Sunday, August 19, 2012

How Many Dollars To Say We Are Sorry?

As human beings I think we all have a natural tendency to want to help those less fortunate.  To extend a hand when someone needs some help getting back on their feet.  To share good fortune with someone who is less fortunate.  To help someone that received a bad break  in life.  To provide encouragement when someone is down.

No country in the history of mankind has been more generous in helping those in need than the people of the United States of America.  Both at home and abroad.  We are a compassionate people.  Of course, all that aid, assistance and altruism would not be possible if we were not the richest country on earth.  You can have the biggest heart in the world but unless you also have a big pocketbook there are finite limits on material support.

The simple truth is that more can be done for those that have less when you have more. A country that is prospering can do more than a country in decline.  Therefore, the first priority of anyone who wants to help those less fortunate is to promote greater prosperity for the country.  "A rising tide really does lift all boats" as President Kennedy once said.

A second truth is that whatever amount is dedicated to helping the poor and disadvantaged is never going to be enough.  More is always going to be needed and wanted.  However, we live in a world of limits.  How much is enough?  Do you even know how much is being spent right now to help the poor?  How much do you think it is?  I will give you a point of reference.  We are spending about $700 billion on our total Defense budget and $500 billion on Medicare in 2012.

Free coffee and doughnuts during the Depression
With this as context let's consider how much of the federal budget is actually being spent on programs to help the needy, disabled and less fortunate of our nation.  Is it enough?  Is it fair?  If not, how much more would be needed to satisfy those that say it is not enough and it is not fair.

The answer:  The federal government spent just short of $1 trillion ($983 billion) on payments for individuals in 2011 for Medicaid, unemployment benefits, disability benefits, welfare, housing assistance, food stamps and student assistance.  In other words, we are spending 40% more on helping the poor than we are spending on the entire Defense budget. 

Bear in mind that the $1 trillion in spending for public assistance does not include any payments for Social Security old age and survivors payments, Medicare, Federal employee or military retirement benefits or Veteran's Benefits.  These amount to an additional $1.4 trillion in payments to individuals in the federal budget.  Thus, $2.4 trillion, or about 2/3 of the federal budget, is dedicated solely for payments for individuals.  

I suggest that very few people, and most certainly almost no liberals, know how much we are already spending on the poor and less fortunate in our society.  We hear a lot about how we should dismantle our Defense budget to help the poor.  These facts suggest that it may have already been done.

A good question to ask someone who is arguing for more spending on the poor is to ask them how much is already being spent.  Alternatively, ask them compared to what we spend on Defense today, what would be a "fair" amount to allocate to these programs?  I doubt few would have the courage to suggest more than 100%.  Of course, the reality is that we are already spending 140% of the Defense budget to help the disadvantaged and disabled.

How much is $1 trillion?

Let's consider the arithmetic of public assistance:

There are about 117 million households in the United States.  This amount of money could provide an $8,500 stipend for every one of them.

There are approximately 43 million men, women and children who live below the povery level.  This is equal to a $23,250 payment to each of them if it was distributed in this way.

There are 55.5 million children in U.S schools from kindergarten to 12th grade.  If $1 trillion was solely allocated to education it would be equivalent to almost $18,000 per student.

Individual income tax receipts for 2011 per the 2012 federal budget were $956 billion.  That's right, we actually spent more last year on public assistance for the poor than we collected in total individual income taxes!

Consider what this means for the overall federal budget. Bear in mind that we have had budget deficits of over $1 trillion for the last four years. Let's assume for this purpose that Social Security and Medicare are self-supporting from payroll taxes and the costs and revenues are off-budget.  Unfortunately, this is not the case right now but let's be generous with the facts.

For the remainder of the federal budget you have two ways of looking at the situation we are in.
  1. All of the federal individual income tax receipts are being used to pay for public assistance programs and we are borrowing everything else to run the rest of government (Defense, Highways, Prisons, National Parks, CIA, EPA, FDA, FBI, and all other government operations etc.)  or
  2. All of the federal individual income tax is being used to fund all federal government functions and we are borrowing every cent we spend on our public assistance programs.
What more can be said?  What more can be done?  What more can we afford?
The chart below shows how the $1 trillion of public assistance was spent in the 2011 federal budget.     

One trillion ways to say we are sorry.  Is it enough?  Is it more than we can afford?  That is for you to decide.

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