The Ugly Truth About the Federal Deficit: It's Not Just Entitlement Spending

Worries about the U.S. federal deficit have turned into a mania in recent years as trillion-dollar deficits have become the norm. Yet the national debate about the deficit has mostly ignored the key driver of our recent deficits: the bloated U.S. security apparatus. Instead, discussion has centered on two other issues: entitlement spending and tax revenue. Many on the political right have strictly focused their attention on reducing "entitlement" spending, particularly Medicare and Medicaid. Meanwhile, the political left spends most of its energy fighting to increase tax revenue by raising rates for wealthy Americans and closing loopholes.

In the course of this posturing, politicians have danced around America's military- and security-related spending problem. This totaled approximately $900 billion last year, and it will come close to that figure this year despite the recently enacted "sequester" that cut more than $40 billion from this year's military budget. Without cutting military expenses significantly, the U.S. will not find an acceptable solution to the deficit problem. However, at present, neither party seems willing to accept the political risk of arguing for a leaner defense budget.

Recognizing these competing forces is critical for promoting a healthy national debate about the deficit. It's also important for investors trying to understand the outlook for the U.S. defense industry. The growing obsession with deficits makes it more likely that eliminating (rather than merely reducing) the deficit will be the country's ultimate goal. If conservatives succeed in targeting a long-term balanced budget -- rather than a smaller deficit, which many liberals prefer -- entitlement cuts, while necessary, will need to be accompanied by significant defense-spending reductions.

Entitlement spending: The great canard
The growth of entitlement spending is a long-term problem for the U.S. government. Thus, conservatives who argue for "fixing" entitlements are not wrong, per se: The rapidly rising cost of health care is of particular concern. However, present-day entitlement spending is not the biggest driver of the federal deficit. Spending on the three major entitlement programs -- Social Security, Medicare, and Medicaid -- is typically blown out of proportion in debates about national fiscal policy. For example, the "Face the Facts" group highlights annual "mandatory" spending of more than $2 trillion as a major cause of federal deficits.

While it is literally true that mandatory spending exceeds $2 trillion, that figure is grossly misleading, because it ignores program-specific revenues. Social Security and Medicare are social-insurance schemes that are primarily funded by payroll taxes. Lots of money passes through those programs, but the net impact on the federal budget is relatively small (less than $200 billion last year).

According to the Congressional Budget Office, Social Security expenditures were $768 billion and Medicare expenditures were $551 billion in 2012. (The Social Security Administration reports spending of $786 billion; I cannot resolve that discrepancy.) However, excluding the effects of the payroll tax holiday, Social Security was overfunded. Revenue from the FICA payroll tax, interest on the Social Security Trust Fund, and taxation of benefits totaled $840 billion. Medicare ran a deficit, but spending of $551 billion was offset by total receipts of $334 billion, including payroll taxes and premiums paid by participants. On a net basis, the Social Security and Medicare combined deficit was well under $200 billion.

If we include Medicaid -- the third major entitlement program -- the cost of entitlement spending grows to a little more than $400 billion. While that total is nothing to sneeze at, it is clearly not the primary driver of the federal deficit, which was roughly $1.3 trillion last year.  Entitlements are projected to become a massive draw on the federal budget in the future, particularly as the baby boomers retire, but entitlement spending has actually been a relatively small contributor to federal deficits over the past decade.

The military burden
The cost of security-related spending dwarfs the net cost of Social Security, Medicare, and Medicaid combined. The CBO's most recent (post-sequester) estimate of 2013 discretionary security spending was $751 billion. That primarily accounts for military spending but includes spending for related departments such as Homeland Security and Veterans Affairs. That total excludes mandatory spending related to benefits for veterans and members of the military, which is projected at $132 billion. Thus, total military and security spending will approach $900 billion, even after the recent budget cuts.

Obviously, some level of military spending is vital for our national security. However, by comparison to any reasonable standard, the U.S. spends far too much. China, which fields the second-most powerful military, plans to spend just $119 billion on the military this year, along with $124 billion on internal security. While these figures may be understated to some extent, Chinese military spending is undoubtedly a fraction of U.S. military spending.

Given the vast scale of U.S. military and security expenditures compared to other expenditures, the U.S. cannot afford to ignore defense cuts if it is to balance the federal budget. The cost of the military is a much larger driver of our recent deficits than entitlement spending, and defense spending could be cut substantially without grave danger to our national security.  Historically, a 2-to-1 spending advantage over the nearest potential challenger has been considered more than adequate. The U.S. could cut at least $200 billion from the defense budget (currently more than $600 billion) while still exceeding that standard.

Taxes are not enough
Republicans may be overly focused on entitlement spending, but the focus of most Democrats on raising revenue is also misguided. If we exclude "pass through" social-insurance taxes, the CBO expects total federal revenue of $1.76 trillion in 2013, of which $224 billion is committed to "net interest." However, roughly $125 billion of interest owed to the Social Security and Medicare trust funds (which own government bonds) is excluded from that figure. After deducting both types of interest, the federal government has $1.4 trillion to pay its other bills.

As noted above, military- and security-related spending totals $900 billion. If that figure is allowed to stand, it leaves just $500 billion for running the rest of the U.S. government, maintaining our infrastructure, providing basic assistance to the poor, funding Medicaid, and covering the deficit of Social Security and Medicare (which may rise to as much as $250 billion this year). That is hopelessly inadequate, leading the CBO to expect a 2013 deficit of $872 billion despite sequester-driven spending cuts and the expiration of some of the Bush tax cuts.

While raising taxes again would narrow the deficit, federal revenue (excluding social-insurance taxes) would have to increase by 50% to fully cover the 2013 deficit. That scenario is out of the question, leaving Democrats with only a partial solution to a big problem. Increasing tax revenue cannot close the deficit gap, although it could help in conjunction with significant spending cuts.

A grand bargain
Given today's toxic political climate, I am skeptical that a grand bargain solving America's deficit problem will be found soon. If a such a bargain were to be forged, entitlement reform would have to be included, because the growing cost of medical care could easily overwhelm other cuts. But entitlement reform alone cannot do the trick. Making Medicare self-sufficient and cutting Medicaid significantly might reduce the 2013 deficit by 30% to 40% but would still leave the government at least $500 billion short of a balanced budget. Increased tax revenue would also likely play a part in any grand bargain. However, while more revenue could reduce the deficit a little further, it could not eliminate the deficit. (Incidentally, nonsecurity discretionary spending of $390 billion in 2013 is already lean and does not leave much room for cuts.)

Significant defense-spending cuts are therefore a necessary part of any viable strategy to balance the budget. Both political parties could continue to ignore reality almost indefinitely, but if they ever get serious about eliminating the deficit, major defense cuts are almost certain to occur. This is an underemphasized point in the national debate today. It is also an important point for investors in defense stocks to remember. Lockheed Martin (NYSE: LMT  ) has been able to keep its F-35 Joint Strike Fighter off the chopping block so far, despite shoddy performance and massive cost overruns. Lockheed's massive reliance on U.S. military contracts could put it at risk if defense cuts were finally approved. General Dynamics (NYSE: GD  ) is another company that is highly levered to military spending and could potentially face cuts if the U.S. reduces orders for the costly attack submarines it produces.

Investing in the defense industry today is equivalent to betting that the U.S. will never erase its deficit -- and so far, that's been a good bet. However, it remains to be seen whether we can regain control of our profligate spending.


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  • Report this Comment On March 12, 2013, at 6:21 PM, Tellitlikeitis13 wrote:

    If there were more people with jobs, who could pay taxes, and government didn't increase spending, that would help. Also, if government lowered aid to other countries, that would help. And, deporting illegals, and not letting them use our hospital system without insurance would help. And, lowering gas prices would help lower costs of goods and services. Just saying.

  • Report this Comment On March 12, 2013, at 6:24 PM, jnobfan wrote:

    I am a Conservative voter who believes the first job of the Federal Government is to keep us safe.

