70% of U.S. Government Spending Is Writing Checks To Individuals

An anonymous reader writes with this excerpt from Investor's Business Daily:"Buried deep in a section of President Obama's budget, released this week, is an eye-opening fact: This year, 70% of all the money the federal government spends will be in the form of direct payments to individuals, an all-time high. In effect, the government has become primarily a massive money-transfer machine, taking $2.6 trillion from some and handing it back out to others. These government transfers now account for 15% of GDP, another all-time high. In 1991, direct payments accounted for less than half the budget and 10% of GDP. What's more, the cost of these direct payments is exploding. Even after adjusting for inflation, they've shot up 29% under Obama." It's very hard to lay blame on only one part of the U.S. government, though; as the two largest parties are often fond of pointing out when it suits them, all spending bills originate in the House.

Comments

Makers and takers

[sharky611aol.com]

Yet if you point this fact out, you lose a presidential election...

Re:Makers and takers

[Anonymous Coward]

Riiight,
because after 40 years in the military, getting a pension check means you're a "Taker".
F.U. and Romney too.

Re:Makers and takers

[rafjaimes]

Have you even looked at the budget breakdown? Pensions are the #1 expense. Instead of 40 years in the military we're probably closer to the point where people's retirements are longer than their actual years of service. You only need 20 years of service in order to retire younger than 62. The average retirement age of a federal employee is 60 but what if someone retires in their 50's or even 40's and then ends up living into their 90s? The results can be fairly extreme. http://www.usgovernmentspendin...

Re:Makers and takers

[alexander_686]

Ummm No. In the Bitcoin debates I have always been liberal on money creation – that some low level inflation is better than low level deflation. But never give control of the printing press to politicians. They will turn on the tap and inflation will spiral out of control. See Germany in the interwar era, or Zimbabwe a few years ago. Deflation may enrich the wealthy (as you point out), but high inflation destroys and savings of the poor and long term investments for the growth of tomorrow.

Re:Makers and takers

[Agares]

If you count all military who currently serve as well as retirees who get a check we make up well under 1% of the population. The issue here is that we have too many freeloaders. I understand that people need help from time to time, but it cannot be a way of like. However some do need constant assistance since they are disabled and what not. Those people are not a concern since they are such a small portion of the population. To put it simply though we have too many who just cheat the system.

Re:Makers and takers

[Anonymous Coward]

How many? Do you have stats on this? Furthermore, how much would it cost to fix this? Would we actually end up saving money?

Re:Makers and takers

[Anonymous Coward]

Anyone who thinks the fed "creates [money] out of thin air" and as a consequence is able to "raise revenue without increasing taxes or borrowing it" has undoubtedly received their economic education from a single source, namely youtube.com

When the federal reserve increases the supply of money, inflation is the net result. The net result of the fed increasing the money supply and inflation, is a tax on everyone who currently owns US dollars, as each of their dollars now purchases fewer real goods.

It doesn't come from thin air at no cost, no matter how many youtube videos you watch that claim it does, or what liberal college professor you overpaid to tell you it does. If you learned this in college, demand a refund on your tuition.

And it is not 1870 anymore either.

Re:Makers and takers

[pjt33]

"Direct payments to individuals" would seem to include your pay during those 40 years too. It's obvious to me that the wording is chosen to be deceptive.

Re:Makers and takers

[fuzzyfuzzyfungus]

Yet if you point this fact out, you lose a presidential election...

Actually, there may be a confounding factor (this is a hypothesis, anybody who has real numbers is welcome to step forward to argue for or against):

Assuming you aren't inimically opposed to the concept of the welfare state (whether because you think that it's actually a good idea, or whether you think that it's relatively cheap insurance to keep a fundamentally capitalist economy with slightly higher tax rates to buy off the proles, irrelevant), the state basically has two options for 'redistribution':

1. Actually comparatively high taxes on individuals and corporations, used to fund a variety of not-directly-cash public services(eg. national health system, cheap or free education, etc.).

