“Where does all the money go” is a question that I’ve asked myself and heard others ask especially in light of the recent battle in the U.S. Congress over raising the debt ceiling, raising revenue, and cutting expenses. Well, let’s dive in and take a look in layman’s terms.
First, what is the debt ceiling? Simply put, it is the amount of money the U.S. Government is allowed to borrow in order to meet it’s debt obligations. Part of the rub that’s in the spotlight especially with the emergence of the Tea Party movement is the amount of expenses the U.S. Government incurs. The Tea Party, and most conservatives, want a limited government that leads to very limited spending. I happen to personally agree: the U.S. Government has way too much expenses that should be reviewed and discontinued immediately.
Second, there are ways for the U.S. Government to increase revenue; the easiest and most relied upon method is through taxes. Federal income tax is the number one method and has been for quite some time. Also, selling bonds – borrowing money from the people and guaranteeing a payback with interest in a set amount of time is another way the US Government raises revenue. But again, the Federal Income Tax is by far the number one method.
Third, the number and kind of expenses the U.S. Government has is undoubtedly in question, and rightfully so. Entitlement programs, for example, are expenses that are most needed by the poor, lower-middle class, senior citizens, and disabled. Simply purging entitlements is not logical, but they do need to be reviewed and tightened up due to abuse and mismanagement.
There are many types of expenses the U.S Government is responsible for monthly. Let’s take a look at these expenses at a high-level for the month of August 2011:
1. Medicare/Medicaid: $50 Billion. The elderly rely on Medicare, but those on welfare get Medicaid. How much of the $50B is divided between Medicare and Medicaid I don’t know.
2. Social Security benefits: $49.2 Billion. Currently, the U.S. Government takes in more each month than it pays out. However, it is not just the retired that receive Social Security; those that are unable to work (not unemployed) can apply for it, too. It isn’t easy to receive it, and usually takes forfeiting an arm and/or leg to get it if you are not at retirement age, but there are millions in this country who receive it.
3. Defense Vendor payments: $31.7 Billion. Defense Contractors, and the things that go BOOM. Of course, R&D fall under this category. I mean, come on, the nukes we have to destroy the planet 10 times over are getting old, you know? Technology folks, that too is where it’s at.
4. Interest on Treasury Securities: $29 Billion. The government has borrowed plenty of money in it’s day, and they are required to pay interest just like you and I.
5. Education: $20.2 Billion. Student loans, Pell Grants, etc.
6. Federal Salaries & Benefits: $14.2 Billion. Those politicians that we elected into office (i.e. Congressmen, Senators, and the President, for example) get paid, just like you and I. So do their staffs. We also flip the bill for all the parties, trips, vacations, and other benefits, too.
7. Unemployment Insurance Benefits: $12.8 Billion. Not only does it behoove us to have as many people as possible working in this country to stimulate the economy via spending, but to decrease the amount of money that is paid out to those unemployed each month. Right now the unemployment rate is at 9.2% – very high.
8. Food/Nutrition Services and TANF (Temporary Assistance for Needy Families): $9.3 Billion. Yikes – TANF began in 1997, and it’s purpose is to provide temporary financial assistance while aiming to get people off of said assistance primarily through employment. The maximum length of time an individual may receive these benefits is 60 months, but in some states it is less.
9. Housing and Urban Development Programs: $6.7 Billion.
10. IRS Refunds: $3.9 Billion. This is a personal sore spot and one that in my humble opinion needs to be looked at big time. Tax credits for major corporations including Big Oil, tax write-offs that affect AIG (Adjusted Gross Income), and other loopholes that the wealthy take advantage of should be immediately considered.
11. Military Active Duty Pay: $2.9 Billion. Those that serve are worth every penny, and then some. The Congress better not even consider touching this line item.
12. Veterans Affairs Programs: $2.9 Billion. Again, don’t even think about it, Congress.
13. Small Business Administration: $300 Million. How about investing more here? No, that makes too much sense; besides, the major corporations and CEOs are more important than the Mom & Pop shops all across America, right?