    That said we have over 900 military bases on foreign soil and endless "wars" are now considered "normal" by the people and the press.

    DDE warned us about "The military/industrial complex" I submitt that he was correct to warn us about that but it has grown into a "Military/Industrial/Government/Media complex" that is wildly sucking the money out of the economy. Its a moneytrain and it cannot be stopped. Please buy and store some common sense items to keep your family safe from the coming trainwreck.

  • Report this Comment On March 12, 2013, at 6:27 PM, FireDCidiots wrote:

    The only thing more heinous than the elected politicians that run our government, is the media that they are in the bed with.

  • Report this Comment On March 12, 2013, at 6:29 PM, victimofthe60s wrote:

    Shortly before 9/11, Rumsfeld, then secretary of defense, announced that the pentagon had misplaced 2.3 trillion dollars. This was quickly buried in the news by the events of that fateful day.

    None the less, that is a significant amount to simply disappear and never be questioned. Interesting food for thought.

  • Report this Comment On March 12, 2013, at 6:32 PM, frecklesdog wrote:

    As I suspected, uncle sam is trying to screw the old folks saying social security is going to bankrupt the country, when it is really overfunded! If the pols had never started robbing ss years ago by taking the payments and dumping them into the general account, and issuing IOU'S in the form of bonds (that they have to pay interest on) we would not be having this conversation. God save our grandkids!!

  • Report this Comment On March 12, 2013, at 6:38 PM, ericeh16 wrote:

    Hey, social security isn't an entitlement it is funded by us the workers and if congress had left it in its own account where they couldn't spend it, it wouldn't be part of the deficit talks . Put social security back in its own account and have congress quit spending it on other programs!

  • Report this Comment On March 12, 2013, at 6:42 PM, SGliders wrote:

    The government considers it an entitlement program because the majority of those collecting benefits never paid a dime into it! That needs to change -- if you didn't pay in, then you should not receive benefits!

  • Report this Comment On March 12, 2013, at 6:47 PM, YoureKiddingMe wrote:

    Spend trillions to blow up two countries, spend trillions more to rebuild said countries.

    Or

    Spend trillions to provide healthcare for your own citizens.

    Which do you think is the better return on investment?

    For the record, I'm a conservative voter and third generation veteran.

    However, unlike conservative leadership, I can balance my checkbook and determine where my money will be best used.

  • Report this Comment On March 12, 2013, at 6:50 PM, bmaca5 wrote:

    Huh? So, because we have taxes dedicated towards paying down one sector of the budget, we don't have to count them as part of our deficit? So, if we set up a separate payroll line item to pay for defense and we cancel the one we pay for Social Security, do you make the argument that it is now Social Security that is the problem? Payroll taxes are one type of our total tax burden as citizens. That total tax burden is used to pay for expenses like Social Security, Medicare, Medicaid, and Defense. It doesn't matter if you have specific funding, it all goes into the same basket, and it all gets pulled from said basket. Here's an idea, quit spending so much on Social Security, Medicare, and Medicaid, and perhaps the payroll taxes can go back to where they were in 2012, or less.

  • Report this Comment On March 12, 2013, at 6:53 PM, wonderousdragon wrote:

    The wealthy families have been in control and stealing from the lands of this nations ever since they took it from the native Americans! They've made it common to take the oil and other resources from this land and claim it for themselves. So common, that most think nothing of it! We should be just as "entitled" to the resources of this land as those who were able to get it before we were born. We have a birthright to own everything here, but we have been convinced that capitalism and the uber rich have all the rights in the world, and that is how they want it! They are the real greedy "enititled" ones, but they have a psychosocial tradition of twisting everyone's minds into thinking that those of us less fortunate do not deserve all the fruits of this country, fruits that these warmongering thugs have always, and will always continue to steal!

  • Report this Comment On March 12, 2013, at 6:54 PM, whirlybird122 wrote:

    Why do you folks keep calling social security an entitlement when it is not , if the democrats would have not robbed it several times it would be fine

  • Report this Comment On March 12, 2013, at 6:58 PM, factchaser wrote:

    Let's see: today I read the govt is spending $1.5 mil to find out what makes lesbians fat. I read the Obama's spend $102k per year for their dog handler and $277k on caligraphers, $4 mil on their vacation to Hawaii, $1 mil on the golf trip with tiger. Hmmm.....I think there are things that can be cut besides the military spending. And don't forget the Stimulus to find out why pigs stink, the sex of shrimp, etc., etc.

  • Report this Comment On March 12, 2013, at 6:59 PM, Spinmaker wrote:

    Where R the taxpaying jobs from the Tax cuts for the RICH Hasn't the fool read Dwight Eisenhowers warning on the Military Industrial Establishment?

    One must conclude that our government policy makers think US fools or are themselves fools

  • Report this Comment On March 12, 2013, at 7:00 PM, bmaca5 wrote:

    We don't have conservative leadership. We have had liberal leadership since George W. Bush took over, and we are now in this predicament because Obama has simply accelerated the rate at which we spend money that we don't have. This article is completely false in its argument, entitlement spending IS the greatest % of our spending. Just because we have taxes dedicated to paying for them doesn't mean you get to ignore how much they cost! Seriously?

  • Report this Comment On March 12, 2013, at 7:03 PM, fiscalconserve1 wrote:

    We don't need $900 billion dollars on defense spent every year. We have enough weapons and munitions to destroy the planet 10 time over and the most advanced weapons. Only crazy paranoid war mongers think that this is the right thing to do. We need to back out of world politics for a while. Our government has proven it can't do the job for our own country, so why should we be trying to impose our will on other people. Let's clean up our own house and let those other countries fall on their own sword. It's time america gives up its role of the th world's police and spend our money at home where it belongs.

  • Report this Comment On March 12, 2013, at 7:17 PM, mtnmark69 wrote:

    Military spending is the Elephant in the room, only it has become a sacred cow. Huge numbers of no-bid contracts, parts being made in every state instead of one location, planes being forced on the air force that they do not want, bases built overseas for extraordinary costs and then not used, more back-up systems on cargo aircraft than on commercial jet-liners, it just goes on and on. And yet the President was out there talking about not finishing aircraft carriers and nuclear subs due to sequestration. Where is the huge industrialized military enemy that warrants us continuing to do this? Both parties are responsible for creating this situation. What a waste of money, resources and a brain drain for more weapons development. We have the best military by far, but it is bloated beyond belief. Of course we need a solid defense, but this will hurt us if we do not change it.

    As for health care, that too is ridiculously expensive, but the attitude of most seems to be as long as it's covered by my insurance it doesn't matter. Making it available to all will also hurt us in the long run if we don't address cost.

    We don't call this corruption, but it sure looks like it.

  • Report this Comment On March 12, 2013, at 7:25 PM, crossle27 wrote:

    62% of our anuual Federal budget goes to entitlements, but the lame stream media is not concerned?

    What would we do without a strong military, in spite of the clueless left saying we can just hug and sing and we'll just fine!

    Grow up, recognize the ugly truth and deal with it. This nation is being drwoned in entitlements, while attempting to cut our defense budget drastically by these commies in this crooked regime. Wake up people, the end of this nation is getting very close...

  • Report this Comment On March 12, 2013, at 7:26 PM, gypsey6 wrote:

    Does the military deficit include the billions of dollars that we send to governments such as Egypt, Iraq, Afghanistan and others who openly criticize the United States and wish we would leave? The old policy of dollars for bullets has to be ended. While it may be fashionable to reach out and help other countries our country needs to be helped first and cutting entitlement programs is not the answer when most retiree live at poverty level in spite of working all of their lives for the opportunity to retire and live out the end of their days without fear of having to get medical treatment or filling prescriptions. It is sad to have to go to your doctor and ask to only prescribe the $5.00 that has proven to be less effective than what you need.

