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Does Washington have a spending problem or an income problem?

Washington's spending has recently been higher as a percentage of the nation's economic output than at any time since World War II. But by the same measure, Washington's revenues are the lowest in more than 60 years.

So does the U.S. have "a spending problem," as Republicans keep repeating in the current debate over how to reduce the nation's record deficits? Or is the problem that taxes are not high enough? Those questions frame a long-running partisan debate, and as usual we won't offer an opinion one way or the other. But for those seeking their own answers, we can offer some fiscal history and factual context.

Some key facts we think are worth considering:

Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.

On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.

These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII. The deficit was 10.0 percent of GDP in fiscal 2009. It declined to 8.9 percent last year as the economy started to recover, but is projected to go up to over 9 percent this year. Each of these deficits is larger than in any year since 1945, measured as a percentage of GDP.

The U.S. is borrowing about 36 cents of every dollar spent so far this year. It borrowed 37 cents on the dollar last year, and 40 cents in fiscal 2009.

The largest components of federal spending are Social Security and Medicare programs for the elderly (33.5 percent of total outlays in 2010) and national defense (20.1 percent). Interest payments on the federal debt alone accounted for 5.7 percent of all federal spending, and that percentage is rising.

The federal income tax accounted for 41.5 percent of federal receipts in 2010 (down from 49.6 percent prior to the Bush tax cuts of 2001 – 2003). Corporate taxes brought in only 8.9 percent, also down sharply since the recent recession. Payroll taxes and other "social insurance" payments accounted for 40 percent of total receipts in 2010.

17 Answers

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  • Anonymous
    10 years ago
    Favorite Answer

    Both but it cannot be solved without more taxes.

    Even if we fire every single person that works for the government and close their department including the military you still will not balance the budget.

    Out of 3.5 trillion only 1.4 trillion is Departments that have employees and provide the services of government. We will only bring in 2 Trillion. Fire everybody an you still do not have a balanced budget.

    Here is the part of the budget that goes for employees and services. It is less than 1.4 trillion All infrastructure spending. The President and Congress. Close them all and the budget is not balanced.

    $663.7 billion (+12.7%) – Department of Defense (including Overseas Contingency Operations)

    $78.7 billion (-1.7%) – Department of Health and Human Services

    $72.5 billion (+2.8%) – Department of Transportation

    $52.5 billion (+10.3%) – Department of Veterans Affairs

    $51.7 billion (+40.9%) – Department of State and Other International Programs

    $47.5 billion (+18.5%) – Department of Housing and Urban Development

    $46.7 billion (+12.8%) – Department of Education

    $42.7 billion (+1.2%) – Department of Homeland Security

    $26.3 billion (-0.4%) – Department of Energy

    $26.0 billion (+8.8%) – Department of Agriculture

    $23.9 billion (-6.3%) – Department of Justice

    $18.7 billion (+5.1%) – National Aeronautics and Space Administration

    $13.8 billion (+48.4%) – Department of Commerce

    $13.3 billion (+4.7%) – Department of Labor

    $13.3 billion (+4.7%) – Department of the Treasury

    $12.0 billion (+6.2%) – Department of the Interior

    $10.5 billion (+34.6%) – Environmental Protection Agency

    $9.7 billion (+10.2%) – Social Security Administration

    $7.0 billion (+1.4%) – National Science Foundation

    Even if we fire every single person that works for the government and close their department including the military you still will not balance the budget. There has to be tax increases.

    Total 1.4 trillion

  • Anonymous
    5 years ago

    Hi, Grandma here and I'm not going anywhere, SS is the easiest thing to 'cure', just raise the cap to two hundred thousand from one oh six and we'll all be fine. Your question about how did the government spending too much become a revenue problem is best answered by saying it always was a revenue problem it became that way when Bush didn't include the cost of the two wars in the budget, he did it extrabudgetarily, and then he instituted a rash of tax breaks, so we had less revenue available to pay for the war. The money that was paid back went into something called the general fund, not any one particular item in the budget, pork barrel is written into the budget and one mans pork project is anothers needed project, it all depends on where you sit. We do need to cut spending, but we can't do that to any great degree right now because of the recession, cutting spending means cutting jobs, and adding thousands to the rolls of unemployment would kill us economically, as those taxpayers, would become non taxpayers. Not at all what we need. So we do need to cut spending, but carefully, or the results will be problematic for the country, and we do need to increase revenues, and you do that by raising taxes, preferably on those who can afford it and won't be missing dinner by paying more. And we won't quit electing politicians by the bacon they bring home, because we are all at heart very selfish and that money is looked upon as bring our taxes back to us.

