Federal Budget for 2006

Here are the rest of the federal budget numbers re-classified in a way that I think makes them understandable. They are approximate because the government figures use varying classifications depending upon where you get the numbers from. These amounts also ignore unemployment insurance, but the net impact of doing so is relatively small. The inflows are without including any payroll taxes as that is dealt with in the Social Security and Health Care pieces referred to below. Outflows are without Social Security and the portion of Medicare paid for by payroll deductions. My hope was to isolate those programs from the other government programs that we fund through general revenues rather than payroll taxes that fund Social Security and a portion of Medicare. By doing it this way, if you want to know how much you are paying toward any particular item you can get a very rough estimate by multiplying the amount you paid in federal income tax times the percentage to the right of the outflow category (plus your share of the additional national debt used to fund the shortfall, so add another 30% or so).

Interest expense is not "net interest" because the portion that the government considers a wash (about $169 billion) is "paid" to trust funds like Social Security but then immediately re-borrowed. Because of this the government accounting figures a net interest amount as though it really wasn't paid. In any event, about $100 billion of the interest expense is paying the interest on the money borrowed from Social Security, so if you like you can add that to your retirement costs.

Non-SS Mandatory Income Security includes all of the means tested entitlements.

The difference between the inflow and outflow explains the additional half trillion or so of national debt from end of year 2005 to end of year 2006 (approximately $574 billion).

A final note - to really understand who benefits and who pays in our system it is necessary to go beyond a simple inflow/outflow analysis. It requires a real analysis of the tax code to understand who is getting a better deal and who is not. One example of this is the capital gains treatment of carried interest for hedge fund and private equity managers that allows them to pay 15% on large portions of their (often seven figure) incomes. I hope, however, that this analysis provides some insight.

For health care go here.
For Social Security go here.
For welfare go here.

Sphere: Related Content

Federal Health Care Expenses

2006, Dollars in millions.
Here are the numbers for Federal health care expenditures. By way of background, Medicare Part A, hospitalization, is paid from payroll deductions while Parts B and D are paid from premiums and general revenues. Part A is currently self funding, but projected to fall into major deficit in the short and long run. In addition, Parts B and D are drawing from the general funds at a level that requires the President to propose modifications by 2009. What all of that means is the costs of health care are expected to increase dramatically and there has been no trust fund established for the bulk of the costs.

All of the numbers come from Tables 2.4, 3.2, and 8.5 of The Office of Management and Budget (OMB) 2008 Budget Of The United States Government Fiscal Year 2008 Historical Tables except for Premiums, Taxes on Benefits and Interest which came from Status of Social Security and Medicare Programs, A Summary Of The 2007 Annual Report.

To sum this up, the Federal Government spends 22.7 cents of every dollar it collects (over and above payroll deductions) on health care. If you are an "average" taxpayer making $50,000 per year and paying 12.45% of your income in federal taxes, then you are contributing $1,414 to health care from income taxes and $725 from payroll deductions (1.45%) for a grand total of $2,139.00. This is in addition to any non-governmental health care you may be paying for.

For Social Security go here.
For welfare go here.
For the balance of the budget go here.

Sphere: Related Content

How Much Does Welfare Cost?

Based on information I received from the Office of Management and Budget I have revised this post. The numbers changed by enough that I though it worth revising.

I have been involved in some discussion of late regarding fairness of our tax system, income distribution, and income redistribution. It seemed to me that there was a lot missing in these discussions. In particular, the facts! So I set out to plow through some government reports to get a handle on were the money comes from and where it goes. This has turned out to be quite a challenge, especially since I am not an accountant (although I think even some accountants would be baffled by some of this stuff).

As I progressed it became obvious to me that this is a project that will need to be broken down into pieces. I decided the first piece would be welfare related expenditures because that has been a popular topic in my conversations and political debates. With that introduction, here are some of the welfare figures. I hope to have more analysis soon, depending upon when one very nice young intern named Karl at the Office of Management and Budget gets back to me with some information. (Karl has since gotten back to me which is why this has been revised. Thank you Karl!)

According to The Budget for Fiscal Year 2008, Historical Tables, total outlays for Means Tested Entitlements in 2006 were $354.3 billion. This was 2.7% of GDP and

Includes Medicaid, food stamps, family support assistance (AFDC), supplemental security income (SSI), child nutrition programs, refundable portions of earned income tax credits (EITC and HITC) and child tax credit, welfare contingency fund, child care entitlement to States, temporary assistance to needy families, foster care and adoption assistance, State children’s health insurance and veterans pensions.

(from Table 8.1, page 133)

The cost of these programs has increased from 0.8% of GDP in 1962 (before Medicaid) to 2.7% of GDP in 2006, or by 1.9% of GDP. If we exclude Medicaid, health care for children and veterans pensions it is 0.89 % of GDP, or $117 billion. (The numbers for the excluded items are found in Table 8.5, page 142). This represents approximately 7.5% of total non-Social Security receipts to the Federal Government. So, for every one of your tax dollars to the Federal Government, about 7.5 cents goes to these programs. I hate to use averages, but the average taxpayer had a tax rate of 12.45% in 2005 (the latest data available here), so if we multiply things out we see that about 0.93% of the average taxpayer’s income went to non-medical “welfare”. So, if you made $50,000 and paid $6,225.00 in Federal income tax, approximately $465.00 went to all of these programs x-health care and veterans pensions.

Next up I hope to isolate some of the health care numbers. I believe this is truly where our fiscal crisis lies and I hope to see whether I am correct. It will require working through historical budget numbers together with Social Security numbers - my head hurts already!

For Social Security go here.
For health care go here.
For the balance of the budget go here.

Sphere: Related Content