Sunday, July 17, 2011
FactCheck.org, Does Washington have a Spending Problem or a Tax Problem?:
Washington's spending has recently been higher as a percentage of the nation's economic output than at any time since World War II. But by the same measure, Washington's revenues are the lowest in more than 60 years.
So does the U.S. have "a spending problem," as Republicans keep repeating in the current debate over how to reduce the nation's record deficits? Or is the problem that taxes are not high enough? Those questions frame a long-running partisan debate, and as usual we won't offer an opinion one way or the other. But for those seeking their own answers, we can offer some fiscal history and factual context.
Some key facts we think are worth considering:
- Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25% in fiscal year 2009, highest since 1945.
- On the other hand, federal revenues are expected to drop to 14.8% of GDP this year, lower even than the 14.9% attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4%.
- These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII. The deficit was 10.0% of GDP in fiscal 2009. It declined to 8.9% last year as the economy started to recover, but is projected to go up to over 9% this year. Each of these deficits is larger than in any year since 1945, measured as a percentage of GDP.
- The U.S. is borrowing about 36 cents of every dollar spent so far this year. It borrowed 37 cents on the dollar last year, and 40 cents in fiscal 2009.
- The largest components of federal spending are Social Security and Medicare programs for the elderly (33.5% of total outlays in 2010) and national defense (20.1%). Interest payments on the federal debt alone accounted for 5.7% of all federal spending, and that percentage is rising.
- The federal income tax accounted for 41.5% of federal receipts in 2010 (down from 49.6% prior to the Bush tax cuts of 2001 – 2003). Corporate taxes brought in only 8.9%, also down sharply since the recent recession. Payroll taxes and other "social insurance" payments accounted for 40% of total receipts in 2010.
It's easy to argue one side or the other by just citing facts that support a particular view, and omitting others. In the Analysis that follows, we offer some graphics, details and documentation in an attempt to give our readers a quick look at the entire picture — both where the money goes, and where it comes from.
|Breakdown of "other" in 2010
|(Percent of total revenues)
|Estate & Gift