Student Concerned about Department of Government Efficiency

 I am finding it hard to believe that Trump has sent out mass e-mails to federal employees offering them a severance package and asking them to leave their jobs. This just gives absolutely no thought to all of these people’s lives and how much pressure they are being put under to be able to keep their jobs when they have done nothing wrong to deserve something like this. On MSNBC’s show Morning Joe they were even saying now they have these young kids fresh out of college interviewing a lot of these people about what they do every day, and they said they feel like they are being monitored constantly. Who wants to work under conditions like that? I know I would not be able to perform my job the same way if I knew I constantly had eyes on me just waiting for a reason to fire me. 

I do not remember what company it was but one employee said Elon Musk and his whole family moved into the 6^th floor of the building he works in so he could have eyes on them constantly. In my opinion, this is a terrible idea, we are going to lose essential workers who are experienced and know exactly what they are doing for absolutely no reason. Then, when this administration realizes that they need those employees, they are going to have to hire new people and spend all that time training them, trying to get them up to speed on how to do their jobs. This is not a good idea—especially not with the FBI; they want to get rid of such a huge percentage of the FBI. I do not see how it would be possible for us as a nation to be safe without such a big percentage of the agency gone all of the sudden. It makes the United States very vulnerable to all of our enemies trying to get intel on us and the same thing is happening with the CIA, so he is just opening up our borders for something terrible to happen. 

This kind of news really does worry me, especially having a young daughter who is at the age of 13, and I am scared for her future. What is really scary is this is just a couple of weeks into the new administration and so much craziness has already taken place.  I know the VA was another government institution that was affected by these e-mails asking them to resign, and that has had them nervous as well. I believe they are eventually trying to get rid of the VA and privatize it so that they can just start sending veterans out into town to regular doctors and lose a lot of the other benefits veterans need such as disability and specific care such as combat PTSD groups that you cannot find in another medical center, and it means a lot to the guys because most of them won't open up to people that have not been through the same thing. So overall, I don’t know what is going to come of it, but I think the only person that needs to be fired and sent home is Elon Musk. 

Sure does make me wonder how the richest guy in the world has all of these huge companies and has all of the money in the world but yet that’s just not enough for him, he has to try to inflict pain on people. It is insane how much free time he has considering he owns Space X, Tesla, X, etc. You would think he would have something better to do with his time then follow Trump around like a lost puppy.  

Here are some concerns I have:

1) Reorganizing the federal government and pushing the bureaucracies to become more efficient may be a laudable project, but much depends on the approach used.  In the 1990s, the Clinton-Gore administration made such an effort, and it was largely successful.  I had an uncle who took part in the reorganization from within the Department of Energy, and he speaks with pride of how he shifted funding from atomic weapons to the human genome project. I share your concerns that Elon Musk and the Trump Administration are not pursuing efficiencies and reorganization in a way that is likely to achieve the desired goals.

2) My understanding of the Constitution is that the funding for these various agencies comes from the Congress (especially the House of Representatives), and the president just is responsible for putting the laws and funding given by Congress into effect. My understanding is also that the President cannot simply withhold funding once it has been allocated by Congress (see the 1974 Impoundment Control Act).  Thus, I am concerned that DOGE and the Trump Administration may be breaking laws and violating the Constitution.

3) My understanding of labor law and human rights associated with workers is that Federal Workers are protected by contracts and labor law, and my impression is that many of the firings of federal workers are illegal. 

4) Although I have several criticisms of various branches of government and departments, and can therefore empathize with feelings of anger and hostility directed toward the bureaucracies, my general understanding of federal agencies is that they are staffed by competent and hard-working people who are highly skilled and often near the top of their fields.  The NIMH and CDC have frequently impressed me, and I have known people in both of those organizations, and attended one NIMH conference. I have also known people (some old friends I've known since childhood, and some family members) who work at HUD, the Department of Transportation, the CIA, the State Department, the Department of Energy, the Environmental Protection Agency, and the Department of the Interior. Without exception, every one of these persons I know within the federal workforce is a person of admirable character, intellectual brilliance, and awesome competence.

 The wholesale attack on federal workers and agencies everywhere in the government seems to me like it is directed by people who are governed by gut feelings and cult-like political enthusiasm, and not by well-informed understanding of where the problems lie.  The inclination of Musk and his young assistants reminds me of the revolutionary zeal of Chinese Red Guards during the cultural revolution, more than the sober and well-thought-out reforms that would address the real problems in the federal government.

