  

Click Image Link: Pat Cunningham - Tax cuts that were supposed to create jobs

Note: during the 30-year period from 1981 through today, annual tax receipts have steadily decreased!

Americans currently pay the lowest percentage of their income in taxes since 1955, and corporate tax receipts are at historic lows! There were consequences: America’s national debt has grown from $900 billion in 1981 too over $15 trillion today:

• 1981 to 1989 the debt grew from $900 billion to $2.7 trillion, (Reagan)
• 1989 to 1992 the debt grew from $ 2.7 trillion to $4.5 trillion, (Bush-1)
• 1993 to 2000 the debt grew from $4.5 trillion to $5.6 trillion, (Clinton)
• 2001 to 2008 the debt grew from $5.6 trillion to $10.7 trillion, (Bush-2.) 
• Oct-2008 to Sept-2009 the debt grew from $10.7 trillion to $12 trillion, (Bush-2)**
• Oct-2009 to today the debt grew from $12 trillion to $15 trillion, (Obama) 
• ** REF: the 2009 budget signed by Bush-2 on 10-3-2008: Public Law 110-343

 Note: during the past 30-years, the U.S. population grew by over 80 million people!

3. Washington spending compared to tax receipts! At the beginning of this report, I pointed out that 2011 spending amounted to $3,600 trillion, of which seventy one percent is divided between three subcategories:

 a. Social Security, Medicare, and Medicaid represent 45% of total federal spending! However, both Social Security and Medicare are financed through FICA payroll taxes and retiree’s monthly health care premiums! Both programs currently have surpluses that are owed them from the U.S. Treasury! Therefore, two points need to be made: First, only the annual portion of income taxes used to fund Medicare should be counted as federal spending! Second, Medicaid is welfare, and should not be included with Medicare!

Tax Revenues Compared to Retirement and Health Care Spending:	Fiscal Year 2001	Fiscal Year 2011	Difference
Total Tax Revenues	$1,990 Trillion	$2,300 Trillion	+$310 Billion
Spending on Social Security, Medicare, and Medicaid	$870 Billion	$1,640 Billion	+$770 Billion
Spending as a % of Revenue	44%	71%	248%

Note: While health care costs have significantly increased the past twenty-five years, Congress has not increased Medicare FICA payroll taxes for twenty-seven years!

b. National Defense, Homeland Security, and Foreign Affairs spending represent 25% of federal spending and 38% of total tax revenues. Since 9/11, defense spending has jumped 238%, from $370 billion in 2001 to $880 billion in 2011:

Tax Revenues Compared to Defense Spending:	Fiscal Year 2001	Fiscal Year 2011	Difference
Total Tax Revenues	$1,990 trillion	$2,300 trillion	+$310 billion
Discretionary: Defense-Security-Foreign Affairs	$370 billion	$880 billion	+$510 billion
Spending as a % of Revenue	19%	38%	164%

The United States spends more on defense than the rest of the world combined! U.S. Defense spending allows our allies to hold back their defense spending, and invest their tax revenues on infrastructure, education, and health care! The time has come for the American people to begin questioning the wisdom of spending our tax dollars on defense department sacred cows:

• Can the U.S. afford over 500 military bases at home and around the world?
• Does the U.S. Army still need 80,000 troops in Europe, and 30,000 in Japan?
• Does the U.S. need to stay in Afghanistan any longer? What is our mission?
• Does the U.S. Navy need 50 attack submarines to fight an enemy that hides in caves?
• Should the U.S. continue spending billions on (Star Wars) missile defense system?
• Do the U.S. Air Force, Navy, and Marines each need $400 billion of new jet fighters, when their existing fleets of F-15, F-16, and F-18 jets are far superior to everything in the world?

Cutting spending on the above sacred cows could save taxpayers over $300 billion a year, and easily get the United States back to defense spending levels prior to 9-11-2001!

c. Other Mandatory and Discretionary spending represent 29% of federal spending and include: Unemployment compensation, Welfare Programs, Interest on the national debt, Government operations, Education, Transportation, and a multitude of small spending programs that add up! This spending is the most maligned by conservatives! Conservatives are pushing to reduce this non-defense spending by setting caps that can’t exceed a set percentage of GDP. Therefore, as the population grows, and the cost of goods and services increases, the government will be spending less per person on non-defense programs.

Tax Revenues Compared to “Other Domestic Spending”:	Fiscal Year 2001	Fiscal Year 2011	Difference
U.S. Population	281 million	308 million	+27 million
Total Revenues	$1,990 trillion	$2,300 trillion	+$310 billion
Other Mandatory Spending	$ 190 billion	$470 billion	+$ 280 billion
% Of Revenue	10%	20%
Other Discretionary Spending	$ 100 billion	$160 billion	+$60 billion
% Of Revenue	5%	7%

The “Others - Mandatory and Discretionary spending” are devoted to government services that benefit broad swaths of the population, and should grow proportionately with population growth.

III. Conclusion - America’s massive national debt can be traced to four major economic events:

1. Thirty years of starving tax cuts enacted by conservative congresses,
2. A growing and ageing population,
3. Excessive over spending on defense and wars,
4. A slow extraction of U.S. wealth to the Middle East, Asia, and China!

Conservative “Supply-Side Economic Policies”, which have been in place for thirty consecutive years, have completely failed their intended promise too grow the economy and create jobs in the USA! Instead, economic growth occurred in Asia and communist China, and millions of good paying jobs were outsourced to low wage countries.

Furthermore, from 2001 through 2011, America’s national debt grew from $5.6 trillion to $15 trillion. This huge debt increase is well documented, and can be easily traced to seven major events:

1. Lost tax revenue from the huge 2001 Bush tax cuts - Public law 107-16,
2. Ten years of “Unfunded Wars” in Iraq and Afghanistan,
3. Bush’s “Unfunded Medicare prescription drug benefit”,
4. Lost tax revenue from the exporting of good paying jobs to low wage countries,
5. The 2007 - Great Recession,
6. The 2008 - $800 billion TARP, and Federal Reserve bailouts of Wall Street Banks,
7. The 2009 - $800 billion Obama Stimulus program. Note: Obama care begins in 2014!

© This document is property of Dan Reed and reproduction requires his prior approval. Approval may be attained through an emailed request to dancar@en.com. 


A list of reference materials, which include: over fifty articles, statistical summaries, and various other information sources used in preparing this report, can be purchased for the small fee of $10.00, by simply emailing your request to dancar@en.com.