Charts of the Day

Yes, I've previously demonstrated that the Federal budget deficit is caused mostly by transfer payments, not the war on terror. Most recently, based on OMB's Mid-Session Review, I showed that:

Entitlements, and growth in entitlement spending, remain the biggest budget busters, not the Iraq war. Indeed, the CBO confirms (at pages 7, 10) that spending on Iraq and Afghanistan amounts to about 1.1 percent of GDP, as compared with 10.4 percent of GDP spent for Social Security, Medicare, Medicaid and other health spending in total (adding income security spending would up the latter number). For the math challenged, that means entitlement spending's impact on the deficit is an order of magnitude greater than the cost of the war.

Here's two more charts based on Table 5 of the most recent monthly Treasury Statement of Receipts and Outlays. I split total outlays into "Defense-related" (DoD (including retirement/tuition), plus the weapons part of DoE, plus the VA, plus the TSA, Coast Guard and domestic nuke detection programs from Homeland Security), large entitlement-related (Social Security, Medicare/Medicaid, all Housing & Urban Development and unemployment payments from DoL) as opposed to all other spending. I did the math for years FY09 and FY10, each limited to the period October to July to make the figures comparable. The results:


source: NOfP chart via July 2010 Treasury Data


source: NOfP chart via July 2010 Treasury Data

So, again, it ain't Defense spending. Reducing the deficit requires lowering net interest costs, which already are nearly $20 billion each month. Then, we need to cut transfer payments -- as The Heritage Foundation said early this year:

Much of this spending growth will be driven by entitlements such as Social Security, Medicare, and Medicaid. Over the next decade, the CBO projects that Medicare will expand by 7 percent annually, Medicaid by 5 percent annually (above levels already bloated from the recession), and Social Security by 5 percent annually.

Otherwise, America could answer the Meltzer/Richard hypothesis: what happens when the average voter gets more government benefits than he pays in taxes? Can you say: sovereign default?

(via Don Surber, Federal Budget)