I'm concerned that in the long-run, this sadistic populism that attacks authority and government with ignorant enthusiasm will become a dominant approach in American politics, used by demagogues on the right and left, leaving serious people of the left and right and the technocratic center increasingly marginalized.  I doubt whether any revolutionary pragmatism or extreme human rights advocacy will be able to save our society if cult-like movements worshipping the rhetoric of madmen and incompetent ignoramuses gain power. 

Income Taxes as a Fine for Being Useful

A former graduate student of mine; a very generous and friendly former student whom I greatly admire and with whom I've remained in contact for about a decade now since he graduated, recently posted a meme photo image of an Uncle Sam with the words: "Income Taxes are the Fine One Pays For the Crime of Being Useful and Productive".   I admit it's a cute meme, and there is some truth to it, in a broadly understood context. Yes, it’s logically true that producers contribute to the public good, and those who don't produce can't contribute as much or in the same way because they haven't produced anything to contribute, and for humorous effect, we can call "contributions to the public good" a “fine” (a punishment) we must suffer for doing the right thing.  Phrasing it this way is funny.  I get it.

But, some people might take the humorous idea of the meme seriously and allow it to reinforce some general misconceptions about how people contribute to the public good.  I therefore responded with this:

Income taxes are what one pays to sustain public goods, like education, roads, airports, national defense, space exploration, housing for the homeless and poor, food assistance to the poor and hungry, medical research (NIH and CDC), public lands management, enforcement of clean air and clean water.

The responses and my final response were interesting:

One person wrote (quite aptly, I think) in response to my observation:
Tell that to Springfield, think they forgot.

My old student wrote a thoughtful question:
So we had no roads or education, national defense or assistance for the poor, prior to 1913? Wonder how people ever got by.

Another person posted something that got me thinking about how people perceive taxes and government spending:
Income Taxes may well have started out as a means to fund some of those things but today it is simply wealth redistribution.

And then my former student re-introduced some humor to the proceedings:
And extortion

Well, even though I think they are sort of joking, we now have a claim that income taxes are “simply wealth redistribution” and also “extortion” and I felt the need to respond, so here was my reply:

Are you open to learning something about taxes and federal spending? The biggest things that the government spends money on are: Social Security; Medicaid; Medicare; and National Defense. Social Security is paid for with the payroll taxes, which cover all but $200 billion, and that gap is covered by taking money out of the Trust Fund (for Social Security). Medicare is the next biggest spending item, and it's covered by premiums and the Medicare payroll taxes, and some money taken from the Medicare Trust Fund. So, Medicare and Social Security (which account for 39¢ of every $1 spent by the government) don't rely on income taxes. Income taxes go to the other 61¢ of every $1 spent. This is split into: 
1) Medicaid and health services (about 12¢); 
2) National Defense (about 16¢); 
3) interest on the national debt (11¢) and 
4) everything else (22¢). 

Medicaid is redistributive: it pays for medical care for poor persons who would otherwise simply remain sick or die or else get charity care (if available). People who can afford to pay are going to get hit with some of these costs anyway: if we didn't have Medicaid, many doctors and hospitals would feel ethically obliged to care for the sick who couldn't pay (the alternative of allowing them to suffer or die is generally contradicted by the teachings of Christianity, for example), and medical care charities would be more aggressive in fund-raising. The costs would be shifted (by health care providers and medical charities) to paying customers and those who were more benevolent and willing to be philanthropic. Medicaid simply distributes the burden to all of us taxpayers, so that the more benevolent don't end up carrying the cost while the stingy get away as free riders, and medical costs for the rest of us remain more affordable (because we are paying income taxes which support Medicaid so that our health care providers don't have to increase the costs they charge us in order to cover their costs of providing care which wouldn't be paid for without Medicaid). 

Defense is also redistributive (all government spending is). Our money goes to pay warriors, people who build things for our military, and so forth. It's essentially a way to provide jobs for engineers and soldiers and everyone who takes care of military equipment, builds military equipment, provides services to the military, and so forth. I would rather that we redistributed more money to people who are doing medical research, who are more likely to improve my quality of life and delay my death, and less money to the military, but that's evidently a fringe opinion. 

Interest on the national debt is redistributing money to people who hold U.S. Debt. That includes most people who have mutual fund investments, where a certain percentage of assets are usually in the safe U.S. Treasury investments. 
As for "everything else", (the 22¢ of every $1 spent by the government that isn't Social Security, Medicare, Medicaid, interest on the debt, or Defense), it's a mixed bag of policies that redistribute money to the poor and policies that distribute money to prison guards, and research scientists, and people who build and maintain roads and ports and airports, and safety inspectors, and Census Bureau demographers, and FBI agents, and so forth. All of this is stuff that taxpayers evidently want done, since their elected representatives have voted for such things. 