  • Report this Comment On March 12, 2013, at 7:28 PM, ElkRiver wrote:

    This is a good article, quite revealing; however, what can be done to put us on the right track? We have a broken Congress (House & Senate!)

    The California Aquaduct network of canals keeps an arid part of California irrigated enough to produce a lot of our crops while East Texas and nearby lands have/are drying up for lack of water. The California network of canals cost $1.3 billion (present day value of money) to construct. If our Congress would direct its efforts inward, cut all of the pork (disguised as "ear marks"), take on the challenge of cutting the defense budget without cutting benefits for active duty and veterans, including their families, and other such programs, we could have a National Aquaduct System that would guarantee our citizens crops from all over the U.S.

  • Report this Comment On March 12, 2013, at 7:43 PM, usedcondies wrote:

    A growing body of empirical evidence points to increasing dependency on state largess. The evidence documents as well a number of perverse and disturbing changes that this entitlement state is imposing on society.

    Consider:

    • Over the 50-plus years since 1960, according to the Bureau of Economic Analysis, entitlement transfers—government payments of cash, goods and services to citizens—have been growing twice as fast as overall personal income. Government transfers now account for nearly 18% of all personal income in America—up from 6% in 1960.

    • According to the BEA, America's myriad social-welfare programs (the federal bureaucracy apparently cannot determine exactly how many of these there are) currently dispense entitlement benefits of more than $2.3 trillion annually. Since those entitlements must be paid for—either through taxes or borrowing—the burden of entitlement spending now amounts to over $7,400 per American man, woman and child.

    • In 1960, according to the Office of Management and Budget, social-welfare programs accounted for less than a third of all federal spending. Today, entitlement programs account for nearly two-thirds of federal spending. In other words, welfare spending is nearly twice as much as defense, justice and everything else Washington does—combined. In effect, the federal government has become an entitlements machine.

    • According to the latest data from the U.S. Census Bureau, nearly half (49%) of Americans today live in homes receiving one or more government transfer benefits. That percentage is up almost 20 points from the early 1980s. And contrary to what the Obama White House team suggested during the election campaign, this leap is not due to the aging of the population. In fact, only about one-tenth of the increase is due to upticks in old-age pensions and health-care programs for seniors.

    Instead, the country has seen a long-term expansion in public reliance on "means-tested" programs—that is, benefits intended for the poor, such as Medicaid and food stamps. At this writing, about 35% of Americans (well over 100 million people) are accepting money, goods or services from "means-tested" government programs. This percentage is twice as high as in the early 1980s. Today, the overwhelming majority of Americans on entitlement programs are taking "means-tested" benefits. Only a third of all Americans receiving government entitlement transfers are seniors on Social Security and Medicare.

    • As entitlement outlays have risen, there has been flight of men from the work force. According to the Bureau of Labor Statistics, the proportion of adult men 20 and older working or seeking work dropped by 13 percentage points between 1948 and 2008.

    The American male flight from work is so acute that more than 7% of men in their late 30s (the prime working age-group) had totally checked out of the workforce, even before the recent recession. This workforce opt-out, incidentally, was more than twice that of contemporary Greece, the poster child for modern welfare-state dysfunction. The share of 30-somethings neither working nor looking for work appears to be higher in America than in practically any Western European economy.

    • Arithmetically speaking, the recent American flight from work has largely been a flight to government disability programs. According to the Social Security Administration, the number of working-age Americans relying on Social Security's disability programs has increased dramatically over the past two generations.

    In December 2012, more than 8.8 million working-age men and women took such disability payments from the government—nearly three times as many as in December 1990. For every 17 people in the labor force, there is now one recipient of Social Security disability program payments.

    But the pool of working-age government disability recipients may be even larger than those getting funds just from the Social Security disability programs alone. The Department of Health and Human Services reports that more than 12.4 million working-age Americans obtained disability income support from all government programs in 2011. That's more than the total number of employees in the manufacturing sector of the economy.

    • In recent years, the biggest increases in disability claims have been for "musculoskeletal" problems and mental disorders (including mood disorders). But as a practical matter, it is impossible for a health professional to ascertain conclusively whether or not a patient is suffering from back pains or sad feelings. The government's disability-insurance programs were intended to address genuine need. On the current trajectory, the Social Security disability fund is projected to run out of money during Mr. Obama's second term.

    • The president and others describe Social Security and Medicare as "social insurance" programs rather than transfer schemes. True, the eventual beneficiaries of these programs contribute payroll taxes to the Social Security and Medicare trust funds during their working lives. But "insurance" programs are meant to pay for themselves; Social Security and Medicare cannot do so.

    According to the trustees for those two programs, Social Security and Medicare have already made tens of trillions of dollars in future promises that are not covered by their expected funding streams. If and when outside resources are required to honor their promises, these entitlements become transfer programs, not insurance programs.

    The moral hazard embedded in the explosion of social-welfare programs is plain. Transfers funded by other people's money tend to foster a pernicious "something for nothing" mentality—especially when those transfers seem to be progressively and relentlessly growing, year by year. This "taker" mentality can only weaken civil society—even as it places ever-heavier burdens on taxpayers.

    Generosity is a virtue, on that we can all agree with President Obama. But being generous with other people's money is not the same thing.

  • Report this Comment On March 12, 2013, at 7:45 PM, kathy02001 wrote:

    what i dont understand after people when there were working why dont they have it now really loop holes needto be closed and pork protect close cut in pay for the whithouse yes that means you obama and congress sentate if we have to be target then you to all fair i dont like the idea of social security and food stamp that ttake care of our people need to be only cut 3percent really we do need to eat stop attack the poor yes was the middle class now there poor really stop forgeiner aid for3yrs

  • Report this Comment On March 12, 2013, at 8:01 PM, cnyap wrote:

    Baloney article - the author doesn't know his history. We've ALWAYS spent a good portion of government revenues/taxes on defense - that's what federal fgovernemtns are created to do! In the past, we have NOT spent at these levels for entitlements however.

    And if he wants to play the game of piling on every "security" item as being defense, then I'll argue that troop and civilian workers' pensions ought to not be part of defense, but instead considered to be entitlement spending since they'd need pensions regardless of which gov't department they worked for anyhow, right?

    Those w/o a bias consider the core defense budget to be $550B and the total (ie with the war and some other stuff) to be $650B. Compare that against $1500B deficits for 3 years and $1100B+ this year. The deficits are 2x more than the defense budget!

    We spent plenty on defense and TWO wars under Bush, had LOWER tax rates, and a mediocre post 9/11 economy, yet deficits were much smaller.

    This year we will have record revenues, but the deficit will still be huge.

    The $88B war has been going down by 10's of billions each year and in 2 years will be tiny, so it's the $550B core defense budget that's key long term.

    For the past few decades, we've averaged 5.5% of GDP on defense. We're spending 4% currently - look it up via google or do the math yourself.

    Entitlements on the other hand have exploded in the past few decades. Food stamps alone doubled ($20B to $40B = 2.5B per year increase) in 8 years under Bush and doubled again in just 4 years under Obama ($40B to $80B = $10B/year (almost 25% annual) increase. It increased even after unemployment went down!). We are almost paying as much on food stamps as defense procurement - shocking and sad.

  • Report this Comment On March 12, 2013, at 8:26 PM, TMFGemHunter wrote:

    Thanks for the comments everybody.

    @bmaca5: I respectfully disagree. Social Security and Medicare ARE a different kind of spending than defense. Working age people are paying the FICA taxes now in order to get benefits later (essentially a small pension and retiree health insurance). If you get rid of those programs, people will still need to save roughly the same amount of money to pay for retirement expenses and health insurance. You're not really "saving" money.

    It's fine if you think that those programs should be privatized. But if you are going to still charge payroll taxes and use it to pay for a military that is almost twice the size it should be, ordinary people will be worse off.

  • Report this Comment On March 12, 2013, at 8:33 PM, jmac851 wrote:

    Figures don't lie, but liers figure.

