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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.
Why is this a problem? You've outlined some interesting results here, but what makes you think there's an issue here?
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.
Socialism: a lie told by totalitarians and believed by fools.
In 2009 Slashdot turned into an internet libertarian website targeted to IT personnel. Didn't you get that memo?
Riiight,
because after 40 years in the military, getting a pension check means you're a "Taker".
F.U. and Romney too.
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.
What if the checks are only taking money from the Fed, which creates it out of thin air anyway, and is required to return all interest on T-bills to the Treasury? No harm.
Lincoln realized that government's greatest potential lay in its ability to create money, and created over $400 million greenbacks to raise revenue without increasing taxes or borrowing it.. The Greenback Party of the 1870s, made up mostly of poor farmers who were being hurt by the deflation of trying to take those greenbacks out of circulation and go back on the gold standard, were ahead of their time in recognizing that government can and should create money to help individuals.
"Individual" in this case does NOT mean "person".
If you download the spreadsheet you can see that they classify total spending as either "direct" or "grants", of which the vast bulk is "direct". Everything that is not a grant must be being paid to an entity of some kind, whether an actual person, a company, a non-profit or something. You can verify this is the total Federal spending using the Monthly Treasury Statements at https://www.fms.treas.gov/mts/... - I recommend the PDF versions.
As for the percentage going to veterans, I expect the number of veterans isn't growing very much, whereas the Federal budget is. So a constant amount in a larger total is going to be a smaller fraction.
Bottom line, this article is FUD and should not be taken serious by anyone.
Graham
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.
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.
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"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.
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.
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.
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....
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.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
The entire argument about "passing the tax along" is bullshit. By the same logic, personal income tax is "passed along" to corporations, as people purchase less. It's disingenuous to focus on one particular link in the circular wealth transfer that is a functioning economy, and claim that taxing at that particular link is somehow unfair, while taxing all the others are fair.
As for "getting back at them rich", we just need to start taxing capital gains same as regular income (or better yet, more - it's only fair that "sweat of the brow" earnings are taxed less than collecting rent).
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.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
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.
It would change America's mindset. If suddenly the "freeloaders" and system "cheaters" couldn't extract cash from an ATM with their foodstamp card, then they would have to go about it a different way.
There are plenty of cases where people live in gov't funded housing, get food stamps, slang drugs and have more than I do as professional. Take away the gov't funded housing, and suddenly they have some skin in the game... makes fuckin' sense to me. Maybe they find other avenues of illegitimate income, but maybe they don't. Either way, if we keep closing loopholes, eventually they have to do it the way I am.
Yeah, let's get rid of the freeloaders and cheaters.
From FTA:
http://news.investors.com/0310...
The 1% Handouts
Instead, a surprisingly large amount of federal money is handed out to wealthy Americans through Social Security, Medicare, farm subsidies, unemployment benefits, conservation programs, disaster payments and other programs.
An IBD analysis found that the richest 1% of Americans, in fact, receive roughly $10 billion each year in federal checks.
Outgoing Sen. Tom Coburn, R-Okla., who exposed these vast payment programs available to the rich, said "this reverse Robin Hood-style of wealth distribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit."
The rich pay most of the taxes and pay a higher percentage of income on taxes than everyone else.
I know that right-wing talking point and I've checked it out before. Don't forget the footnote:*
_________
*Footnote: "Taxes" are defined to exclude FICA, which is the largest payment most middle-class and working people pay.
Percentagewise, the rich pay roughly 30%, the same as the middle-class, although those that can put everything into investment income like Mitt Romney pay about 15%.
That's why Warren Buffet pays less than his secretary.
Investing money in securities is typically about as useful to the economy as stuffing it in a mattress.
Umm, no.
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)
Again, this is wrong. For one thing, note that broker fees are on the order of fractions of a percent, not 30%.
When you buy Google stock from Google (i.e. during an IPO or subsequent public offering), that money goes to the company so that it can invest the cash in growth -- that means buying equipment, facilities, real estate, hiring and paying employees, etc. That money is most definitely in circulation.
Of course Google isn't selling stock right now because it has plenty of cash to fund growth and doesn't need to raise capital. So if you buy Google stock right now, you're buying it from someone else who bought it from Google (or from someone who did; the chain can be arbitrarily long). But the point is that you're buying it from someone. As it happens, I just sold a non-trivial (for me) chunk of Google stock; there's a check waiting at home for me which I'm going to spend on building a house (well, on covering some of the early incidentals; I'll get a loan for the bulk of it). That money will buy building materials, pay constructor workers, etc. That money is also definitely in circulation.
But what if you buy your stock from a big investment firm rather than from someone like me? Is it out of circulation then? Nope. The investment bank will take your cash and put it into something else... something, in fact, that it believes will be more productive than Google. At least that's true of the value-investing portion of the investment industry, obviously there are other segments that focus on arbitrage. The money managed by those segments is more debatable, but they do contribute significantly to liquidity, which translates to your ability to buy or sell Google stock on a whim.
There are some issues with the velocity of money in the US, which is a measure of how quickly it circulates. It's at the lowest point in decades. The fed has been pumping massive amounts of new money into the system, and it's not helping. I'm not enough of an economist to really understand the issues here, but the most sensible explanation I've seen is that circulation is reduced because people are using the money to pay down debt. We had a massive explosion of velocity fueled by an extravagant credit boom, but it was unsustainable. That unsustainability was a big part of the housing crash and the recession, but we still have excessive debt and the correction isn't over yet, so velocity stays low.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
No, the politicians had fairly low control for most of the history, most of the time it has been tied to the gold standard. Lincoln went off the gold standard with the Greenbacks but he was punished whenever he drifted to far (IIRC the Greenback at one point trade $.25 to the dollar). FDR weakened the link but it was Nixon who cut it.
The wealthiest individuals do not pay income tax because they don't have income. Their "income" is actually long term capital gains with the highest rate paid at 20%. They don't pay SSI, Medicare or Medicaide and even if they did they are capped at $125,000 in income. Because of this Mitt Romney had to pay extra taxes for his effective rate (the actual taxation rate) to be 15%.
For a wage slave to pay an effective rate of 15% they would need to make less than $10,000 per year. Warren Buffet has noted that he has paid less taxes (as a percentage of income) than his secretary since Regan was in office. Most of the 1% in fact avoid almost all taxes, including sales and others by using their wealth to exploit different state level taxation rates (such as keeping a home in a zero income tax state and a home in a zero sales tax state then spending part time in each state with sufficient time spent to eliminate both income and sales tax).
Properly executed with a good accountant the 1% have paid less than 10% in taxes by careful manipulation of their long term capital gains. It's possible to not only make money on a stock but claim an overall loss. And the best part about capital gains is that, baring dividends, no gains are realized until there is a transaction. This makes is possible to sink 100's of millions into a trust that appreciates in value but never pay taxes on it because a sale of shares never takes place. Then when money is needed a paper loss equal to the 20% tax is realized at the same time to eliminate the liability. This is so common now that the rich like Mitt Romney are forced to pay extra to hit net tax rates of 15%.
Only the middle class and upper middle class pay high taxable percentages, once you reach a certain asset threshold your taxation rate begins to drop substantially. The middle and upper middle class are the ones getting hosed, all so the richest among us can pay super low rates.