The Budget Issue

Over the last few weeks we've seen the basic wrangling between the Republicans and the Democrats on the budget. However, neither party is addressing the issues, which means the Washington Lobotomy factory is still in high gear.

Let's start with a a few charts, courtesy of information from the CBO:


Over the last 40 years, mandatory and discretionary spending as a percentage of the total federal budget have dramatically changed their overall positions. Mandatory spending now accounts for 60% of the budget while discretionary spending now accounts for 40% of the budget.

In addition, medical spending is the primary reason for the increase in mandatory spending:


Notice that over the last 40 years, medicare spending has increased from 10% of mandatory spending to a little over 20%. In addition, Medicaid spending has also increased from about 4%-5% to a little over 10%. At the same time, Social Security spending as a percentage of mandatory spending has decreased from a little under 50% to a little over 30%.

The point of these two graphs is to illustrate the following points.

1.) The percentage of the US budget over which we have some degree of control is decreasing at an alarming rate. If we are going to deal with this part of the issue, Congress will have to fundamentally change aspects of a major part of US expenditures. Politically, this proposition is incredibly dangerous.

2.) Note that the primary issue is medical spending, not Social Security.

Finally, the budget issue is occurring at a time when the tax burden is the lowest its been in 40 years:

Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress. The real problem is spending,counters Adam Brandon of FreedomWorks, which organizes Tea Party groups. "The money we borrow is going to be paid back through taxation in the future," he says.

Individual tax rates vary widely based on how much a taxpayer earns, where the person lives and other factors. On average, though, the tax rate paid by all Americans — rich and poor, combined — has fallen 26% since the recession began in 2007. That means a $3,400 annual tax savings for a household paying the average national rate and earning the average national household income of $102,000.

And yet, at no point in the "conversation" have we heard any mention of raising taxes.

More than anything, this entire "debate" has illustrated the ridiculous nature of the American political debate and system.