  • Report this Comment On March 12, 2013, at 8:35 PM, mortmain wrote:

    It's entitlement spending. Defense is a red herring. Everyone talks about cutting defense but no one ever does it. NIMBY. Look at Europe. It's entitlements.

  • Report this Comment On March 12, 2013, at 8:41 PM, TMFGemHunter wrote:

    @cnyap: I'm a political scientist: I know my history. It's one thing to spend 5% of GDP during the Cold War when the U.S. was facing a massively powerful Soviet Union.

    If you look at the 1920s, when the U.S. had a similar level of safety compared to today (being much more powerful than any potential challenger), the U.S. spent about 1% of GDP on the military.

    You're entitled to disagree with my accounting, although I think it's fair. Military pensions, DoD civilian pensions, veterans affairs spending, etc. is all vastly inflated because the whole defense apparatus has been twice the size it needs to be for a long time. Those workers would not be receiving gov't pensions if those gov't jobs didn't exist.

  • Report this Comment On March 12, 2013, at 8:50 PM, Thesteve1978 wrote:

    Your accounting for Ss is flawed. The deficit is current receipts - future promises. Even if you try to do it your way you must deduct tax revenue lost by Ss.

    SS currently has promised 35-45 trillion and has 2 trillion.

    Gov should use gaap.

  • Report this Comment On March 12, 2013, at 9:23 PM, kenobragg wrote:

    Its not right to expect the US tax payer to pay for milatary spending for other countrys, Freedom comes with simple truth. We must take care of our own, Health care is money spent here at home, lots of the milatary waste is overseas. We have two Oceans, and every house has a gun for Defence. in 1950 they clamed the could destory the earth 47 times over, just how much Defence is enought.

  • Report this Comment On March 12, 2013, at 9:32 PM, TMFGemHunter wrote:

    @Thesteve1978: What you're really doing is complaining that the SS system was set up to start paying benefits immediately in the Great Depression at the same time that it started collecting revenue. You are correct that if SS worked on GAAP numbers, it would have substantial liabilities.

    But from a long-term cash flow perspective, which is all that really matters, the SS deficit is fairly moderate. Moreover, SS has been a profit center for the government up to the present day. People are only becoming worried about it now because it's time to start paying the baby boomers back for what they put into the system.

    To be clear, we still need entitlement reform. But moving to the chained CPI and raising the retirement age by a couple of years would take care of the problem. The real issue is that liberals have really dug in their heels against any change in the CPI calculation or the retirement age.

    Social Security was designed as a program to help seniors stay out of poverty in the last 10 years or so of their lives. To the extent that there is a "problem", it is that Americans are living longer. Now many people are living 20 or even 30 years past retirement. Unfortunately, it's just not realistic for many people to work for 40 years and save up for 30 years of retirement.

  • Report this Comment On March 12, 2013, at 10:00 PM, ChMacQueen wrote:

    The article fails to mention many other "entitlements" that Americans consider in the large scheme but the Media and Washington ignore. Welfare, all public benefits such as housing, food stamps and such, free education for non citizen children. Illegal aliens being "allowed" to stay illegally with lack of real border security. Hospitals forced to help any1 who comes into the ER matter if they can pay or not which is very much abused by minorities especially illegal aliens who have no rights. That drives up our health costs considerably.

    SS is mostly funded however 9% on the SS payroll are non qualified mostly immigrants who were waivered into the program who never paid into it. 9% reduction there and wouldn't hurt. Medicare would be far smoother privately along with the forced ER treatment and medicaid being tore down as it stands as costs of healthcare would plummet under a private payer.

  • Report this Comment On March 12, 2013, at 10:17 PM, clydeglyde wrote:

    seriously.how many have been to the zoo and seen monkey sh$# fights better organized than this.not to mention honest.

  • Report this Comment On March 12, 2013, at 10:30 PM, TMFGemHunter wrote:

    @CHMacQueen: The ER problem is a big issue in my opinion, but there's no solution.

    Conservatives go crazy when the possibility of a government-run single payer system comes up. But that would give everyone health insurance. On the other hand, pretty much everybody else goes crazy when the alternative is leaving poor people on the street to die (which is essentially what you are suggesting should happen).

    As for the idea that the cost of healthcare would plummet under a private payer, I don't think there's any evidence to support that. Most other countries have either a single payer system or more government involvement in healthcare than the U.S., yet the U.S. has by far the highest health care costs.

  • Report this Comment On March 12, 2013, at 11:35 PM, kmtominey wrote:

    If people will look at the preamble to the constitution you will see and read a MISSION statement. The role of government includes Provide for the Common Defense, ..Promote the Common Welfare ..and Secure the Blessings of liberty. Then look at the details of the element of the constitution and the amendments for likes to the key language in the preamble.

    Much of the activities undertaken by government beyond the military have to do with 'promoting the common welfare ,,, securing the blessings of liberty.." SS would be fine if those of us who are in the upper half of the income area paid the payroll tax on all of our income. Medicare is a steal at 99/mo. The premiums should be much higher for those of us with higher incomes say topping out at 3K/mo for 3 million and up.

    These two programs are superb at protecting the citizens from poverty and no or poor health care in their elder years. Not to mention the protection for widows and ophans and the disabled. I remember my grandmother who should have been comfortable until a stroke and the subsequent nursing home care wiped her out. Fortunately she died literally two months before her money was gone or she would have been a charity case and in the late 60's that was not a pretty picture.

    An income tax surcharge to retire debt associated with Iraq, unfunded drug and advantage subsidies, etc - Personally i would like to see a 10% surcharge for this purpose. Better, quaduple it for Bush, Cheney, Rumsfeld, Feith, et al and for all legislators who voted for war without reading the classified intell report. Up it by a factor of 10 for those who read the report and still voted Bush 43 the power to start a war.

  • Report this Comment On March 13, 2013, at 1:11 AM, agatator wrote:

    OK! so we all know what needs to be done. how do we make it happen? Bitching only causes resentment. we got up off the ground during the 60's and accomplished more then what had been done in 100 years. America has not learned from what the baby boomers were able to do! Time you BABIES WAKE UP STOP BLAMING US FOR YOUR PROBLEM AND FIX IT YOURSELVES.

  • Report this Comment On March 13, 2013, at 8:40 AM, mountainfrog wrote:

    The enemys of America know very well they can not defeat us militarily. But they can beat us economically. They destroyed our economy by forcing us to spend our resources on endless brush wars. The IED's that maime our troops cost not much more than a large pizza but inflicts damage of unknow costs. Drones kill enemy combatants but how much did it cost to take out one person? This is an endless cycle and we need to stop playing into their hands.

  • Report this Comment On March 13, 2013, at 4:26 PM, DSRyan wrote:

    The issue with entitlements isnt so much as where they are now/today, but rather where they are headed due ot the demographics. BTW, I agree the military has to be reduced as well.

  • Report this Comment On March 13, 2013, at 4:39 PM, TMFMorgan wrote:

    Citing payroll taxes' relation to entitlement spending only makes sense if payroll taxes are segregated from the rest of the government. But they're not. When entitlements ran a surplus, the remainder went to the general fund. When they run a deficit, the difference is made up by the general fund. There's no segregation.

    For example, you write:"However, excluding the effects of the payroll tax holiday, Social Security was overfunded."

    That's partly because the general fund chipped in $120 billion to cover the cost of the payroll tax.

  • Report this Comment On March 13, 2013, at 7:51 PM, TMFGemHunter wrote:

    @DSRyan: No doubt about that. My point here was that even if you excluded the drag of entitlement spending, the gov't still ran a $900 billion deficit last year.

    @Morgan: I disagree. Payroll taxes ARE segregated from the rest of the government. The general fund borrowed from the SS trust fund when SS was running a surplus and the rest of the government was running a deficit. If SS had not run a surplus, that money would have been borrowed through public Treasury offerings.