2. Avoid the flack associated (in the US) with robust public-sector offerings, and sneak in your social welfare spending primarily in 'emergency' programs (WIC, etc. which pay in scrip; but have nontrivial USD value once you discount them for being able to purchase only certain classes of goods) and in 'hand up for the virtuous poor' type things ("earned income tax credit", assorted subsidies for small business loans, edging up to programs that are basically a sop for the middle class, like mortage related deductions).

Now, lest anybody misinterpret me on this point: I Think It Is A Bad, Bad, thing that nontrivial swaths of the US population are basically so damn poor that the only cash worth squeezing out of them is sales taxes and check-cashing joint fees. However, barring a solution to that problem, it would be my contention that (like our absurd 'We should really have universal health care; because our current system is an utter clusterfuck delivering bad results for crazy high prices, and tying workers to their jobs; but universal health care is commie socialism, so let's have a crazy arrangement where the government 'launders' universal health care(at a tidy markup) through the incumbent private insurance companies!') our 'let's see if we can get some of the benefits of a welfare state without courting the unpopularity of calling it that, and without the clout to do anything about the ever-widening wealth gap' approach has left us with a singularly dysfunctional creature, neither fish nor fowl.

Re:Makers and takers

[mellon]

Actually we can. The problem with your reasoning is that it presumes that money is given in exchange for work of equal value, but of course the very basis of business is that you pay less than what the work is worth, and the difference is your profit. So this notion of a 1:1 connection between money and value is simply mistaken, and not only that, it's impossible in a capitalist society. In a society where the disparity between pay and profit is as large as it is in ours, it's nonsensical to talk about money this way. Granted, I'm only pulling one thread out of the tangle here, but hopefully it's illustrative.

Re:Makers and takers

[mellon]

When a substantial portion of the money supply is out of circulation, printing money taxes that out of circulation money and gets it back into circulation, which can grow the economy. So while the effect you describe exists, it is not the only effect that must be accounted for. When the bulk of money in the economy is not circulating, the economy shrinks, and that's at least as damaging as the value of money shrinking.

Re:Makers and takers

[Anonymous Coward]

Inflation certainly grows the economy, as all assets denominated in dollars, see their valuations rise, because the value of a US dollar has fallen.

Whoopity do ... the GDP number went up. This isnt real growth. Your example of 'promoting economic activity for the sake of economic activity' is also not real growth, when one defines real growth as the production of wealth. If this were true, as a nation, we could become exceedingly wealthy simply by expanding the money supply, issuing monthly checks to ourselves, and buying as much consumer crap as we can each month. Certainly you are not claiming that behavior generates real wealth ?

I am not arguing against the concept of monetary expansion and contraction, or its usefulness when utilized responsibly, as you seemed to provide an example of.

I am however pointing out the ridiculousness of thinking it "comes from thin air" at "no cost." I suppose when grandma can't buy a single carton of eggs with her entire months social security check, we can just blame it on evil greedy corporations right ?

"Printing money" is a tax, same as any other, in color if not name, and someone pays the price. The same is true of the opposite action of "destroying money." It to is a tax, and someone pays the price. And no matter the form of tax, there will always be a politician claiming its for everyones benefit, even tho, someone will be getting fucked, while someone else gets to do the fucking sans lubricant.

Every action has an equal and opposite reaction, and there are no free lunches.

Re:Makers and takers

[Anonymous Coward]

Which is why this statitistic is utterly meaningless without a thorough breakdown of where the checks go and why.

I mean technically every tax payer who gets a refund gets a check from the government, but (barring EIC) it shouldn't really count because that money was never the governments in the first place.

All the people who work for the government? I presume most of them get checks or they would stop showing up to work.

Social Security?

Military pay and pensions?

