Steven Engelhardt

While many people focus on the revenue half of government in that they incessantly clamour for lower taxes, to spend is to tax, as Milton Friedman taught us. Therefore we should look at how the Federal government’s outlays have changed over time. Here is a breakdown of outlays from 2005 and 2006 by major agency:

As a reminder, all numbers are from the U.S. Treasury Preliminary Statement of Budget Results for Fiscal Year 2006. Figures are not adjusted for inflation.

I don’t understand why “undistributed offsetting receipts” are counted as negative outlays and not receipts. Regardless, the three largest increases in outlays in percentage terms were from Homeland Security, the Office of Federal Student Aid, and the Corps of Engineers, respectively. The three largest increases in outlays in dollar terms were from Interest on the public debt, Medicare, and Homeland Security, respectively.

The Department of Defense, Medicare, Medicaid, Social Security, and the Interest on the public debt comprise over 75% of all Federal spending. However, Social Security is currently running a surplus. If you were to eliminate Social Security along with its associated, dedicated taxes, you would make the Federal deficit quite a bit worse in the short term.

Given current trends, future obligations, and political realities, I am highly pessimistic about the ability to address the Federal deficit from the spending side. The supermajority of future improvement will likely have to come from the revenue side. This means, of course, higher taxes. However, the longer we wait, the more likely it is that Interest on the public debt will continue grow far faster than the rest of the budget, which will make future tax increases or spending cuts even more painful.