As for the redistribution toward the poor, who are usually poor because they are disabled or chronically sick or mentally or cognitively impaired, or are children of adults who are unable to find and keep high-paying jobs, 11.3¢ of every $1 spent by the federal government go to things like school lunches, supplemental nutritional assistance, housing vouchers, public housing, unemployment compensation (which is paid for by payroll taxes paid by employers for the most part rather than income taxes), international development and humanitarian assistance, social services in education, community and regional development grants, etc.). About 3¢ of the remaining 10.7¢ goes to Veteran benefits and services, leaving about 7.7¢ for all the other discretionary outlays, like the budgets of the Department of Education, Department of Transportation, Department of Justice, the Census, NASA, the NIH and CDC, Disaster relief, Homeland Security, the State Department, and so forth. 

The opinion that "it's mostly redistributive" is correct in the sense that all government spending is redistributive. The money paid in taxes goes out as benefits, wages, subsidies, or prices paid to workers, military personnel, retired persons, health care providers, children, and poor persons. But, the idea that most of the income taxes are redistributed to poor persons isn't really based on actual spending. Medicaid and all the other spending that goes to poor persons (actually it goes to the people who provide housing, food, and health services to poor persons for the most part, as the poor quickly spend the money they receive on keeping themselves from starving, becoming homeless, or dying or remaining sick) accounts for about 23.3¢ of every federal dollar spent, whereas all other spending that isn't covered by payroll taxes and trust funds amounts to about 37.7¢ (for defense, interest on the national debt, and other things that don't especially target the poor). 

As for it being extortion. This is stretching the meaning of "extortion". Yes, if you are a citizen and you live in a society and you refuse to contribute to the society in an amount determined by an assembly of representatives who were elected by you and your peers, you can be fined, or even jailed, so there is certainly coercive power involved. But, if you can afford a passport and a ticket to a low-tax or no income-tax society, you can always relocate yourself to the Cayman Islands or Somalia or Saudi Arabia or whatever alternative society without income taxes appeals to you more than this one. Income taxes (and government spending) are much lower in Singapore, South Korea, Hong Kong, and Taiwan, and the standard of living in those societies is pretty good, and in Taiwan and South Korea you would be about as free as you are in the USA. It's possible to build a fairly decent society with lower taxes. But even those societies use coercive power to take money from residents and citizens as contributions toward maintaining the common good (like defending from invasions threatened by North Korea and China, providing universal health care insurance, providing very modest retirement pensions, and so forth).

We had large taxes on certain goods before the income tax. Alcohol, for example, was heavily taxed. Before 1913 our ancestors' consumption of beer and whisky covered many government expenditures. Also, without the stabilizing influence of a public welfare and pension system, we had dramatic economic swings, with crashes and panics afflicting our economy every 3-5 years, during which the economy contracted by levels unimaginable by today's standards. The early 1890s and the 1930s were far, far worse than the Great Recession of 2008.

A student's reaction paper reflecting on the budget problems.

Today I want to discuss my thoughts on the budget, the debt, and the plans to eliminate the deficit. I watched a speech, which Obama gave recently at a Virginia University about his plans to eliminate debt and fix budget deficit. The speech was pretty good and I liked most of what I heard him saying. He talked about not cutting anymore from education and about how he thinks we should be adding to education because if it weren’t for loans, grants, and scholarships, most students would not be able to afford their college education, including him and Michelle.

He talked about making health care and Medicaid affordable and attainable for everyone so that people will be able to receive adequate care for their needs. He also talked about wanting to improve our health care services so that people will not feel as though they need to travel far distances to receive quality care, including out of the country. I agree that health care and education should be added to and improved instead of taken away from and crippled. Every student should have the opportunity to go to college and get the help they need. Every human being should be able to count on getting quality health care assistance in their local community.

Why can’t they just make some even cuts across the board, in all areas, instead of finding a few to make huge cuts to; if we made small cuts to each area maybe we could make up some of our losses. Also why can’t the President just use the Treasury Department he has there in DC and print the money we need to pay off our debts, and then start over on a clean slate? I know people say it will affect the value of the dollar, but who controls that anyway? He is the freaking President so he should be able to make those kinds of decisions. And also, stop paying people so much money; why does anyone need to make over one million dollars a year? That is just plain stupid and greedy; take some of that money and pay our debt instead of paying entertainers and athletes.

