Where your tax dollars go
By Sandra Guy sguy@suntimes.com December 19, 2010 8:13PM
Erskine Bowles (left), accompanied by former Wyoming Sen. Alan Simpson, co-chairmen of President Barack Obama's bipartisan deficit commission, gestures while speaking on Capitol Hill in Washington Wednesday. | AP
Updated: April 19, 2011 5:13AM
Last month, a bipartisan, White House-created commission recommended painful measures such as lowering Social Security cost-of-living increases and overhauling corporate and individual income taxes to tackle the country’s staggering debt.
Last week, Congress and President Obama agreed to spend as much as $1 trillion to keep in place decade-old tax cuts, extend unemployment benefits and provide an across-the-board payroll tax cut and other spending to help stimulate the economy.
Already, the federal budget calls for spending $1.3 trillion more than the government takes in — the budget deficit.
As the government expands spending, cuts revenue and frets over the nation’s debt, you may wonder where your federal tax dollars are going. Do you want a detailed receipt?
The centrist, nonprofit think tank Third Way thinks you should get one. It developed an itemized taxpayer receipt in hopes that Congress will pass a law to give each taxpayer an easy-to-understand list of how his money is spent, said David Kendall, senior fellow for health and fiscal policy at Third Way, based in Washington, D.C. No one is sponsoring such a bill, but efforts are under way to recruit a sponsor.
The biggest portions of income and payroll taxes fund the big three social and entitlement programs: Social Security, Medicare and Medicaid.
Third Way sought to list items that taxpayers could easily identify, so rather than listing, say, the U.S. Department of the Interior, the group figured out how much money the department spends on national parks. The receipt lists 50 top spending items and then lumps more than 100 smaller items into a category labeled “other” because the group deemed those smaller items too voluminous to list individually.
“Both liberals and conservatives are concerned and aware of government spending, perhaps more than ever before,” Kendall said, noting that the Obama administration has made it easier for researchers to obtain data from the Office of Management and Budget.
Keeping up with our debts consumes the fourth-largest share of spending. The interest we’re paying on the nation’s debt totals $200 billion annually. That amounts to $494.50 a year for a working couple with two children and an income of $80,000. The interest due will double by 2014 and double again by 2020, reaching $916 billion nine years from now, because interest rates are bound to rise and the size of the debt will increase, said Roberton Williams, a senior fellow at the Tax Policy Center, a nonpartisan Washington, D.C., group affiliated with the Urban Institute and the Brookings Institution.
Debt isn’t all bad
Running a deficit isn’t evil in itself, and America’s debt pales in comparison with many foreign countries, experts point out. University of Chicago economist Allen R. Sanderson said the federal government, much like families, racks up debt for good reasons.
“Many families are making debt payments because they have a mortgage or they are putting their kids through college,” Sanderson said. “Houses are good investments and sending kids to college is a good investment. The question is, ‘What are you spending your money on?’ ”
One of the largest recent investments by the government is No. 6: the Troubled Asset Relief Program. The $700 billion TARP was created by the Bush administration in 2008 to fight a credit freeze that threatened to bring the economy to a halt. The program is expected to cost the government $25 billion or less, based on what has been paid back as well as gains in the value of the government’s stake in businesses it rescued, including General Motors.
Rounding out the Third Way receipt’s top 10 are military expenses, including the wars in Iraq and Afghanistan (No. 7). Since 2001, Congress has approved $1.1 trillion for the two wars and associated costs such as foreign aid and base security, bringing the spending to about 8 percent of the Gross Domestic Product.
That’s a small share compared to the cost of World War II, which expanded the national debt from 44 percent of the GDP in 1940 to 109 percent in 1946, according to research by Cengage Learning. “World War II was off the scale in terms of military spending,” Sanderson said.
Leading the way after the receipt’s top 10 are food stamps, followed by the CIA, veterans benefits and federal highways. Spending on health-care research (No. 16) is about even with spending on foreign aid (No. 17), and just a little more goes to the FBI (No. 29) than to the Head Start preschool program (No. 30) and the Federal Emergency Management Agency (No. 31).
Just keeping track of the nation is a major cost: the U.S. Census ranks 38th and the Bureau of Labor Statistics, which tracks economic data, ranks 48th.
“In order to balance the budget this year, you’d have to get rid of 40 percent of our spending. That’s because spending is up and revenues are down as a result of the stimulus bill and the recession. Yet people will scream bloody murder if you cut highway construction, and they will argue that food prices will go out of sight if we eliminate farm subsidies,” Williams said. “On any particular item, the group that cares about it is passionate and willing to spend a lot of money and effort to protect it.”
Among the “other” category’s bigger items are the program that provides income to poverty-stricken elderly and disabled, called Supplemental Security Income at $41.3 billion and education funding for universities and learning-disabled children at $30 billion.
The last item to make the list of 50: salaries and benefits for members of Congress and their staffs.
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