US Federal Spending

U.S. Federal Spending in Fiscal Year 2010 was $3,456 B.

• 20% to Defense
• 20% to Social Security
• 23% to Medicare and Medicaid
• 6% to Interest on the Debt
• 12% for Other Mandatory
• 19% for Discretionary

U.S. Federal Tax Receipts for Fiscal Year 2010 were $2,162 B.

That covers about 60% of spending.

• 42% from individual income
• 40% from Social Security
• 9% from Corporate Income
• 3% from Excise
• 6% from Other

Assuming that we don’t want to cut defense, social security, or Medicare, and don’t want to declare bankruptcy by not paying interest on our debt, 69% of our spending is generally non-controversial. In addition, I’ll assume that paying Veterans’ pensions and healthcare, federal employee retirement, , transportation, including FAA and air traffic control, and spending on our National Parks is also non-controversial. They add 10.5%, leaving us with about 80% of our budget as non-controversial. We’ll leave off, even though they might be generally agreed upon, things like Unemployment, other healthcare, space/science, and agriculture. (For more, here.)

We are now paying taxes to cover 60% of spending, but generally agree we want to maintain 80% of the budget.

We are currently paying taxes at the rate of 15% of GDP, which is the lowest since 1950. To cover 80% of the budget, we would have to raise taxes now to 20% of GDP, which is about where they were in 1981 (19.6%) and 1998-2001 (roughly 20%).

Of course, growth out of the current recession is expected to raise the percentage of GDP we will be paying in taxes in the next five years to 17%, then 18%, then 19% (chart).

Which still leaves us 20% of government to fight over and pay for or cut.