originally published 9/30/2021

Government spending—The $5 Trillion Pie

            We Conservatives and Liberals fight like cats and dogs over government spending. Much of it has to do with each side’s beliefs in what is the appropriate role of government. Part of it comes from who has to pay for it. Conservatives, who tend to be wealthy and business owners, are more heavily taxed to fund that spending. Taxes and the size of government are covered in their own sections. Conservatives traditionally are concerned about fiscal responsibility. That will be addressed later in this section.

            Where it all goes: Nearly ¾ of government spending goes to Defense, Veterans Affairs, Social Security, and Medicare/Medicaid.

            According to an audit by the Government Accounting Office, the outlay of the US government for 2019 was $5.1 trillion. Over a quarter of it was for the military (18% for defense, 8% for veterans’ affairs).  Most conservatives demand a powerful military and approve military spending. Ronald Reagan nearly doubled military spending, from $154 billion in FY 1981 to $295 billion in FY 1989, so Conservatives can’t object to that. (GAO, 2020)

            Social Security, accounting for 22% (GAO, 2020), is an entitlement that workers have paid into and expect to get back, and then some. Not everybody agrees that it is enough, but it at least allows seniors to live free of hunger. Even a majority of Republicans support the role of Social Security (NASI, 2021), although most of them favor putting control of a portion of it into the hands of the workers (Republican view, 2014). That brings us up to nearly half of government expenditure.

            The Department of Health and Human Services, which is mostly Medicare, accounts for another 24%. Conservatives don’t want to give up Medicare, either (Kiley 2018).

Then there’s the interest on the Federal debt (8% of spending), which, as we have seen so far, is owed mostly for these things Conservatives actually want and expect. That leaves just 20% of federal spending that Conservatives might disagree with. This remaining 20% includes education, transportation, science, agriculture, international affairs, the treasury, Justice (Oh, they want Justice!), and Homeland Security (ditto). (GAO 2020)

            Welfare—The Tiny Largest Fraction

            That leaves us with Welfare. For the 2011 federal budget, Senator Jeff Sessions authored a Congressional Research Service report, titled “Welfare Spending—The Largest Item In The Federal Budget.” (Sessions, 2011) He listed 83 items, which he referred to as “welfare,” totaling about $1 trillion. He concedes that the spending was “primarily Medicaid and CHIP.” These are federal assistance for health care for the poor and for poor children. He did not include federal assistance for health care for adults over age 65 (Medicare), because it ceases being welfare on ones 65^th birthday, and because it is a federal entitlement, with a very strong voting lobby behind it.

            Sessions’ 83-item list includes 8 items for health care, 9 for food assistance, 10 items for housing assistance, 17 items for education (including work study), and 3 for jobs programs. 4 are specifically for seniors, 2 for the developmentally disabled.  4 are for foster care and adoption services. There is also a program for public works economic development, one for water and waste for rural communities, and one—surely much loved by Conservatives—for child support enforcement.

            Most, if not all, of these programs are likely to be considered worthy in principle by most Conservatives. None of them puts money in the hands of the recipients. The people receiving the money are the health care providers, grocers, apartment owners, teachers and administrators.

            The Supplemental Nutrition Assistance Program (SNAP) provides benefits to help people in low-income households purchase food (i.e., food stamps.) In 2010, SNAP benefits averaged about $4.30 per person per day, for households whose average total household income was about $8,800/year. Nearly 45 million recipients, one out of every seven U.S. residents, received SNAP benefits in an average month in fiscal year 2011 (CBO, 2012), in the aftermath of the 2008 recession. 

            So, how about those welfare checks (TANF) that are what Conservatives are really complaining about? 0.54% of government spending in 2015. (Kearny, 2017)

         Econofact. July 25, 2017.

   Liberals favor more spending and government involvement

            Liberals want government to help solve society’s problems, and that typically involves money. Democratic presidential candidate Bernie Sanders proposed $50 trillion in new government spending, with $44 trillion new taxes. (Wolf 2020), and Elizabeth Warren proposed increasing government spending by 50%. Warren’s plan theoretically would pay for itself with taxes and a reduction in military spending, provided that everything worked out as planned. (Kaplan 2019) If it didn’t work out, we would be left with just a bigger bureaucracy to manage, and an increase in debt.  

The programs they want include tuition-free college, canceled student debt, universal pre-kindergarten and “Medicare for All” health insurance. Candidate Andrew Yang proposed a 10% value-added tax to fund a universal basic income of $1,000 per month. (McLaughlin 2019)

Does throwing money at social problems work? Let’s look at child poverty. There are bills planned to give income tax credits, and even direct payments, to poor people to raise their children. This strategy does work to reduce the number of children living below the poverty level, and improves their test scores and income in later life. It even increases prenatal care and reduces the amount of money spent on maternal alcohol and tobacco, (Matthews, 2019)

One could argue that this also enables people to start families before they are financially stable. Theoretically, subsidizing such lack of responsibility could enlarge the problem that it intends to solve. Perhaps, while we are assisting people who have children who do not have the resources to adequately care for them, we should also be taking serious and effective measures to prevent that from happening in the first place. Parents can reduce child poverty by delaying their 1^st child until later in life, and using those early years for the hard work, education and sacrifice invested in oneself to be in better position to raise a child.

