Of Income and Outlays

 

I became a great grandfather for the seventh time on March 8, 2025, a baby boy, eight pounds six ounces, first name Kayce, middle name Rodney. At the time of this joyous event, our national debt was $36.22 trillion. As an American citizen, what is Kayce’s share of that debt? I’ll let the math majors out there do the calculation: $36 trillion, divided by 310 million citizens. The answer is a very big number, and he’s not even a week old. Is this what we want to leave behind, a bankrupt nation? Here ya go kid. It’s your problem now. Can the federal budget be balanced? As a nation, can we stay solvent?

Remember the old days when you used to prepare your own tax returns? You went to the Post Office, or your local library, and you picked up the necessary forms, including an instruction booklet for completing Form 1040. The booklet was a hundred pages, give or take, and near the very end was a page titled, “Major Categories of Federal Income and Outlays for Fiscal Year [nnnn].” The page presented two pie charts, one for Income, one for Outlays, followed by explanatory notes for each category. (See the attachment below.)

Here are some interesting figures from Fiscal Year 2023, the latest available from the IRS:

·                Income: $4.441 trillion

·                Outlays: $6.135 trillion

·                Deficit: $1.694 trillion (28%)

Here are the categories of Income:

·                Personal income tax: 35%

·                Social Security/Medicare: 26%

·                Corporate taxes: 7%

·                Excise/gift/other taxes: 4%

·                Borrowing to cover the deficit: 28%

Here are the categories of Outlay:

·                Social Security/Medicare: 39%

·                Social programs (incl. Medicaid): 23%

·                Defense, veterans, foreign affairs: 19%

·                Interest on the debt: 11%

·                Physical/Human/Community development: 7%

·                Law Enforcement, general government: 2%

 

There were some surprises (for me) in these numbers. First on the Income side: corporate taxes were 7%. Looking back on prior years, they were as high as 9% in 2015, and as low as 3% in 2020; on the whole, 7% was about average. Think of the hugely successful corporations, such as Apple, Tesla, Amazon, Google, and Microsoft. Think of the Fortune 500 companies. All businesses benefit from infrastructure built with tax dollars—highways, bridges, seaports, airports, water, electricity, stable markets, etc.—and yet the corporate contribution is 7%. Maybe it’s just me, but it seems small.

Another eye-opener on the Outlays side: When you combine Social Security/Medicare, Medicaid/Social Programs, and Defense it comes to 81% of spending. Add Interest on the Debt and you have 92%. That doesn’t leave much that can be termed “discretionary spending.”

It is possible to balance the federal budget. This was accomplished during Fiscal Years 1998 – 2001. In fact, there were budget surpluses. It could be done again, but firing government workers will not do it. The non-military government payroll is approximately $336 billion (source: Google AI). If you fired everybody, it’s not nearly enough to cover the deficit.

The greatest obstacle to a balanced budget (my opinion) is dishonest politicians, and I’m pointing the finger at both parties. Republican orthodoxy is to cut taxes and “do something” about Social Security, Medicare, and Medicaid. Democratic orthodoxy is to constantly extend those programs. Neither side will speak the truth to their respective constituency. The truth is we need BOTH spending cuts and revenue growth. To date, I’ve heard only one politician admit that fact, and even then, it was briefly, softly, nearly a whisper.

It takes a lot of political courage to face the truth. But the numbers do not lie.

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