Making cuts across the board?  Well, some things are mandated by law, while other things are not legal obligations, and the government can decide to decrease funding (discretionary spending). So, when it is time to cut, the cuts are focused in the discretionary spending, and mandatory spending gets very little reduction. Also, some spending is very productive, and helps the economy, so we would like to preserve that and cut the less productive spending. For example, if we could use our education spending to make our population super-smart and hard-working and outstanding in their skills and knowledge, that would make our society much wealthier, and all the spending on education would come back to the government in increased tax revenue and decreases in needs for poor relief. Other spending isn’t so productive, or is actively counter-productive. There are some agricultural and energy subsidies that probably do significant harm to many people, and mainly are useful because they enrich a few powerful and wealthy landowners. So, if we could distinguish between the harmful or wasteful spending and the good investment spending, many of us would like to make selective cuts against the wasteful spending (I’d like to cut defense spending by about 50%, myself).

Another reason why we make deep cuts in some programs and preserve other programs is related to political power.  Some programs enjoy broad appeal, and other programs are controversial.  I think that some of the stuff we as a nation do with international aid is among the best stuff we do. I’m proud of our role in rebuilding Europe after the Second World War, and I’m proud of our work to increase literacy and women’s health in the less materially developed world. And yet, many Americans would like to cut foreign aid, or even eliminate it.  In contrast, there are very few Americans who would cut the levels of benefits in Social Security, since most Americans receive Old Age benefits, or expect to.

The president does not control the money supply.  The Treasury isn’t responsible for creating money.  Money is created by the Federal Reserve Banking system, which is not directly answerable to any politician. If politicians did control the money supply, they could increase the supply, and use it to pay off debts.  However, this would make it very expensive to ever borrow money again.  Also, there would be significant inflation, and inflation can be harmful, especially to banks and wealthy people. When inflation increases, interest rates increase. If you owe money and have a rate locked in, whoever lent you money will lose much of the value of their loan to you if inflation and interest rates go up.  This would not be good for banks. In case you haven’t noticed, the bankers are a very powerful special interest in our society.  The politicians will do very little that harms the interests of the banks or the people who control great wealth. But yes, a decrease in the value of the dollar and a little bit of inflation can be a good thing for American competitiveness, as it will make our products cheaper on world markets, and that may increase demand for services and goods that are produced by Americans.

Military Spending in proposed FY 2012 budget

The President says we can find some savings in our military spending.  Let's take a look at the White House proposed FY 2012 spending related to defense:

43.2	Billion for the Department of Homeland Security
553	Billion for the base budget of the Department of Defense (War Department)
11	Billion I estimate is given to the (classified) National Intelligence Program budget.
114.7	Billion for military activity in Afghanistan and Iraq (excluding Department of State spending in these areas of the “Overseas Contingency Operations”)
61.8	Billion for the Department of Veterans Affairs
11.8	Billion to the Department of Energy for “Nation’s Nuclear Weapons Arsenal”
795.5	Total spending related to military and security from foreign threats included in proposed FY 2012 White House budget

Yes, with nearly 800 billion spent on protecting us from foreign threats, it does seem likely to me that we could reduce this spending.  Here is my proposed military budget:

36	Billion for the Department of Homeland Security
450	Billion for the base budget of the Department of Defense (War Department)
11	Billion I would give give to the (classified) National Intelligence Program budget.
40	Billion for military activity in Afghanistan and Iraq (excluding Department of State spending in these areas of the “Overseas Contingency Operations”).  I'd be getting us out of Afghanistan much sooner. Put 10 billion of the savings into foreign aid type intervention in Afghanistan.
65	Billion for the Department of Veterans Affairs (increase their budget and do more for the health of our veterans)
8	Billion to the Department of Energy for “Nation’s Nuclear Weapons Arsenal.” I'd spend much of this money to get rid of such weapons.
610	Total spending related to military and security from foreign threats included in proposed FY 2012 White House budget

 There, I've just demonstrated how we can save $185 billion per year in expenditures by reducing our spending on killing people or preparing to kill people. That's over $2 trillion in reductions over the next ten years as our Overseas Contingency Operations and atomic weapon arsenal costs are permanently reduced. 

  I would probably make even deeper cuts, but this proposal is politically feasible, I think.

Health Care Costs and Health Care Reform.

Here is a short descriptive paper one of the students wrote about health care costs and the health care reform of 2010.