But I guess we are supposed to assume that 70% of the money we pay in taxes is spent on welfare on top of the 50% that goes to foreign aid and 30% on interest and 400% on nasa and 50000000% on foreign wars....

Re:Makers and takers

[JesseMcDonald]

The problem with your reasoning is that it presumes that money is given in exchange for work of equal value, but of course the very basis of business is that you pay less than what the work is worth, and the difference is your profit.

You have a very strange notion of how business works. The idea is that you pay more than what the work is worth to the worker, and charge less than what the product is worth to the customer. The difference between these two is your profit. It works because the same good can be worth different amounts to different people.

The middleman isn't getting paid for nothing, either. He provides value to the worker in the form of a predictable paycheck, and value to the customer by organizing workers to produce the desired goods. Without him the (now self-employed) workers would have to go out and find individual short-term jobs on their own, and customers would be limited to such goods as can be produced by individuals or small, close-knit groups.

Re:Makers and takers

[DarkOx]

The problem with your reasoning is that it presumes that money is given in exchange for work of equal value, but of course the very basis of business is that you pay less than what the work is worth, and the difference is your profit. So this notion of a 1:1 connection between money and value is simply mistaken, and not only that, it's impossible in a capitalist society.

No you don't understand capitalism.

In a free market people don't exchange something of lessor value for something of greater value or vice versa, one of the parties would never agree. What happens is we meet and discover we value things differently.

If I hire you do a job, I do so because I value the "work" less than my money. That might be for any number of reasons: maybe I don't have time to do it myself despite the need; maybe I have a lot of money I don't need for anything else; maybe I don't know how to do the work and so If I chose to invest time instead of dollars the costs would be much greater; etc.

You on the other hand have offered to do the work because you have time, and want something else more and believe that you could satisfy that if you had more money. You value your time and labor less than my dollars.

Re:Makers and takers

[buddhaunderthetree]

Except that this fact isn't correct, which makes me wonder if anyone bothered to fact check the original article. The article states that 38.6% of 2.6 trillion is transfer payments in the form of medicare and medicaid, that's about 1 trillion for the mathematically challenged. That encompasses basically all medicare and medicaid outlays. The problem is medicare and medicaid outlays are not payments to individuals. For example 26% of medicare outlays are to hospitals, 23% to insurance companies for medicare advantage, 13% to physicians and so on. So the article is factually wrong, a fact that I think will be overlooked by everyone.

Re:Makers and takers

[nbauman]

How many? Do you have stats on this? Furthermore, how much would it cost to fix this? Would we actually end up saving money?

There are plenty of stats on the subject, and the amount of pervasive abuse is also apparent.

But you can't cite any stats.

Therefore, many of us would conclude:

1. There are no statistics.

2. You're full of shit.

Re:Makers and takers

[Cyberax]

First, central bankers have shown a remarkable restraint. There haven't been ANY hyperinflation episodes in developed countries for more than 50 years. Even in developing countries or xUSSR countries most hyperinflation episodes are linked with political upheavals.

In fact, right now ECB doesn't print _enough_ money - inflation is way under the targeted level, threatening to go into outright deflation.

Re:Makers and takers

[dryeo]

In fact, right now ECB doesn't print _enough_ money - inflation is way under the targeted level, threatening to go into outright deflation.

Have you been shopping for food in the last few years? All the important stuff like food, gas, heat and shelter sure seems to be going up faster then claimed. Or perhaps it is offset by the luxury goods that many or most can't afford or need to buy very often. I don't care if yachts and big screen TVs are getting cheaper. I do care that my income is flat and groceries keep going up.

Re:Makers and takers

[mellon]

Investing money in securities is typically about as useful to the economy as stuffing it in a mattress. It is only when money is spent on goods and services that it adds to the economy. When I buy $100 in Google stock, that money just vanishes as far as the economy is concerned (well, modulo the 30% broker fee, of course). It might come back later, but until it does it's gone.

