The Evolution of a National Debt Burden – Part 7/7

Next, we should discover where the revenues comes from that helps pay the bills of the annual federal budget, America’s wars and socialist-welfare programs.

The Washington Post reported that federal government’s revenues for 2011 were $2.57 Trillion, and this money came from six sources:

  • individual taxes of $1.1 Trillion (42.8%)
  • social insurance (Payroll – Social Security and Medicare) of $934 Billion (36.3%)
  • corporate taxes of $297 Billion (11.5%)
  • customs duties of $27 Billion (1.05%)
  • excise taxes of $74 Billion (2.87%)
  • estate and gift taxes of $25 Billion (0.97%)
  • other of $87 Billion (3.38%)

How much did the federal government spend in 2011? $3.8 Trillion.

  • Defense spending was $895 Billion or 23.55% (this money is available for use at the discretion of the user. Discretion means: the freedom to decide what should be done in a particular situation).
  • Other discretionary spending was $510 Billion or 13.4%

Mandatory spending programs (required by law or rules; compulsory which means there is no choice. The only way to change this spending is through the Congress or if the Supreme Court rules it is unconstitutional) were:

  • Social Security (SS) of $730 Billion or 19.2% – passed into law by Congress in 1935

The 1935 Social Security Act created primarily a pay-as-you-go system, meaning that payments to current retirees come from current payments into the system. The trust fund represents a legal obligation of the federal government to program beneficiaries. The government has borrowed nearly $2.7 trillion as of 2011 from the trust fund and used the money for other purposes such as paying for wars and funding other social welfare programs that do not have a tax source to fund them.

The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033 … Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

  • Medicare of $491 Billion or 12.9% – passed into law by Congress in 1965

Medicare is a national social insurance program, administered by the U.S. federal government since 1965, that guarantees access to health insurance for Americans ages 65 and older and younger people with disabilities as well as people with end stage renal disease. The trust fund is considered insolvent when available revenue plus any existing balances will not cover 100 percent of annual projected costs. The projected date of HI Trust Fund exhaustion is 2024, the same date projected in last year’s report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs. The Trustees project that the share of HI expenditures that can be financed with HI dedicated revenues will decline slowly to 67 percent in 2045, and then rise slowly until it reaches 69 percent in 2086. The HI 75-year actuarial imbalance amounts to 36 percent of tax receipts or 26 percent of program cost.

  • Medicaid of $297 Billion or 7.8% – became law in 1965

Unlike Medicare, which is solely a federal program, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive matching funds and grants.

Medicaid funding has become a major budgetary issue for many states over the last few years, with states, on average, spending 16.8% of state general funds on the program. If the federal match expenditure is also counted, the program, on average, takes up 22% of each state’s budget.

Medicaid does not pay benefits to individuals directly; Medicaid sends benefit payments to health care providers.

  • Troubled Asset Relief (TARP) of $11 Billion or 0.29% – became law in 2008
  • jobs initiatives or JOBS Act of $25 billion or 0.65% – passed in Congress April 5, 2012
  • other of $612 Billion or 16.1%
  • Interest on the debt of $251 Billion or 6.6%
  • potential disaster costs of $3 Billion or 0.079% – FEMA was formed June 19, 1978
    The Department of Housing and Urban Development in 1973-1979
    FEMA became an independent agency 1979-2003
    In 2003, FEMA was placed under the Department of Homeland Security

Conclusion: Because the national debt for 191 years until 1981, when Ronald Reagan was elected president, came from the cost of fighting wars, then some or all of the current national debt must also come from wars that the US fought after 1981. In addition, some of the national debt may come from some social welfare programs but cannot come from Social Security or Medicare because these two programs are funded by a specific tax and trust fund.

The US Defense Budget 1947 – 2012 was $15.6 Trillion and the Defense Budget comes out of the general fund. In addition, another $850 Billion went to foreign military and economic aid—a form of foreign welfare that is never paid back by the countries that receive this aid.

In contrast, total spending on social welfare programs 1947 – 2012 was $6.2 Trillion, but $1.343 Trillion of that was unemployment benefits (established in 1932) funded by a federal-state program jointly financed through federal and state employer payroll taxes. Generally, employers must pay both state and federal unemployment taxes. The IRS collects this annual federal employer tax used to fund state workforce agencies. This means actual welfare programs cost $4.857 Trillion over sixty-four years.

Then defense spending cost 321% more than social welfare programs over the same period of time.

You decide the answer to the last questions:

Where does most if not all of the National Debt come from and why do we keep hearing from the Tea Party and the GOP that social welfare programs are the blame?

How much did President Obama add to the federal budget – the actual amount he is responsible for?

Note: The Inflation calculator used for this series of posts may be found at Dave Manuel.com, and the primary source for government spending was US Government Spending.com

Return to The Evolution of a National Burden – Part 6 or start with Part 1

Also discover Each President’s share of the US National Debt and learn more from the National Debt Info-Graphic by President 1945 – 2012

_______________________

Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”

The Evolution of a National Burden – Part 6/7

In 2009, the National Debt, at the end of President G. W. Bush’s (2001 – 2009) last annual budget reached almost $12 Trillion.