    I'm perfectly happy to say that SS and Medicare should run a balanced budget over the long term. That probably means raising the retirement age, although there could conceivably be other solutions. However, you seem to imply that the general fund should keep/monetize the SS Trust Fund surplus by canceling all the intra-governmental debt. I can't get on board with that. The payroll taxes are specifically designated for SS and Medicare, and they shouldn't be going to fund our expensive military habit.

    You are correct that the general fund kicked in some money to the SS Trust Fund in order to cover the payroll tax cut. That happened for a couple of years, but is over now, since the payroll taxes are back to the regular rate.

    Best,

    Adam

  • Report this Comment On March 13, 2013, at 11:36 PM, FoolishLonghorn wrote:

    @TMFGemHunter - Read what bmaca5 wrote again.

    The author is arguing because we devote a specific portion of our taxes towards social security and medicaid, we should only count the difference. bmaca5 is not arguing that we should privatize or eliminate these programs. He is arguing, correctly, that the author's suggesting accounting is bunk.

    None of the federal tax collected is directed towards defense. Defense can never come out ahead, as the author argues that social security does today.

    All that really matters is what the government takes in and what it spends. That some of the tax is earmarked for social security is irrelevant. And the fact that our government has already spent all of that social security surplus and then some is evidence that congress feels the same way.

    By all means, let's discuss what to do about defense spending, social security, medicaid, and all other government programs. But to argue that social security is ahead and not part of the problem while defense is far behind based on the fact that a large portion of what is taken from my pay is earmarked "social security" and "FICA" is absurd.

  • Report this Comment On March 14, 2013, at 8:37 AM, TMFGemHunter wrote:

    @FoolishLonghorn: the FICA taxes were introduced in order to pay for SS and Medicare. They are earmarked towards those programs. The amount that you pay into the SS system through FICA determines how large your benefits are. In every way, the programs are set up to be self sufficient within the designated funds. To argue that they're just part of the overall government and equivalent to defense or other day to day government activities is just revisionist history.

    The fact that the government spent the social security surplus is meaningless, since it "bought" that cash with debt securities now held by the SS Trust Fund. We've shown quite dramatically in the past 10 years that we're happy to issue debt to anybody to fund our government (and most of all, the military). I'm not sure why people think it's OK to cancel the SS Trust Fund's bonds but not other individuals/institutions/countries' bonds.

    All I am arguing for with regard to accounting is that FICA taxes go toward the SS and Medicare programs as they are designed to do. All of the other taxes and revenues are meant to cover all of the government's spending. That would include defense, domestic spending, Medicaid, interest payments, and any deficit from SS and Medicare.

    Defense is by far the largest drain on the federal budget of any of these items. All of the individual income tax collected in the US is just barely enough to cover our interest expense, DoD and Veterans Affairs budgets, and defense-related pension benefits. If you want any roads, schools, border security, courts, foreign embassies, forests, safe food, etc. (let alone social programs), you need to either raise tax revenue or cut defense spending.

  • Report this Comment On March 14, 2013, at 10:37 AM, FoolishLonghorn wrote:

    @TMFGemhunter

    Clearly we will never agree, and again you miss my point. I am not arguing that defense spending should be increased, or decreased or remain the same. I am not arguing that social security should be privatized or that medicaid should be cut.

    If you think that because the tax withheld from your check by the federal government is divided into 3 categories, that social security and FICA are not contributing significantly to government debt, than I strongly disagree.

    And of course, even assuming the accounting matters, medicaid is in the red, social security will be there soon, and it's going to get much worse in the coming years.

  • Report this Comment On March 14, 2013, at 1:45 PM, TMFGemHunter wrote:

    I don't think I miss your point whatsoever. We just disagree! FICA has always been treated as a tax designed for the sole purpose of supporting SS and Medicare. When the SS system was running out of money back in the 80s, the system was reformed so as to be solvent. At that time, nobody questioned that the Social Security Trust Fund was separate from the rest of the government accounts.

    In my opinion, the only reason why this is even an issue is that it was convenient for President Bush to fund his military adventures with money borrowed from SS. Most fiscal conservatives were happy to let him spend that money then, but now they don't want to put that borrowed money back into the SS system.

    By the way, I do agree with you that SS and Medicare need to be fixed so that the FICA tax covers expenses over the long term. My point in this article was to show that balancing the budgets for those programs does not come close to closing the overall budget deficit.

  • Report this Comment On March 15, 2013, at 9:47 AM, TMFMorgan wrote:

    Adam,

    I'm not sure how these statements can be consistent:

    "I disagree. Payroll taxes ARE segregated from the rest of the government."

    and:

    "You are correct that the general fund kicked in some money to the SS Trust Fund in order to cover the payroll tax cut."

    SS funds itself, except for when it doesn't.

  • Report this Comment On March 15, 2013, at 1:29 PM, super1337 wrote:

    What a joke of an article.

    There is no social security trust fund... the money was spent decades ago.

    The SSTF is both a liability to the US government and an asset. That would be like writing out a check for a million dollars and claiming that you can retire.

    A simple test that one can do to determine if a social security trust fund exists or not:

    What would Social security do if they didn't have a trust fund? They would use the payroll tax and issue treasuries to send out social security checks.

    But that's the same as having a SS trust fund. The government will issue debt, and hand over the money to SS for them to send out checks.

  • Report this Comment On March 15, 2013, at 1:43 PM, ibuildthings wrote:

    Lots of the shipbuilding work over the years has been done by unionized employees who cared little about the quality of their work. In long-time union shops, its easy to know who can't be found unless you look in a favorite napping place, and lots know who comes to work drunk. But it costs more to get rid of them than it does to hire someone else to do the work.

    That submarine fire that killed some folks and cost half a billion dollars' loss was started by a worker who was bored and wanted the rest of the day off.

    This is the same kind of problem they have with poor teachers who can't be removed, and poor car company employees who can't be removed.

    This is not a hit against unions' purpose. Their presence prevents a lot of employer mischief. It is a hit against their principle of refusing to allow morons and deadbeats in their ranks to be removed, and of course how expensive those kinds of problems become.

    We also have the famous cases of Senator PuffNStuff needing airplanes to be built in his district, pressuring the Military to take planes they don't need.

  • Report this Comment On March 15, 2013, at 1:49 PM, ibuildthings wrote:

    It isn't a matter of poor purpose. It is a matter of poor execution. The border is a case in point. It costs less to build a double-wall fence with 10 feet of no-mans-land and guard dogs than it does to build all the other fancy equipment that is always down for maintenance, or hire more border patrol who get ordered to look the other way when the political winds shift. Put microphones in the ground to hear digging and razor wire up top. People used to routinely demand this from the government, who responded by saying it would be an insult to our good neighbors to the south, and illegal immigration isn't much of a problem because most return after the harvest.

    By the way, that fence would also save the tens of billions of dollars spend on handouts, hospital stays, and police services. There's some savings, but nobody in Congress has the courage to discuss it. Political correctness is the most expensive problem we have.

  • Report this Comment On March 15, 2013, at 2:26 PM, Legend23 wrote:

    Our nation is completely polarized. The mud slinging and finger pointing is tremendously out of control. The country is split in half. Our defense spending is large, but has also provided you and yours the way of life you know today. Cut the lions claws, the hyena's move right on in. Isolationism and passive aggressive foreign policy allowed for Imperial Japan, Nazi Germany, ect... Quit trying to predict what the future will be like without a strong National Defense, just open a history book.

  • Report this Comment On March 15, 2013, at 3:07 PM, whereaminow wrote:

    It's not that today's political climate is toxic, so much. Historically, there have been many periods in American history with highly politicized climates.

    The problem is that today's political debate is so f*cking stupid, whereas the generations that came before us actually discussed political issues with some knowledge of political theory and economics.

    The control of political debate by opinion makers in the media combined with the control of education by mindless bureaucrats has produced a society of political idiots that bicker with each other over absolutely nothing of principle.