Not news, not for nerds

[lgw]

I hate to be the guy saying "why is this on Slashdot", especially since I've been posting these very budget numbers here for years, when it has been relevant to the thread, but WTF? This is a blatant political click-troll story. It's not news (been this way for many years), and it's not "for nerds".

Sure, I guess we could rehash the same old "NASA's budget is trivial in the scheme of thing" posts, but really.

Re:I'm confused

[seepho]

In 2009 Slashdot turned into an internet libertarian website targeted to IT personnel. Didn't you get that memo?

Re:And...

[jedidiah]

Also, one of the listed examples was "farm subsidies". That is not something that can be assumed to be a "check to a person". A lot of large farms are corporate. So farm subsidies in some cases are just corporate welfare.

Perhaps this "checks to people" idea assumes that corporations are people too.

Also not sure what this is doing on Slashdot...

Re:Biggest detail left out

[joe_frisch]

So the richest 1% receive approximately 0.4% of the money. Not really surprising or interesting.

Lessee, where's my dictionary?

[jfengel]

mandatory (adj): Obligatory; required or commanded by authority.

As the article points out, most of this is going to mandatory programs, which would be the same even if it were Romney or McCain or Sarah Fucking Palin in office.

What this means, for those dumb enough to believe what they read in IBD, is that what Obama has achieved is to reduce the amount of spending on the discretionary side. Agriculture, down 8%. HHS, down 7.6%. Even Homeland Security, down 2.8%. The Pentagon is down over $100 billion.

But hey, by all means, let's make sure that this looks like Obama's doing a bad job, because that was clearly the author's goal before he wrote it. The rest is just a matter of selecting the data until it proves what you wanted it to prove.

When we hear a serious discussion of how to cut benefits (something other than "the poor should die" and "let's give it all to Wall Street, because they're so freaking responsible"), we can have an actual conversation. But articles like this show why anything from Obama, no matter how reasonable, is doomed even before it gets printed.

Re:Lessee, where's my dictionary?

[LynnwoodRooster]

How mandatory is the payment of SSI? According to at least one Congressman, and the Supreme Court has also ruled that Social Security carries no legal obligation or promise. It is a benefits program that can be legally changed or even ended at any point, with no repercussion relating to the taxes collected from you. You have no legal right to your Social Security payments.

I'd say that is a LONG WAY from being mandatory. Sounds more like it's at-will by the Government, since there is no legal obligation to pay anyone any Social Security.

Is /. the Wall Street Journal now?

[PvtVoid]

Seriously. The entire story should be modded "troll".

Come and get it, stupid future generations!

[Impy the Impiuos Imp]

Much of the remaining 30% was things like defense and infrastructure -- this may be bloated, but in theory it benefitted fuure generations, so it was considered ethical to borrow from them to pay for it. But wealth transfer payments?

That is flat-out current generations refusing to carry their own weight.

By the way, taxing the rich won't cut it -- taxing 100% of the rich's income would gain you an additional $500 billion a year (assuming they continue to work for free, good luck with that and keeping their salaries pointlessly high). This is still hundreds of billions a year short.

No, every elected politician knows you have to tax the middle class to pay for the middle classess' wealth transfers (social security, whether retirement or disability).

And these politicians are cowards because they are a huge and motivated voting block.

No, we, the middle class, have to decide on an amendment to prevent ourselves from borrowing from our children. We won't, because we, and our politicians who we elect, are weak.

Re:And...

[Anonymous Coward]

What I have a problem with is that I know several illegal residents here with their entire family living off of state and federal programs. One of them hasn't worked in years and hasn't needed to.

Now they don't live like the middle class, but sure live better than some of the homeless people that I have come across. They qualify for these programs because they have never had a job before.

What would you rather do? Work hard in your home country and live in poverty or come to the US illegally and live slightly above the poverty line and never have to worry about working at all?