However, according to Joe Weisenthal of Business Insider Magazine, it was President Clinton (1993 – 2001) that brought about the global financial crises of 2007-08 that still haunts us today because he did not spend enough and increase the national debt.

Conservative, Libertarian and Tea Party national debt critics often use this opinion as evidence to place blame on President Clinton in addition to welfare spending for the current growing $16 Trillion National Debt as if no one in the Republican Party (GOP) is responsible for one cent of it.

At this point, I think it is necessary to stop and examine the foundation of this claim before continuing with the Evolution of a National Burden.

Who is Deputy Editor Joe Weisenthal and Henry Blodget, his boss at Business Insider Magazine?

Binyamin Appelbaum at The New York Times says, “In Weisenthal, Blodget has found a market-obsessive who embodies his vision. Weisenthal, 31 and still a bit baby-faced, is funny, omnivorous and well versed in the mechanics of the economy. In the intensely competitive world of financial blogging, dominated by young men who work long hours and comment on every new development, Weisenthal stands apart by starting earlier, writing more, publishing faster. …

“Weisenthal wanted to come to New York as a playwright. In college at the University of Texas, he wrote the lyrics and music for a satire of Ayn Rand’s philosophy, and after graduating in 2002, he submitted it to the New York International Fringe Festival. When the play was rejected, he took the analyst position instead. And when that began to sour, he and a friend started a blog cataloging their thoughts about markets called TheStalwart.com. …

“Weisenthal says his own political thinking has shifted from something like libertarianism to the Keynesian view that the government should borrow and spend massively during a recession.”

Weisenthal’s thinks Bill Clinton brought about the financial crisis by running surpluses (and not borrowing and spending massively adding to the national debt). Weisenthal claims that it was Clinton’s surpluses that lead to the accumulation of private debts that subsequently triggered the financial crisis.

His boss, the editor and CEO of The Business Insider Magazine, is Henry Blodget.

In 2002, then New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Blodget gave assessments about stocks which conflicted with what was publicly published. In 2003, Blodget was charged with civil securities fraud by the U.S. Securities and Exchange Commission. He agreed to a permanent ban from the securities industry and paid a $2 million fine plus a $2 million disgorgement.

Before his time at Merrill Lynch and the subsequent charge of civil security fraud, Blodget was a freelance journalist and a proofreader for Harper’s Magazine. In 2001, he accepted a buyout of his contract from Merrill Lynch and left the firm. Blodget’s net worth is $15 million today. Source: Get Networth.com

You may want to learn more about Henry Blodget from Tim Worstall’s The Henry Blodget Edition of Lies, Damned Lies and Statistics published by Forbes.

In addition, you may want to read this from John Carney, a Senior Editor at CNBC.com. “My old boss Henry Blodget has a post up at Business Insider lamenting the fact that he cannot cast his vote for a fiscally conservative Republican without also supporting what he calls “Republican Religious Aggressives.”

Blodget started as a freelance journalist/proofreader and then worked for Merrill Lynch before being banned from the securities industry due to a charge of civil securities fraud. Then he became the millionaire editor and CEO of a financial magazine, and in  Joe Weisenthal, Blodget, a “conservative Republican” probably found maybe the only thirty-something man with libertarian/Keynesian views on the planet that “embodies his (own crackpot) vision”.

Does white collar crime pay?

On November 10, 2012, the National Debt hit $16.2 Trillion.

Note: The Inflation calculator used  for this series of posts may be found at Dave Manuel.com, and the primary source for government spending was US Government Spending.com

Continued on December 7, 2012 in The Evolution of a National Burden – Part 7 or return to Part 5

Also discover Each President’s share of the US National Debt and learn more from the National Debt Info-Graphic by President 1945 – 2012

_______________________

Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”

The Evolution of a National Burden – Part 3/7

If you have heard or read, as I have, that the US Founding Fathers did not support universal health care for Americans, it helps to compare medical care then with today and then remember that the Founding Fathers wrote a Constitution that was flexible and designed to change with the times as the country grew.

In fact, when the US Founding Fathers wrote the US Constitution, there wasn’t one country on the planet that had universal health care.

The first country that would have a universal health care system was Germany with Otto von Bismarck’s social legislation in 1883 (almost one hundred years after the adoption of the US Constitution).

Next was the UK when she passed the National Insurance Act in 1911 marking the first steps toward universal health care covering most employed persons and their financial dependents and all persons who had been continuous contributors to the scheme for at last five years.

As you have now learned, in 1787, the concept of universal healthcare did not exist anywhere in the world, so how could America’s Founding Fathers be against something that did not exist?

In 1792, America’s population was 4.2 million and its GDP was $223 million, the cost of defense was $1.2 million (.5% of GDP); interest on the Federal debt was $2.3 million (1% of GDP), the deficit was $1.4 million (.6% of GDP), and the national debt was $77.2 million (34.6% of GDP).

