Wednesday, June 23, 2010

The Federal Budget: Where is the Money Going?

  • Federal spending has grown 62 percent faster than inflation since 2000.
  • Defense spending has grown 91 percent over its pre-9/11 trough, yet still remains well below the historical average as a percentage of the economy.
  • The expensive Medicare drug benefit played a large role in Medicare’s sharp cost increase.
  • Anti-poverty spending rose rapidly under President George W. Bush, and has risen again during the recession.
  • Unemployment spending is also up due to the recession.
  • Energy costs fluctuate yearly, so the rapid growth rate over 2000 is not indicative of a long-term trend.
  • Mortgage credit and deposit insurance costs were high in 2009 due to the financial and mortgage bailouts. The low (and occasionally negative) 2010 totals result from recipients repaying a portion of that spending.
  • Despite the new spending and deficits, record-low interest rates caused net interest costs to decline. Net interest spending will jump when interest rates rise back to normal levels.

  • Discretionary spending is the portion of the annual budget that Congress actually determines.
  • Since 2000, discretionary outlays surged 79 percent faster than inflation, to $1,408 billion. The “stimulus” is responsible for $111 billion of 2010 discretionary spending.
  • Between 1990 and 2000, $80 billion annually in new domestic spending was more than fully offset by a $100 billion cut in annual defense and homeland security spending, leaving (inflation-adjusted) discretionary spending slightly lower.
  • Since 2000, all types of discretionary spending have grown rapidly.
  • Overall, since 1990, domestic discretionary spending has risen 104 percent faster than inflation and defense/security discretionary spending has risen 51 percent.

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