Frightening statistics surrounding the healthcare field appear to be released every day. In 2008, it was projected that 16.2% of our nation’s economy is spent on healthcare. New reports have that number increasing again for 2009. Early estimates report that Americans spent $2.5 trillion on healthcare, giving the overall percentage a gain to about 17.3% of our nation’s budgetary allowance. This symbolizes the biggest one-year expansion of healthcare’s share in our nation’s economy on record. Justifications for such dramatic increase are accredited to the recession. As millions of Americans have lost their jobs and consequently their health insurance, Medicaid has seen a record increase involving those individuals that qualify. Roughly 45 million people remain uninsured, translating into sky rocketing costs for current insurance holders.

The United States government may or may not have finally come up with a solution. Following decades of failed attempts by Democrats, the United States House of Representatives made history when they passed health care reform in a 219 to 212 vote on March 21^st, 2010. Two days later, President Obama signed the bill it into law. So far, Democrats vow that the new law will yield great changes for the American public. Beginning with the reduction of premium costs and providing the largest middle class tax cut for health care in history, 32 million Americans are expected to be able to afford healthcare who otherwise would go uninsured. It sets the stage for a new competitive health insurance market, allowing millions of citizens to choose from the same pool that members of Congress do. By overseeing insurance companies, the government boasts that there will come an end to the discrimination of people with pre-existing conditions. Perhaps at a greater sell, the nonpartisan Congressional Budget Office projects that the healthcare reform will reduce the federal deficit by $138 billion over the next ten years. Yet, the reality of healthcare reform has not been met without criticism.

Just as one argues that the reform will greatly reduce our nation’s budget, those that oppose argue that the $938 billion price tag for this bill (over the next ten years) outweighs its advantages. Lack of funding to support the massive bill would, in turn, lead to rationed care, longer waits, and delays. Furthermore, the bill neglects a secondary source of negligent spending, the pharmaceutical industry. In 2009, spending increased a whopping 5.2% to $246.3 billion dollars. Researchers hold the growth of brand name drugs, the demand for H1N1 vaccines, and the increased per-person use of drugs as responsible. Some concerned insurance holders fear that the quality of medical care will nose dive as the demand for care steadily increases.

Regardless of what the supporters and those that oppose the bill say, the outcomes of the healthcare reform have yet to be tallied. What faces the American public now is a lengthy waiting game.

The following websites were used as references:

http://prescriptions.blogs.nytimes.com/2010/02/04/us-health-care-spending-rose-at-record-rate-in-2009/

http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html

Reviewing all the welfare spending.

I’ve been reading an interesting report on means-tested welfare spending put out by Robert Rector and some friends at the Heritage Foundation back in September of 2009. Although the report has some very misleading language and some unfair presentation of a numbers game, it does indeed provide some very good observations and suggestions. The most fundamental problem with the whole report is that it seems to take a position that America has two classes: the low-income persons who tend to be unmarried and irresponsible and lack a strong work-ethic, who receive hundreds of billions of dollars in welfare; and the taxpayers who work and earn an income and pay taxes to support the low-income class. The flaw with this whole framing of the issue is that about 70% of the low-income class that receives means-tested benefits is in fact destined to become part of the taxpaying, income-earning class. That is, most people who are poor and receive means-tested benefits are only doing so for a few years while they are children or young parents, and after a few years in poverty they transition out of poverty and generally stay out of poverty unless they go through a life-changing thing like a divorce or an injury or illness, and even then they tend to bounce back out of poverty again. Of the remaining 30% or so who spend more years in poverty you have about half who are on the upper end of the low-income spectrum, and they tend to be low-skilled persons whose incomes bounce around between 50% of poverty and 200% of poverty, depending on life events or labor market conditions. The small percent of the population that spends almost their whole lives in poverty include those who have chronic illnesses, disabilities, developmental disabilities, chronic mental illness, personality disorders, or substance dependence problems. There just aren’t many able-bodied persons in good mental health who are free of addictions and remain poor, receiving means-tested benefits for decades.

One of the best points made by the Heritage Foundation report is that if you combine all the means-tested welfare spending and divide it by the number of persons who live in households earning under 200% of the poverty line, the benefits would equal about $7,000 per person. For a family of four that would equal $28,000, and would bring the family over the poverty threshold (which for a family of four is under $23,000). So, with all this spending on means-tested benefits, we taxpayers ought to expect that after tax and after benefit incomes in the USA would leave no one in poverty. At least, this is what an efficient welfare system would do.