    David in Liberty

  • Report this Comment On March 15, 2013, at 3:55 PM, macjon55 wrote:

    One of the problems with military spending (and corporate spending) is the use it or lose it budget system. There is money spent just for the sake of using up a budget so that the next years budget isn't cut. I've heard stories from ex military personnel that they would scrap a perfectly good piece of equipment and buy new stuff just to burn their budget so next years wouldn't be cut or actually increased. This type of system needs to be fixed if you really want to curb spending in general. Both government and private industry.

  • Report this Comment On March 15, 2013, at 3:57 PM, mjtri wrote:

    For DOD % of budget spending, see http://en.wikipedia.org/wiki/File:U.S._Defense_Spending_-_pe...

    Defense spending is actually relatively low, not that it can't be intelligently trimmed some.

  • Report this Comment On March 15, 2013, at 4:07 PM, burt6b0 wrote:

    The interest on the debt will kill us, when the fed quadruples the interest charged banks to 1%, and we will be in even bigger trouble after it doubles to 2%.

    On 12 March 2013, debt held by the public was approximately $11.856 trillion or about 75% of GDP

    The total debt is 16.693 Trillion today.

    the interest for 2013 is projected to be 247.7 B

    on a Gross Public Debt of 17,547.9B.

    the interest for 2012 was 224.8 B

    on a Gross Public Debt of 16,350.9 B.

    When the interest on the debt quadruples (an FED rate of 1%) the interest on the debt will go from 6% of the budget (224.8/3,795.6= 5.92%)

    to 24%.

    When the FED rate raises to 2% the interest on the debt alone (not counting any entitlement or military spending) will swallow up 48% of the budget.

    When will the USA get serious about reducing our debt? When the Bond market stops loaning us money.

  • Report this Comment On March 15, 2013, at 4:36 PM, mapsguy wrote:

    We haven't had Conservative leadership since Eisenhower. We have had ideologues who could care less about conservation of anything except their own wallets.

  • Report this Comment On March 15, 2013, at 5:06 PM, TMFGemHunter wrote:

    @burt6b0: The gov't doesn't pay the interbank rate on debt. Short term Treasuries pay barely any interest, but longer term government debt has a higher interest rate. If you calculate the weighted average interest rate on debt held by the public, it's about 2% right now. It's still a significant expense, and one that will get much higher as the debt held by the public grows.

    @TMFMorgan: Obama decided that the payroll tax was the best mechanism for giving a temporary payroll tax cut. I don't have any particular opinion on whether that was a good idea. But I think it's pedantic to state that because the general fund kicked in some money in two separate years, that means that FICA is just a general tax and SS is just a regular expense. The two are inextricably linked in my opinion: SS is a social insurance scheme funded by FICA.

    @Legend23: I'm not against a strong national defense, as I understand it. But "strong" has to be defined with reference to specific threats. We could cut the defense budget in half and still be the strongest country in the world in land, sea, and air operations. Moreover, most of the next 10 most powerful countries are longtime U.S. allies. There's just no way to justify the current level of military spending unless you argue that it is America's job to solve the rest of the world's problems.

    @super1337: Actually, very little was spent "decades ago"; about 65% of the money in the Trust Fund was accrued (and lent to the government) in the past dozen years, i.e. under Bush and Obama.

  • Report this Comment On March 15, 2013, at 5:19 PM, TMFMorgan wrote:

    Adam,

    To me, the payroll tax cut being replaced by $250 billion from the general fund is just an example of how government receipts are fungible. The segregation of entitlements from the rest of the government is not only an odd concept; it just hasn't taken place in reality.

    It's as if I said my grocery bill ran a surplus, but my rent was causing a big deficit. In reality I have income and bills, and all of my income is used to pay for all of my bills. It's the same for the government. The payroll tax cut showed what will happen when the trust funds are depleted: Nothing. Benefits will be paid for out of the general fund. It's all fungible.

  • Report this Comment On March 15, 2013, at 5:56 PM, jackson2010 wrote:

    Hey folks. Why is a $ spent on defense more or less valuable than a $ spent building a bridge???

    They are both "stimulus"!!! If we stop R & D and construction of faster, more capable planes, don't we risk abdicating control of the sky to those that will?? Then what??? Don't we need smarter, more highly skilled talent or do we want more dirt pushers.

    Maybe $900B is too much, but we don't build many ships anymore and if we had to, where are the skilled people we need to build them.

    We can only lose our freedom once. Then what?

  • Report this Comment On March 15, 2013, at 6:05 PM, RetiredEng wrote:

    Please take a breath and watch a movie. I suggest "Too Big to Fail", an HBO movie about the run-up to the great recession during 2008. It covers a lot of ground but one scene sticks in my mind. The US Treasury Secretary was at a dinner in China with his Chinese counterpart. The Chinese minister leaned over and said that the Russians had approached them about calling the US debt (yes Russia hold some US debt too). The Secretary looked shocked and asked if they were going to do that. The Minister said "No, of course not", but then added that our debt was our greatest weakness. It's a movie...maybe this happened, maybe not, but the point is obvious: We should balance the cost of hardware, bullets and manpower against the need to reduce our debt.

    (The actual numbers change daily, but the US government and private investors own most of the debt, China and Japan each own about $1.1 trillion; Britain less as part of a total foreign ownership of 25 to 30% - google "who owns US debt 2013" for details)

  • Report this Comment On March 15, 2013, at 6:26 PM, RetiredEng wrote:

    To: TMFMorgan: The value of keeping SS and Medicare (and other gvt) accounts separate is that you can track and analyze the data. The same is true of any company from the smallest department to the P&L for the whole corporation. If you do not know where the money is coming from and where it is being spent, you have no hope of managing the business successfully. Accounting rules like GAAT, as noted earlier, provide standard methods for business accounting. Ideally then, if we know we have a SS funding problem, the numbers can be crunched and changes proposed, tested and hopefully implemented. The logic and number crunching is easy...getting politicians to do it right appears impossible.

  • Report this Comment On March 15, 2013, at 6:55 PM, RetiredEng wrote:

    To: Jacskon2010: Spend money on a bridge and you get to cross a river to visit a relative at less cost, start a business on the other side, move goods across the country using less diesel, etc, etc. It is an investment that leads to more benefits. Buy a bullet and you have a bullet, it leads to no further economic benefit. Yes, if you need it to keep you free to spend money on the bridge...it is absolutely necesary and should be on-hand before you know you need it. But economic strength is as important as military strength. Witness the success so far of economic sanctions on Iran (a few years) and North Korea (60 years), supported by their sure knowledge of our military strength. Balance is the key. Good luck to the politicians in striking the right balance.

  • Report this Comment On March 15, 2013, at 7:33 PM, Travelintime wrote:

    Best article I've read on this subject in quite sometime. Although one of the most serious political and economic issues in recent memory, we seem so hell bent on our personal prejudices or allegiances to be unable to view the subject rationally, and instead resort to 'blame the other side'. Come on now,I don't believe that we are collectively that ignorant or naive to not agree that the writer of this article, has a very valid and timely point of view.

  • Report this Comment On March 15, 2013, at 9:12 PM, retirednavyguy wrote:

    defense and medicine reflect high costs of new technology. Boomers are ridiculously expensive as are injections of highly effective medicines.

    We need to establish reasonable critical cost basis for our selections. More subs or more carriers; more preventative medicine or more end-of-life heroics.

    But not all of the above as interest groups would like.

    There is a time when certain defense programs should be closed and a time for us to accept death as the best personal option rather than an endless drain of resources needed for our nation's future best interests.

    from a cancer survivor

  • Report this Comment On March 16, 2013, at 12:13 AM, depsee wrote:

    I would suggest that the domestic drone program be a fantastic place to start military budget cuts.

  • Report this Comment On March 16, 2013, at 1:29 AM, ChrisBern wrote:

    I was about to type a reply to the article, but @fiscalconserve1 said it best. Simply put we need to quit being the world's policemen and arbitrators. I am dumbfounded at the things we do as a nation that are at best tangentially related to our own national security. At a cost of hundreds of billions of dollars a year. All the while we run $1T+ deficits. The whole thing would be laughable if it weren't so dang serious.