  • Anonymous
    4 years ago

    Washington is a huge and all know city and is unquestionably suitable deliver a secondary or simply visit this city. with hotelbye you'll find more. One of many icons of Washington and the entire America is the famous White House, the official house of the President of the United States. The house of each and every president except George Washington, it had been formerly built by James Hoban in 1792, and after being burned down by British allows in 1814 was rebuilt in 1818. While travels of the interior offering the East, Blue, Green, and Red Areas; the Ballroom; and the State Dining Room must certanly be reserved properly ahead of time, every tourist to Washington would want to see that iconic building, at the least from the outside. Nearby to the White House will be the complex 1833 Greek Revival Treasury Building and the 1871 Executive Office Building, one of the very impressive old government houses in Washington.

  • 10 years ago

    Considering how many people are hanging on the edge right now due to the wrecked economy, you absolutely cannot raise taxes at the moment. That would send too many people over the edge who then couldn't afford to pay taxes and would probably fall into the bracket where they would be getting money back, which would kind of defeat the purpose in the first place. I don't think we can afford to cut taxes now but we certainly can't afford to raise them. If the economy was doing better we might have a discussion there, but it simply can't be done at the moment.

    The simple fact is spending has to be cut somewhere. I'm not going to pretend to know where those cuts should be made. But the richest country in the world--by a long shot--getting itself into this kind of mess comes largely due to stupid money management. All that being said, simply saying "stop spending" doesn't do a thing to fix the problems.

    The bigger problem is we're spending money we don't have that we have to borrow. We need to quit borrowing money. We're just going to get into a deeper and deeper hole. If the debt ceiling is raised, we'll just be right back where we are now in a couple of years, only farther in debt and in a worse spot than now.

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  • 10 years ago

    Revenues low because of job numbers. Highest unemployment since the great depression. The real data would suggest that unemployment is one whale of a lot higher than 9.2% This restricts revenue. Even Keynesian economists do not increase taxes during a recession...this is true, unless you believe that we're NOT in a recession. If you work for government; you've been entirely unaffected by any downturn. It all doesn't exist.

    Spending is too high.

  • Anonymous
    10 years ago

    Taxation is not down at all.

    GDP is a phony statistic which includes government spending for no good reason. So taxes can remain the same while spending increases with borrowed money and Presto! taxes go down as a percentage of GDP...

    Take government spending out of GDP, since it has nothing to do with production and since it leads to double counting, and you will see that taxation is barely down at all, despite the obama recession.

  • Anonymous
    10 years ago

    We have a spending problem, for sure, this debt just keeps rising and rising at too fast of a pace, we need to work on bringing it down. Income is not the problem, and anyway, raising taxes (like Obama wants to do) does not create that much more revenue in the first place and would barely put a dent in this compared to cutting spending. It would also hurt the economy, taking money away from the citizens who would spend it and help out the economy.

  • ?
    Lv 6
    10 years ago

    Obviously a spending problem. Since 0bama took office, he has increased the national debt by 30%.

    Add that to the trillions that were added under Pelosi and Reid and you can see spending has to be cut before the younger generations will have no hope for a good life, but more than likely that of a third world country.

  • Anonymous
    10 years ago

    Washington has a thinking problem.

    Our system is so messed-up that poorer families are better off financially when Dad doesn't live at home and Momma has babies from several fathers.

    “The heart of liberalism really is a hatred for God and a belief that government should replace God.” --Todd Akin

    And people ask: Why aren't YOU a liberal?

  • Anonymous
    10 years ago

    This really is not a difficult problem. If you don't have the money then you cut spending. Any middle-class family can tell you that.

    Washington's problem is they have way too many programs they are spending money on. When their income drops they not only refuse to cut spending, they actually increase it dramatically. ie the stimulus packages, omnibus spending, Obamacare.....without any idea how to pay for it.

    Yes we have a spending problem, fix that first then worry about income.

  • Alex G
    Lv 6
    10 years ago

    It is both. Deficit can be reduced only by increased revenue. That will cause pain and will make a closer look at spending inevitable, but you cannot reduce deficit by cutting spending.

    Source(s): Long time ago people at the pub were discussing how many miles per bale of straw they were getting from their donkeys. One clever individual boasted that his donkey survived on a single straw per day and that he would have trained it to survive on half a straw but unfortunately the donkey died. "Frugality is the mother of misery!"
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