I have a friend who has run out of unemployment insurance and has no possibility of a job in the near term because he is over qualified for almost everything. He is in the process of losing all that he has ever worked for.

Tell me you don't see a problem.

Welcome to DrudgeDot 2.0

[damn_registrars]

Don't try to pretend to be nonpartisan with that candy coated BS at the end. This story was posted here by the usual crowd of slashdot conservatives aiming to make President Obama look bad. Nevermind that the article actually points out that less money is paid out in social welfare programs than at any time since before the Reagan administration, the new conservative mantra here is that no money should ever be given by the federal government to individual citizens, regardless of whether it is for retirement, health care, or even wages for work done. If you're not independently wealthy to the degree that you can afford to be part of the federal government for no wage whatsoever, then the conservative voice here wants you thrown out of Washington immediately and asking for assistance at your local church.

Yes, I know this will be moderated down. But none of "troll", "flamebait", and "overrated" are the same as "factually inaccurate" - indeed most are just used as ways of saying "I disagree".

Re:And...

[Grishnakh]

Illegals like that don't just sit around and not work; they frequently work under-the-table, so they keep their healthy benefits while getting extra tax-free spending money. All those landscapers you see driving around are not W-4 employees and do not pay any taxes into the system.

And...?

[Bob9113]

taking $2.6 trillion from some and handing it back out to others.

Ummm, what else is the government supposed to do with the money? If it gave the money back to the same people who paid the taxes in the first place, it wouldn't make much sense, would it?

This year, 70% of all the money the federal government spends will be in the form of direct payments to individuals, an all-time high.

Including medicare, medicaid, and Obamacare? So the payments for drugs and health care are counted as going directly to individuals. OK, and other than the military, what's left? Highways, schools, NASA, and the post office -- and we've been cutting all of those.

So in short, article is saying that taxes are money transfers (which they had better be, or they'd be really stupid), and that health care and social security are going up, and everything else but the military is getting cut. That's news?

an eye-opening fact

Maybe if you're retarded.

Re:And...

[BitterOak]

Why is this a problem? You've outlined some interesting results here, but what makes you think there's an issue here?

Because the United States is not supposed to have a redistributionist government, but the figures seem to suggest that's exactly what it is.

Re:And...

[cayenne8]

You know, we need to take the feds, and just stop.

Let's roll back the clock and have them ONLY to only be allowed to fullfill the narrowly defined duties and responsibilities given by the US Constitution, things like defense, border protection, etc.

Bring the power back to the states as it is supposed to do, and we'll cut most of this spending nonsense out.

At the very least, let's at least narrowly define what "interstate commerce" means, and roll back the laws that are based on the overreach of that idea.

Re:And...

[timeOday]

It's mostly "redistributing" money from people, to their older selves. It's effectively forced savings.

The bottom line is that the term "government spending" is highly misleading, since the government is exercising no discretion on how it is spent... the government simply sends it to individuals (mostly old folks) who decide what their individual priorities are and where to spend it.

Re:And...

[TsuruchiBrian]

Bring the power back to the states as it is supposed to do, and we'll cut most of this spending nonsense out.

Because states are not run by the same democrat and republican politicians running Washington?

Re:And...

[Charliemopps]

Ah, no. The vast majority of people get back far more in social security payments than they ever payed into it. It's the same ponzi scheme pensions relied on (except pensions require the corporation to grow forever rather than the population of the country) and why they to are failing. The only way our social programs can work is if the population of the united states continues to grow at the rate it did in the first half of this century, forever. Currently it is not, and that is why we have a problem. It's very simple math... if you think the US population will increase at a constant rate forever, then our social safety nets are good and there is no problem. If you think our population will go into decline, or even if you just think it will fluctuate back and forth, then our social programs are doomed and they will inevitably bankrupt us.

"Good" takers vs "Bad" takers

[Taco Cowboy]

... because after 40 years in the military, getting a pension check means you're a "Taker"

There should not be any stigma, whether it be positive or negative, attach to the word "taker".