There was no welfare spending probably because 95% of Americans lived in rural America and produced most of the food they consumed from farming and/or hunting. If you live in a log cabin or a sod hut that you built and you grow or hunt the food you eat, is there a need for food stamps?

Today, 79.2% of Americans live in urban cities and do not grow or hunt the food they eat. These people buy food from markets.

In fact, less than 1% of America’s population claims farming as an occupation. The number of farms in the US is about two million. Source: EPA.gov

In addition, life expectancy in 1790 was age 34.5 for males and 36.5 for females, and “the views held by 18th century physicians are very different from those held by medical practitioners of today. Physicians in the 18th century had no knowledge of bacteria, germs, or viruses, nor of the fact that disease was spread by them. Therefore, they did not practice sterilization, or personal or hospital hygiene. … (and) Many people lived too far away from any doctors to use their services, and other people did not have access to doctors because of social customs or beliefs.” Source: US History.org

However, today, life expectancy in the US is about age 75.7 for males and 80.8 for females. Do you know how that increase in the average life span came about?

In the 218 years since 1792, the nation has changed dramatically. Today we have paved roads, railroad, airports, hospitals, electricity, X-ray machines, Cat Scans, MRIs, antibiotics, nuclear weapons, missiles, passenger aircraft, lasers, modern medicine, the Internet, etc.  In 1792, heat came from burning coal or wood and light came from candles. Most people went to the bathroom in an outhouse if there was one available. For most of the US, there was no toilets, running water, sewer systems, etc.

In addition, the first commercial electric power transmission in the US came near the end of the 19th century. Availability of large amounts of power from diverse locations would become possible after Charles Parsons’ production of turbogenerators beginning in 1889.

In 1792, there was no federal pension programs for old people such as federal employee retirement and disability ($119.9 Billion today); Social Security ($706.7 Billion today and funded through a worker-employee tax trust paid for by working people).

Did the nation need a national health care plan, retirement and  Social Security programs when the average person would be dead by age 35? Did anyone even think about it back then?

Beyond the occasional local community supported one-room school house, there was no state or national education systems. But the nation changed, and in 2010 the federal budget cost of public education was $139.4 Billion ($113.2 Billion was paid to the states by the federal government) and state and local costs of public education were $872 Billion funded by state and local taxes such as sales tax and property tax.


Does welfare make Americans dependent and do we have a welfare state in America today?
The answer is NO!

By 2010, America’s population was 308.7 million (compared to 4.2 million in 1792); its GDP was $14.5 Trillion; the cost of defense was $847.2 Billion; interest on the federal debt was $196.2 Billion; and although there was no socialist, life-time cradle to grave welfare system in the US (did you watch the above video?), the cost of welfare was listed as $502.3 Billion that is explained in detail by the CRS overview of federal welfare spending.

We often hear about the cost of big government. Well, the cost of running the federal government in 2010 was only $24.7 Billion for a federal work force, not counting the military or judicial system (federal courts), of 2.8 million people or 0.9% (less than 1%) of the total US population .

Sixty-four thousand work in the federal judicial system and 1.6 million serve in the military fighting America’s endless wars. By June of 2012, the civilian federal work force was down to 2.2 million or  .7% (still less than 1%) of the current 314.8 million US population.

From The Encyclopedia of Earth we learn that, “The tax mechanisms used during the first 150 years or so of U.S. tax history bears little resemblance to the current system of taxation. First, the U.S. Constitution restricted “direct” taxation by the federal government – meaning taxes directly on individuals. Instead, the federal government relied on indirect taxes including taxes on imports (tariffs) and excise taxes. Tariffs were the major source of U.S. government receipts from the beginning of the nation up to the early 1900s. For example, in 1800, custom duties comprised about 84% of government receipts. Internal federal revenue collections (which exclude tariffs on imports) as recently as the early 20th century were primarily derived from excise taxes on alcohol. In 1900 over 60% of internal revenue collections came from alcohol excise taxes with another 20% from tobacco excise taxes.”

As you have discovered, the source of federal government revenues has changed dramatically the last 200 years as the country changed along with the needs of her people and military.

For example, the cost of a musket to arm one US solider in 1792 would have been $250 to $500 in today’s money. For a comparison, a legal fully automatic M16 assault weapon used by US troops that has been registered with the ATF, and can be transferred to a private citizen currently sells for about $16,000, plus a $200 transfer tax.

The cost of one Nimitz-class aircraft carrier runs about $4.5 billion. The original USS Constitution, also known as Old Ironsides, was launched in 1797 and cost about $300,000 to build ($5.45 million in 2012).

Note: The Inflation calculator used  for this series of posts may be found at Dave Manuel.com, and the primary source for government spending was US Government Spending.com

Continued on December 5, 2012 in The Evolution of a National Burden – Part 4 or return to Part 2

Also discover Each President’s share of the US National Debt  and learn more from the National Debt Info-Graphic by President 1945 – 2012

_______________________

Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”