14. Other: $73.6 Billion. Other. Sorry, couldn’t find what “Other” holds. Most likely under-the-table money for some of the politicians in office, past, present, and future. I have a Political Science degree; perhaps I should have used it and pursued a life of “public” service.
The U.S. Government is expected to take in via revenue approximately $172.4 Billion in August 2011. Unfortunately, they are accountable for $306.7 Billion in August; therefore, since they do not have the revenue to cover said expenses, they have to borrow the money to cover it. The current debt ceiling (think of it as a line of credit not unlike what you have on a credit card) will not allow them to borrow enough money to get there, so unless the “credit limit” is raised so that the U.S. Government can borrow the money to make up the difference (i.e. increase the deficit at the same time, by the way), then the U.S. Government will default on some of their debt obligations, and their credit rating (i.e. not unlike a credit score) will drop significantly, which will lead to higher interest rates amongst other things going forward.
Think about this for a moment; an analogy that is alive and well in many homes in this country today. An American family has a monthly budget, and the cash flow they have after taxes is $5K. They have expenses, too, just like everyone else, and when they add up said expenses, the total comes out to $8K, a three-thousand dollar deficit. Ouch. What should they do? Most, not all, but most families take a hard look at their expenses and decide on which ones they can do without easily. Then after they eliminate the “low-hanging fruit”, they add up the total expenses and now they are at $6,500.00, and still have a $1,500.00/month deficit. Now, what some families (ok, a lot of families have been doing) is putting things on their credit cards instead, all the while thinking that they’ll eventually pay down the credit card(s). Well, guess what folks, as you very well know, that rarely happens, and that is why American families are in dire straits today. Guess what? Our federal (and state and local) governments have done the same exact thing: they continue to put things on credit thinking that eventually they’ll be able to pay it off. Unfortunately, just like the American family of today, they cannot, and now they are in serious trouble.
It’s like an addict: they start off using as a form of entertainment, and soon they have to increase the amount in order to get the same experience. Eventually, they need so much that they get into serious trouble, and before you know it they hit the wall hard. Hopefully, their friends and family pull an intervention before it’s too late and get the addict on the road to recovery.
It’s time for the American people to pull an intervention on the American government, folks.
In my humble opinion, we have no choice but to raise the debt ceiling in order to stop the U.S. Government from defaulting on their debt obligations. We have to hold our federal government accountable and stop the increase in spending. We have to demand that those who are given special consideration in regards to taxes are held accountable and made to pay their fair share just like everyone else. That way cash flow is increased and the amount needed to borrow is reduced. Couple that with cuts in wasteful spending and soon the U.S. Government will be weaned off their deadly habit and on the road to recovery.
There it is – the huge mess we are in. Do we raise “the credit limit”, allowing the U.S. Government to borrow more money (and increase the deficit) to cover the obligations, or should we simply default on some of the obligations and send the country’s (and Global) economy into a tailspin causing a new and improved recession? Or, should we raise the debt ceiling one more time (hell, under Reagan we did it 17 times!), but look at raising revenue via ending tax credits and other loopholes while cutting a large chunk of monthly expense? There lies the debate in Congress.
Unfortunately, the August 2, 2011 deadline is approaching fast, and time for debate is over! It’s time to make a move, ladies and gentlemen. Stop the political posturing and ideological bickering, and sit down like mature adults and compromise in the best interests of the United States of America! We, the people, put you into office to do what’s BEST for this country, and it is clearly obvious that defaulting is not an option. The time for politics is over. The world is watching.
Most importantly, we, the people, are watching, and frankly, you are failing miserably. Republicans and Democrats – all of you are performing poorly, and it will show in the polling booths the next go around. We are sick and tired of the games. We are sick and tired of watching the politicians we voted into office to represent our best interests give in to Special Interests, Political Action Committees (PACs), and the wealthy who will push an envelope full of cash for your political campaigns to get what they want. You are there for us. And we, the people, will take you down and find people who will do the job right.
You’ve been warned. We are watching.