    Then again, the people who run with this type of "we need to reduce spending" platform, even with military spending, e.g. Ron Paul, are lucky to get 1-2% of the popular vote. Meanwhile pre-recorded Suits like Romney and Obama and Bush and Kerry and Gore and McCain get nearly 100% of the vote.

    Everyone seems to want real change but nobody wants to vote for it. Vote for it you sheep.

  • Report this Comment On March 16, 2013, at 9:02 AM, esotericevets wrote:

    Good topic. Is not the matter at hand a discussion of goals and the efficient attainment of same? Do not all Americans agree that we don't want to experience 911 again? Do Americans want to pour the total cost of that disaster into the effort to avert another such disaster every few days?

    To what degree can we divine the purpose of our leaders? Do we have government for the benefit of those in government or for the benefit of all? Most would agree with the latter part of that question, judging by the popularity levels of Congress.

    There is always a crunch coming for all of us. Good government would ideally not see its role as being the creator of an onerous overlay on our individual crunches.

  • Report this Comment On March 16, 2013, at 10:00 AM, Chris1016 wrote:

    If we're going to cut military/security spending we should start with the TSA and Homeland Security. I never understood the need for a department of Homeland Security. I thought that's what the armed forces were for. TSA is a joke and the rest of the world knows it. My daughter lives in Australia and when she travels she walks through a metal detector just like we did pre 9/11. The people down under think we're stupid for putting up with our airport security, and they're right.

  • Report this Comment On March 16, 2013, at 10:14 AM, SkepikI wrote:

    A lot of pretty academic discussion, considering we don't have a budget and haven't had one for 3 years. That fact, and the fact that the citizens tolerate in spendthrift government what we fools would excoriate and abandon in droves if our investments did it, explains a lot.

  • Report this Comment On March 16, 2013, at 11:00 AM, guylacroix wrote:

    All of what you say is true from that perspective. But the bottom line, looking at results after 5 months in fiscal 2013, the government spent 1,474 trillion and only took in 1.010 trillion for a deficit year to date of close to half a trillion dollars, suggesting another trillion dollar deficit for this year again.

    Social security, Health Services, Vetrans services and the Interest on the debt all add up to 941 billion, leaving only 60 billion or so for all other expenses which total 464 billion for the first 5 months. Military and Homeland security total 286 billion. So even if you eliminated military expenses and homeland security, you would still be short 178 billion and that only for 5 months.

    The fact is that the government stole 4.5 trillion from the various Trust Funds and replaced those surpluses with non-negotiable IOUs and not marketable Treasury Bonds. So all benefits now have to be paid from current income since the surpluses don't exist in reality anymore they have been spent.

    Whichever way you want to cut it, you either have to increase taxes by a trillion or reduce expenses by the same amount or any combination of the two which add up to close to a trillion.

    The government has reached a point of no return. If it increases taxes, it kills the economy; if it reduces expenses, it kills the economy as taking 1 trillion out of the economy is 7% of GDP. That would be a massive depression.

    When you spend what you don't have, and promise what you can't afford, you will ultimately regret it.

    Politicians don't care...it is the people who will ultimately pay the piper. Debt to GDP is now 106% and growing by 1 trillion a year....how long can that go on?

  • Report this Comment On March 16, 2013, at 12:25 PM, TMFGemHunter wrote:

    @Skepikl: I wouldn't say that citizens tolerate the situation; there's a huge amount of resentment towards Congress and the President. But citizens do feel powerless; neither party has advanced a sensible plan for dealing with the deficit. And unfortunately, the winner-take-all election system in the US makes it very difficult for a third party to gain any traction.

  • Report this Comment On March 16, 2013, at 12:28 PM, markangelo wrote:

    Yes the new Amerikan Dream

    Everyone is a Cop !!!

  • Report this Comment On March 16, 2013, at 2:38 PM, sroark wrote:

    No one wants to fix the real problem. The runaway cost of medicine. In 1983 my son was born premature and spent 25 days in the hospital the cost was $25,000 for the hospital and $2,500 for the doctor. Last week a friend had his thyroid removed he spent one night in the hospital and the bill was $49,000. Since 1980 the price of Drugs Doctors and Hospitals have gone up 18% to 20% every year with no end in sight.

    In Japan the government regulates the cost of medicine the entire country has free medical, to pay for it they have a 2% income tax. We pay 2% medicare tax and our employer pays the same. We're paying twice as much tax as Japan and can't even pay for the old people in our Country. The fix is simple regulate the price they can charge for medical. Medicare should get the lowest price a Doctor or Hospital charges any insurance company. The Drug companies should have to compete just like the Auto Companies do with the rest of the world.

  • Report this Comment On March 16, 2013, at 2:40 PM, wantingtoretire wrote:

    Somebody wrote the military/industrial complex sucks money out of the economy. Since it is part of the economy, how can it suck money of the economy...................?

  • Report this Comment On March 17, 2013, at 11:08 AM, miJenotS wrote:

    My qualifications to comment: I've observed a lot, I'm 70 years old, my retirement program is fully funded, I work full time, as an ER NURSE- 36 hours/week, and will continue to into the future; my budget is balanced, with a surplus.

    Primary recommendation to put ALL spending in perspective: Stop referring to Federal spending as money from Washinton, or Federal Funding, call it for what it is, "TAX PAYOR DOLLARS.". The money comes from the pockets of tax payers, either future tax payers (borrowed $), or taxes collected from someone today.

  • Report this Comment On March 17, 2013, at 2:31 PM, yamantaka2 wrote:

    Excellent article that identifies the really big elephant in our living room!

  • Report this Comment On March 18, 2013, at 4:20 PM, zgriner wrote:

    "However, excluding the effects of the payroll tax holiday, Social Security was overfunded. Revenue from the FICA payroll tax, interest on the Social Security Trust Fund, and taxation of benefits totaled $840 billion."

    IMPOSSIBLE.

    Social Security was reported to have started drawing down on its trust fund. How could Social Security be overfunded if the amount of money withdrawn from the trust fund exceeded the current interest collected plus the amount of money not collected because of the payroll tax holiday?

    And, since when are taxes on Social Security payments calculated back into Social Security funding?? Once you start with that, Social Security is no longer funded on its own but relies on General Revenue.

  • Report this Comment On March 18, 2013, at 5:35 PM, Gato337 wrote:

    The best way to cut down entitlement spending or "government largess" would be to address the underlying causes of wealth inequality in the US.

    <<usedcondies>> stated that entitlement spending was only 6% of the federal budget in 1960 and has increased steadily since then. Well, you know what else has increased steadily (if not exponentially!) since 1960? THE WAGE GAP and WEALTH INEQUALITY. The reason more people need government assistance is because wealth is becoming ever more concentrated at the top of the foodchain. Our middle class is getting squeezed like a lemon!

    The reason entitlement spending was so low in the 1960's was because that period of US history was when our distribution of wealth was healthiest! (Caveat: I'm not sure if <<usedcondies>> numbers were from before or after LBJ and his great society policies, which of course impacted entitlement spending w/ the introduction of medicare/medicaid, but )

    If we could nurse our middle class back to health and stop encouraging the upward concentration of money, then the government wouldnt need to hand out so many 'gifts.'

  • Report this Comment On March 18, 2013, at 5:39 PM, Gato337 wrote:

    ** oops pressed enter accidentally**

    RE the caveat I mentioned, I haven't done enough immediate research to know how that impacted the federal budget at the time

    BUT my point still stands - if we can move our society towards a more just and equitable distribution of wealth, then the need for a social safety net would not be so great. As long as CEOs are making 300X their company's average employee salary, then, yes, expect entitlement spending to keep growing!