By my calculations, all the benefits and means-tested programs bring the poverty rate from 13.2% (the pre-tax, pre-transfer poverty rate in 2008) down to about 5%-6%. This means that after taxes and transfers and benefits we still have about 5% to 6% of Americans consuming housing, food, energy, medicine, clothing, and such necessities at a level below the poverty threshold. We still have, for example, about 3% or 4% of the population experiencing significant food insecurity (skipping meals, or making choices between eating, paying for housing, purchasing medicine, or heating/cooling their homes). Each year over 100,000 Americans die from medical problems because they can’t afford medicines or medical treatment (see the old 2003 study in the New England Journal of Medicine by David Himmelstein and Steffie Woolhandler). That’s obscene, but it’s about what you would expect if about 4% of Americans were still poor even after taxes and income transfers and benefits, and if the Americans who were poorest were also the Americans with the most health problems who needed more medical care. So, I think the Heritage Foundation does make a good case for re-thinking how we do our means-tested welfare system so that our fairly generous benefits (and I’ve lived in poor neighborhoods within poor nations, so I’m going to admit that American benefits to the poor are often generous) were more efficiently distributed to really eliminate poverty.


I think Robert Rector and the Heritage Foundation may suppose that many taxpayers will feel outraged by average transfers of income from us to our fellow Americans who earn only 200% of poverty or less. For example, my household is solid middle class with a gross pre-tax income of about 236% of poverty, and in 2008 about 14.4% of our income went to all forms of taxes (about $7,500). If we earned $10,500 less than we do, we would be earning 190% of the poverty threshold, and according to the Heritage report, the average benefits to persons in households earning under 200% of poverty is $7,000. That makes it sound as if taxpayers like my family are being brought down from $236% of poverty to 204% of poverty by taxes in order to raise up families earning, for example, 120% of poverty (about $26,500 for a family of four) to 247% of poverty. In other words, means-tested benefits would be adding $7,000 in means-tested benefits per person in the four person household to raise their post-tax post-transfer income (actually a consumption level rather than an income) to $54,500, a couple thousand more than we earned before taxes, and more than $10,000 more than we consumed after taxes and transfers.

Indeed, if things really worked that way, we would have middle-class persons paying $7,500 in taxes so that families making around half of what we do before taxes and benefits could end up living lives at higher consumption levels than we do. You see this perception informally when people at lower-middle-class incomes and working-class incomes, say $30,000 to $40,000, complain about persons with SNAP benefits purchasing better food at the grocery store or driving better cars or living in better houses than they can afford.

Since the American Gross Domestic Product per capita is about $48,000, it seems reasonable to me that we would be transferring $6,000 to $7,000 per capita to the Americans who have incomes under 200% of the poverty level. After all, American spending on medical care, when divided by the population, equals about $7,000 to $8,000 per capita, so I’d think that the poor and near-poor would get income transfers at a level similar at least to this level.

The odd thing is that my household, which is right near the middle of household income distribution in my state (slightly under it), earns only about 27% of what we would if the American GDP was spread equally over everyone (so that each of the four of us had $48,000 per year). Shouldn’t middle-class Americans near the middle of the income distribution be earning more like 40% of what the GDP per capita would be for their household? Why doesn’t the Heritage Foundation publish a paper that looks at that issue of unequal distribution and how the households making over $100,000 are screwing all of us in the middle class who work our 1,900 to 2,000 hours per year for a mere $30,000 to $75,000?

Another thing I love about this Heritage Foundation report is that it puts all the welfare policies together in one place, so you can get an idea of the scope of each type of welfare. I’ll run through them here, sharing my notes.

Medical care. Medicaid. Maternal and Child Health Block Grant. S-CHIP.
Combined state and federal spending was $372.1 billion in FY-2008.
This was 52% of the public effort toward the general welfare through means-tested programs.

Cash Aid. Temporary Assistance to Needy Families (TANF), Supplemental Security Income (SSI), the Earned Income Tax Credit (EITC), and the Additional Child Tax Credit (ACTC). Note that the EITC and ACTC are tax expenditures, so they don’t show up as government spending in the budget. They just show up as less revenue taken in by the IRS (and the IRS actually has the treasury send money back out to people with the EITC and ACTC - a refundable tax credit). According to the Heritage Foundation, total State and Federal spending on the means-tested cash aid was $153.8 billion in FY 2008. Hmm, the TANF budget for FY 2010 is supposed to be $18.6 billion. The EITC was recently still paying out, I think, less than $50 billion. I believe even now SSI is paying out slightly over $50 billion. Many states have EITC, which must explain why this number is so much higher than the federal government's estimate of its spending. I guess maybe if the ACTC is running at about $18 billion and state-run EITC programs pay out $17 billion, the Heritage Foundation numbers are probably about right.