Just like anything else, there are good and bad in every category.

If a person has served his/her country for the past 40 years in the military, of course that individual (and his/her spouse) ought to enjoy the fruit of his/her lifelong endeavor.

A check from the gov is insignificant, in the light of the contribution that has been paid forth, in advance.

Now ... we got to be realistic here and admit that there are way too many who have abused the system.

Way too many of them lazy fuckers who just do not have that urge to make themselves better are sucking the gov dry.

We, as the taxpayers, should not bear the cost of paying those lazy fuckers to continue to be lazy fuckers.

Let's be clear - there are some who are down on their luck (I was very poor before, I know the physical and emotional stresses extreme poverty brings) who needs temporary assistance. I have no qualm of giving them a hand.

But we should draw a limit somewhere - and should not continue in paying those who claim they can't find any work a monthly check just because they tell us they can't find a job.

Are there no job or are those people being too choosy ?

There are millions of illegal aliens in America who can find jobs - the claim of there is no job in America just won't fly.

If those who are getting monthly checks from the gov refuse to work, then they should be on their own.

As I said, I had been poor before, so poor that I didn't even have a place to stay in winter (yes, I did spent some winter nights sleeping on a bench in a park) but at least once I got a chance I grab it and no matter how tough/dangerous that job was, how miserable the pay was, as long as the pay could get myself back to the society, I grabbed it.

Re:And...

[briancox2]

Thank you for that question. I'm glad you asked.

The concern here is for the financial well-being of our country. Once a majority population of a Democracy has figured out that they can just vote themsleves gifts from the coffers of the country, that country will certainly head down a swift path to financial ruin. That's why we don't have Democracy.

The founders of the United States fortunately were aware of this history, so they slowed this phenomonon down by deciding upon a Republic. By voting only for Representatives, the direct control of the coffers is taken away from the voters in favor of stability. But even a Republic's financial solvency can be threatened by a majority of politicians out-promising each other over how many gifts they will give people in order to get elected.

The fiscally conservative side of the voting block is very concerned that a number like 70% receiving direct payments could be the tipping point to create the phenomenon I've described above. That may or may not be the case, as many direct payments are for direct goods and services (e.g. Farm subsidies, federal payroll, etc.) But it is a concern that is something we as a country should watch closely and discuss.

Re:And...

[Anonymous Coward]

It's a lot easier to hold state reps accountable than the 48 senators and 434 representatives that don't represent me.

Re:And...

[LordLucless]

It's not that state politicians are more moral; it's that their power is more limited. Less power = less corruption - and they have 49 competitors, which are relatively trivial to move between (compared to moving to a different country, anyway).

Re:Missing the big point: Exclusions are Giveaways

[LynnwoodRooster]

Proof that Forbes lies? Because looking at Apple's published, audited financial information, I see an income before taxes of $17.7 billion - and they pay $4.6 billion in taxes, about a 23% tax rate. Now, if you are privy to some secret information you could make history and become a "Woodward and Bernstein" level famous journalist by revealing counter information and having Tim Cook and the rest of the executive team sent to prison for violating SOX laws...

It seems to me that Forbes is telling the truth. And the published, SOX-compliant reporting from Apple backs that up.

Re:And...

[timeOday]

Sure, when the ratio of unproductive old people to productive young people increases, the burden on the young people increases. This is true whether your accounting of chits uses dollars, entitlement programs, social customs (obliging children to support their parents directly), or anything else. There is no avoiding it. The only real questions are how to distribute the burden among the able-bodied, and how quickly the assets of the old are transferred to the young.

Re:And...

[ObsessiveMathsFreak]

they frequently work under-the-table

Correction: Someone pays them to work under the table. The same person who won't pay you to work above the table.

Re:And...

[mellon]

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Aah. Anybody remember Schoolhouse Rock?