  • Report this Comment On March 18, 2013, at 10:33 PM, esotericevets wrote:

    Gato337....Long ago I was in Brasilia with a dollar in my pocket and no money coming in for a week. By hanging out with some down and out people, I found a building that we were allowed to sleep in and I found the best pastries that I have ever eaten. These cinnamon rolls were half the size of my head and only cost a nickel. Freshly baked and available all day long, they tasted like heaven and would leave you docile and contented. It was one of the best weeks of my life and I still had change when an 80 dollar money order came in and I was off to the Amazon. Another place that I always enjoyed was a shantytown in Virginia where the locals built their modest houses and a church without benefit of government. There was a obvious sense of pride in ownership and a mighty sense of community in that part of town and when there was gospel singing in the church, you could see the building shake. My point is that things can be engineered to make poverty bearable and if you leave creative individuals alone, they can create a vibrant society even though they are poor. Years later I visited that shanty town and it had been cleared away and there was one modular home in an area that had previously had many shacks. I am sure that the people who lived there are in subsidized housing or maybe in jail. I lived in a small trailer in one of several trailer parks in town. There are no more trailer parks in that town anymore. It just gets harder all the time to be poor with some dignity. I just heard of a man who got arrested and jailed for a few years until he got old enough to collect social security. Things might turn around. There is a popular rap song out now about someone who keeps his sense of art and fashion by buying his clothes at thrift shops. If we manage to change our paradigm of praising wastrels to one of respecting those who tread lightly on the earth, that would go a long way to making this world right.

    p.s. If anyone has been in Brasilia lately, do they still sell those rolls?

  • Report this Comment On March 19, 2013, at 7:03 AM, skypilot2005 wrote:

    F. Y. I.:

    http://finance.yahoo.com/news/outgoing-bank-japan-head-warns...

    Outgoing Bank of Japan head warns no quick fix to Japan's deflation

    3/19/13

    "A lack of cash isn't what's keeping companies from increasing capital expenditure," Shirakawa said, on the last day of his five-year term as governor and his 39-year career at the central bank.

    "If there was a single thing that would have cleared the fog and solved all problems, Japan wouldn't have been in this situation for 15 years," he said, shrugging off the view that monetary stimulus alone can revive the economy.

    But Shirakawa warned that Japan's past experience and recent examples in the United States and Europe show there is no longer a clear link between the size of an economy's monetary base and inflation.”

    Sky

  • Report this Comment On March 19, 2013, at 8:51 PM, neocolonialist wrote:

    This is nonsense. We have a record number of people on welfare right now. We have a Social Security system which is, by all real accounting, bankrupt -- right now. We have record new spending on all social program fronts, right now.

    What the article fails to express, and probably to grasp, is that the constitution specifically establishes the federal government's responsibility to provide and maintain a military. Social programs on the other hand, specifically fall under "all other" responsibilities that were specifically left to the states. Meaning, and I know this isn't popular to say, that Social Security, welfare, medi-whatever, etc. at the federal level are unconstitutional.

    Let's see, take away all social programs and how is the federal governments balance sheet looking? Hey look at that, we're solvent again with a surplus.

    The problem is 100% social program spending.

    The other inconvenient fact this article didn't seem to want to dwell on is the growth curve. It would be nice to be able to conveniently paint over "The growth of entitlement spending" as this article does by looking at "present-day", but that isn't reality. And by the way, for present-day, did the military spending cause the 6 trillion dollar overage Obama has saddled us, our kids and grandkids with? I think not.

    Military spending has gone up, but social program spending has absolutely exploded. And what has transpired thus far pales in comparison to what is going to happen with Social Security, welfare, medicaid, medicare, and Obama care in the next 10 years. Social Security just went broke, but it just got there. The ratio of retirees vs working age in the coming years is expected to climb dramatically. All at a time when the economy is fragile to say the least.

    This article got one thing right, you cannot fix the problem with more taxes.

    But don't worry. Most of the MF folks and those in their socio-economic peer group still have plenty of 401k money to go after.

  • Report this Comment On March 20, 2013, at 10:14 AM, TMFGemHunter wrote:

    I'm not going to respond to this entire comment, but I want to point out one thing. Social spending is not unconstitutional. Why not? Because the Supreme Court has not declared it unconstitutional: and that's all that actually matters.

    You, I, or anybody else can read the constitution and have an opinion on what should or shouldn't be constitutional. But just because something seems obviously unconstitutional to you doesn't make it so. I could just as easily argue that the Iraq War, and the half dozen wars preceding it were unconstitutional (this happens to add up to trillions of dollars of spending), because only Congress has the power to declare war. The fact is that the Supreme Court has found that social spending is constitutional, as are undeclared wars.

  • Report this Comment On March 21, 2013, at 9:21 AM, neocolonialist wrote:

    I wouldn't argue on the constitutionality of the President getting the country into war, I think that is clearly unconstitutional. We have subverted that portion of the constitution ever since Korea. However, I will say this, every conflict in which we now find ourselves started off unconstitutional, but the constitutional problem was solved as soon as congress approved. So, they were unconstitutional, but aren't now.

    Whether the US Supreme court rules social programs as constitutional or not, they are not. It doesn't take a constitutional scholar to read and understand this:

    Article [X]

    The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

    Just like the problem you mention with the President de facto declaring war, social programs are just as unconstitutional. And by the way, the Supreme Court has not ruled either of those cases unconstitutional. Doesn't change the fact that they are.

  • Report this Comment On March 23, 2013, at 11:35 PM, Fight4Justice wrote:

    I find it unsettling that the U.S. government purchased 187 F-22 aircraft from Lockheed of which none can be flown for more than 7 hours without major malfunctions. Not one was ever deployed in either Afghanistan or Iraq due to operational dysfunction. At $70 million per unit, one would expect that they would at least be capable of flying for more than 7 hours. Instead, we just took the loss and ordered the latest and greatest, the F35 again from Lockheed and again over budget and flying problems. Why I ask?

  • Report this Comment On January 14, 2014, at 9:08 PM, sjsteen wrote:

    I can't believe believe some of the comments I've read here. The Military is under paid, over worked and has been total disrespected. The Military is the only reason we're still a Free Country and is always the scape goat for Washington appetite to spend. Don't be fooled I served 31 years in the United States Marine Corps and I can tell you I was under paid and over worked. I say shame on those who think our Government is suppose to pay for their Health care by cutting the Military. No what should happen is we secure our borders with our Military and deport every illegal alien that is every form of Government assistance at the expense of our Military.

  • Report this Comment On January 14, 2014, at 9:58 PM, sjsteen wrote:

    The number one responsibility of the President is to defend this Country. When people forget that and think it's Welfare, health care or any other give away program they think their entitled to we will continue to fail. No where in the Constitution does it say the Government is responsible for our personal debt and day to day needs. The health care system we had was the greatest in the world and that's why people from around the world come here for treatment. Now that Socialized Medicine is taking over it won't be long before the health care system crashes. This is a free Country and I can't believe I hear grown adults talking about we don't need a Military and should take the money from the Military to pay for someone's Heath Care. I say to to them grow up, wake up, get a job and take responsibility for yourself. The Military has been over worked, under paid and disrespected enough. This administration has did nothing except promise give always, allow our justice system to be crapped on and allowed every illegal alien and Terrorist more rights than you and I. If we want to fix the budget first secure our borders, deport every illegal out of the Country, stop sending money to terrorist supporting Countries and most importantly stopped blowing our tax dollars on social programs that don't work. You and I have to provide our life story to the IRS but a illegal alien doesn't even have to provide a SSN numbers for the dependents they claim. That's the problem, illegals getting tax refunds and their illegal, go figure and people have the nerve to blame our debt on the Military. The Military is the most important thing we pay for because without it we wouldn't be having this forum to talk. I say keep a strong Military, kick the illegals out of our Country, Bring manufacturing plants and jobs back to America and the Government will have more than enough money and people will once again work and pay for themselves with depending on the Government.

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