Means-tested food aid comes through Supplemental Nutrition Assistance Program (SNAP, which is still called “Food Stamps”), which in Illinois is delivered through a LINK card. The Women Infants and Children (WIC) program serves almost half the infants born in the USA (about 8.7 million each month in 2008), at a cost of $6.2 billion in the fiscal year 2008. In 2009 SNAP helped 33.7 million persons (summing up all persons living in households that received SNAP benefits), and the average amount received was about $125. In Illinois the maximum benefit for a family of four persons was $668. The program cost about $54 billion that year, at least from the federal level. State programs that administered SNAP added significantly to that level of aid. About 1.5 million persons in Illinois lived in households receiving SNAP benefits. There are also federal school lunch programs (low-cost or free lunches for 30 million children per day at a cost of $9.3 billion), school breakfast programs (breakfasts to 10.6 million children each school day at a cost of $2.4 billion), summer food service programs (meals to 2.1 million children in the summer at a cost of $0.33 billion).

Families following the USDA’s Thrifty Food Plan should be spending 40% to 50% of their food budget on fruits and vegetables, but spending behavior studies in both poor and wealthy families show that everyone tends to spend about 16% to 18% of their food budget on fruits and vegetables. The American Time Use Survey suggests “that low-income women who work full-time spend about 46 minutes per day on meal preparation,” but if people are buying cheaper whole foods rather than prepared and highly processed foods or restaurant foods, their time on food preparation probably ought to average closer to one hour per day on food preparation. Quite possibly some of the resentment against families using SNAP or WIC is because those families buy highly-processed foods and get lots of meat, when they (and all of us) should instead by getting lots of fresh produce instead.

The Heritage Foundation claims that if you combine federal and state spending on means-tested food aid the total cost was $62.8 billion in FY 2008. This is one Heritage figure that seems way too low. I estimate that in 2010 we'll be spending over $70 billion, and perhaps as much as $75 billion on means-tested food aid.

Housing and utility assistance is difficult to calculate at the federal, state, and local level, because it seems almost every power company district has a variety of local programs that get mixed in with the federal Low Income Home Energy Assistance Program (LIHEAP). With housing the main programs are public housing and rental assistance (which is a diverse mix of programs, including the Section 8 Housing Voucher). The Heritage Foundation sums up LIHEAP and the HUD programs for means-tested housing assistance and comes up with a figure of $45.1 billion for Fiscal Year 2008 in housing and utility support. That seems pretty high, as the entire HUD budget in FY 2009 was only about $39 billion and LIHEAP gets between $3.5 and $5.5 billion in funding. I guess the Heritage Foundation must have calculated how much states spend on their state housing authorities and various state and local programs to end homelessness or provide affordable housing to persons with low incomes.

Social Services provided by federal and state governments to persons who qualify through an income test account for $11.6 billion (in FY 2008), according to the Heritage Foundation, and this includes the Social Service Block Grant (SSBG), some TANF funding (I’m assuming Heritage split TANF funding between their category of cash aid and this social service aid category), and Community Services Block Grants (CCDBG).


Child Development and Child Care programs that are means tested include Head Start and Child Care Development Block Grants (CCDBG). The Heritage Foundation says that federal and state funding for these programs was at least (and probably exceeded) $17.7 billion in FY 2008. Some of the means-tested cash aid and social services help was probably spent on child development and child care, so some estimates for those categories may be a bit high while the estimate for this category may be a bit low.

Jobs and job training are frequently available to people without any income test or qualification, but there are some means-tested jobs and job training programs, and the Heritage Foundation says these cost $6.3 billion in FY 2008. They are including stuff like the Workforce Investment Act (WIA) program for adults, Job Corps, Workforce Investment Act Opportunity Grants for Youth, and once again, TANF (which was counted already in cash aid and social services, and contributes to this category as well).

The Heritage Foundation also has a means-tested category for community development, in which they include the Community Development Block Grants (CDBG). These funds are supposed to be spent in areas with high concentrations of persons with low incomes, and much of the money actually goes to help middle-class people who improve infrastructure or offer services or open businesses in areas of concentrated poverty, but at merely $8.2 billion, it’s not worth debating whether CDBG are a means-tested program for the poor; as it certainly sends money into poor communities. I’m puzzled how HUD’s entire budget is under $40 billion, but the Heritage Foundation sums up housing assistance and low-income community grants to get a figure exceeding $53 billion (even subtracting $5 billion for LIHEAP, there still seems to be an extra $8 billion coming from state spending or matching grants, I guess).