            Conservatives want less spending and less government involvement

            Conservative economist Milton Friedman believed that government bureaucrats could not spend money as wisely or as carefully as the taxpayers from whom it was taken. He spoke of “government failure,” and suggested that “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” Moreover, he believed that programs such as public schooling, minimum wage laws, drug prohibition, and welfare caused more harm than good.  (Brock, 2021)

Conservatives (and Libertarians, vehemently so) advocate decreased government spending and regulations, and want to decrease taxes (“starve the beast”) in order to achieve that aim. (Nelson, 2019) Conservatives advocate for letting people and society work out their own problems, without government involvement.

            Government spending can help and harm the economy.

            Conservatives commonly state that government spending impedes economic growth, while Liberals claim the opposite. It appears that it can do both. Capital expenditures, such as building roads, bridges, and schools, help the economy over the long term. However, when the economy is at full capacity, then government spending crowds out private sector spending, so that there is no net growth.  (elearnmarkets, 2020) When spending causes chronic budget deficits and excess federal debt, it produces “drags on economic dynamism.” (Heritage Foundation, 2020) When government spending exceeds 25 – 30% of GDP, it appears to suppress economic growth. (Iacono, 2015)

            Liberal and Conservative views on the economy are explored in depth in that section.

            Is our money well spent? Not all of it.

            We often hear stories about tremendous waste and inefficiency, such as when the government’s Strategic Petroleum Reserve purchased $27 electronic relays for between $484 and $521 apiece. (Schatz, 1996) We shouldn’t be surprised by inefficiency in any large bureaucracy. (Dennin, 2014)

So maybe the problem isn’t that the intended purpose of the tax dollars is wrong, or that we pay too much in taxes, but that our taxes aren’t used efficiently.

            Recession: To stimulate the economy out of recession, Liberals favor government spending, Conservatives want tax cuts or change through monetary supply

            Liberals and Conservatives favor different ways to stimulate the economy. Liberals favor a fiscal (“Keynesian”) approach, where government spends money, which puts money into the hands of consumers, which then fuels investment and demand for goods and services. (Barnier, 2020) Conservatives prefer to cut taxes, allowing taxpayers to decide what to do with the money. (Amadeo, 2020)

            In response to the economic meltdown and recession of 2008, the government used both approaches in The American Recovery and Reinvestment Act of 2009 (ARRA). Overall, it appears that putting money into the hands of people who spend it immediately (i.e., poor people) boosts the country’s economic activity more than cutting taxes for people who don’t need it. (Stone, 2020) The stimulation of the economy is a benefit in addition to keeping American citizens from starving or being forced onto the street.

            Some economists, such as Friedrich Hayek, have stated that attempts to stimulate the economy by injecting money into it inevitably increase inflation.  The rate of unemployment and inflation are inversely related. When more money is being spent, more jobs become available. Employers then have to compete for workers, and workers can then demand higher wages. Thus Hayek opposed Keynesian policies as being inflationary. (The Library of Economics and Liberty, 2020) Issues of inflation and “stagflation” are discussed in the section on the economy.

How government spending affects the economy is discussed in detail in that section. It turns out that a moderate amount, invested in the right places, helps the economy. Above a certain percent of GDP, excess spending impedes economic growth.        

            Tax and Spend or Spend and Debt

            Liberals are often criticized for their tax and spend proclivities. Who is better at managing the economy so that our national debt does not become a greater burden? Let’s look at running deficit for the last 6 presidencies:

            Ronald Reagan (Republican): The federal deficit increased from about $78.9 billion at the beginning to $152.6 billion at the end of it

            George H.W. Bush (Republican): The deficit increased to around $255 billion at the end of Bush’s term.

            Bill Clinton (Democrat): The deficit dropped to zero and he ended his term with a $128.2 billion surplus.

            George W. Bush (Republican): The deficit increased to roughly $1.41 trillion (and he left office at the beginning of The Great Recession).

            Barak Obama (Democrat): He reduced the deficit to less than half, at approximately $584.6 billion, despite having to contend with the greatest recession since The Great Depression.

            Donald Trump (Republican): 2 years into his presidency, the deficit increased by more than $100 billion. A Congressional Budget Office report from April 2018 found that his 2017 Tax Cuts and Jobs Act could add almost $1.9 trillion to the deficit over 10 years. (Funke, 2019)

            Red, the adopted color for the Republican Party, is appropriate for the red ink of the spend-and-debt polices of these 4 Republican presidents.  Tax cuts and military spending add up to federal debt. Liberal presidents Bill Clinton and Barak Obama, despite their penchant for spending money in the public interest, were more fiscally responsible, but at the expense of wealthy taxpayers.

            We should keep in mind that true Conservatives value fiscal responsibility. Here we see an example of how the Republican Party does not necessarily adhere to Conservative values. Differences between the words “Republican” and “Conservative” are explored in that post.

            A large part of the disagreement about government spending involves the role of government in society, which is addressed in its own post. Liberals favor government intervention in society, which involves government spending. Conservatives believe that government should have a much smaller role in business, the economy, and people’s lives. They believe people should be allowed to keep more of their wages and make their own decisions on how it is spent.

How much money the government should spend, and for what, depends on our values, which differ somewhat between Conservatives and Liberals. The “correct” amount of spending is a matter of philosophy.

If we seriously and sincerely want to improve the distribution and efficiency of government spending, then we should roll up our sleeves, do our homework, learn as much as we can about the process, and try to help. We’ve seen how partisan niggling has created an ugly mess. Whatever we do, whether it be involving ourselves in government or just conversations with our friends and family, we should do it being mindful and respectful of the highest values of the other side.

References

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