| Federal Budget Perspective I find it useful to view the federal budget in terms of cost per person or cost per household. The following table does just that and allows me to determine what my family or I pay for each category. For example, my family is paying $520 this year for deposit insurance. This is money spent to bail out failed banking and savings & loan institutions. Note that the above numbers are for federal budgets only and do not include state and local budgets. Public education spends an additional $350 billion ($3,800/family) at the state and local level. I have also gone one step further. Where possible, I calculated the dollars involved per intended recipient (very approximate). Thus retiree households now average over $15,000 per household from social security, medicine, and federal pensions. We originally visited this subject in our Spring 1988 newsletter where we calculated federal spending on a per capita and per household basis. We have updated that data in the table. The 1992 budget for federal spending is 34% greater than in 1988. Its growth of 8% per year has doubled inflation of 4% per year. While many people focus on the federal deficit, we’ve argued for years that the problem was in the level of government spending. Since every dollar spent by the government is a dollar removed from the free market, a primary source of weakness in the private sector is the increased level of government spending. As you can see from the adjoining table, the major growth segment in the federal budget is entitlements, particularly Social Security & Medicare. We have reached a point where the elderly comprise 12% of our population, but receive 60% of all federal social spending. Our politicians are well aware of this. Tip O’Neil was well aware of it a decade ago and Barbara Jordan made a point of it at the Democratic Convention. Few people realize that people who retired six years ago have already received every dime they had ever paid into Social Security, and can expect to receive an additional 3 multiples of their contribution during their remaining lifetimes. (Yes, all of the numbers are adjusted for inflation and company contributions. Details are available upon request.) Currently $14 billion in Social Security benefits go to people with cash incomes over $100,000 per year. I’ve yet to hear an argument why anyone with assets over $1 million or income over $50,000 should receive more from Social Security than they paid into it. Although I am encouraged by the changes which I see proposed, considered, and discussed in this fascinating political year, I will remain skeptical of the American public’s desire to reach a solution to our economic problems until I see them come to grips with the simple arithmetic of the Federal Budget and Social Security. 1988 versus 1992 Federal Budget Programs Current Population: 248.7
Million
Ron Muhlenkamp
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