The Heritage Foundation also created a category for means-tested educational spending. This is mainly made up with Pell grants and Title 1 Education grants going to low-income communities. By their estimate, this means-tested educational spending was $35.5 billion.
Welfare Programs that Are Not Means Tested

Those are the means-tested welfare benefits. The larger portion of public spending on the general welfare comes from public spending on medical help for persons injured on jobs, unemployment payments to temporarily unemployed persons while they move between jobs, benefits for disabled workers, retirement benefits and health benefits for retired persons, and public education. But I'm going to pretend education is it's own thing, apart from general welfare provision.

The mortgage interest deduction (interest you pay on a home loan for your primary residence is deducted from your taxable income). For example, our household makes a bit less than the median Illinois household income, and our home is valued just slightly under the median home value in Illinois, and we pay several thousands of dollars in mortgage interest each year, and this reduces our taxable income to a point where we end up paying about $450 less in federal income taxes. In other words, the federal government is helping our middle-class family pay for our median-value home to the tune of about $37 per month. If we lived in a real estate market where home costs were much higher, or if we were wealthier and could afford a much more valuable home, then this mortgage interest deduction might save us thousands of dollars in taxes rather than a few hundred dollars. This costs the federal government about $80 billion per year.

The government gave away $10 billion in tax revenue with the first time home buyer credit. But this was a part of the economic stimulus package to save us from the Great Recession becoming the Great Collapse.

The Heritage Foundation did not even mention the $16 billion in federal farm program payments that go out to about 2 million farmers or farms. Persons or farms with incomes over $2.5 million who derive less than 75% of their income from farming, ranching, or forestry aren’t supposed to qualify, but the GAO thinks nearly $50 million is paid out to such persons or farms each year. Anyway, I have family who farm, and since they mainly grow fruits and vegetables, they get hardly any subsidies at all. These subsidies go to cotton farmers and rice farmers and sugar farmers and corn or soybean farmers. They're a real mess, too.

Social Security is nearly $600 billion ($550 billion in FY 2009). for old age and survivors benefits.
Social Security Disability Insurance costs about $120 billion ($117 billion in FY 2009).
In Calendar Year 2009 Unemployment Insurance and various emergency unemployment benefits paid out about $130 billion in benefits. In normal years benefits from unemployment insurance and related programs usually $25 to $30 billion, and until the Great Recession the benefits would typically double over normal rates during a recession.

Medicare is about $450 billion.


So, with subsidies to home-buyers (generally not low-income), social security, Medicare, and unemployment, we are spending about $1.4 trillion in non-means-tested benefits, and about $0.7 trillion in means-tested benefits. So, it seems to me income transfers from the top 80% of the population back to the top 80% of the population must represent transfers at least double the level of transfers from the top 50% of the population to the bottom 20% of the population. Robert Rector seems really alarmed by this, and he wants people to pay more attention to the means-tested welfare programs. But to me, the spending seems reasonable.

FY 2011 Budget Proposed by White House

The White House has proposed a budget for FY-2011, with projections out for several years into the future. There are huge cuts in the federal budget planned for FY-2012, including a $45 billion cut in defense spending (why not a $90 billion cut, I wonder?). There are optimistic forecasts of savings from health care reform ($7 billion in FY 2011 and $17 billion in FY 2012, with a $23 billion drop in Medicaid spending from $297 billion to $274 billion) between 2011 and 2012.

The budget deficit we're building up now to take care of the economy will mean that our payments on the national debt go up from $251 billion in FY 2011 to $343 billion in FY 2012. Still, our servicing of the national debt is only about 6.5% of the total federal budget. That's not too bad just yet, but when we are out of the recession and unemployment drops below 7% we need to balance the federal budget so we can reduce the national debt and use a smaller portion of federal spending on debt servicing. The proposed budgets with the long-term forecast don't show us ever balancing the federal budget.

I noticed that only 0.3% of the federal outlays go to international aid (USAID, Peace Corps, Development Banks, and so forth—the only unlabeled sliver of the pie chart above). It seems to me we ought to be spending about 1% on foreign aid. The National Institutes of Health and the Centers for Disease Control and Prevention combined get about 1.0% of the federal budget. These are some of a very few areas where big cuts aren't planned. Still, it seems to me unwise to devote 13.5% of the budget to defense and security from violent threats from abroad and only spend 1% on diseases and health threats at home. Why not spend 3% of the federal budget on health research and prevention of disease and injury and then cut defense spending to 6% or 7% instead of 13.5%?

Anyway, I recommend people check out the proposed budget on their own.

More about military spending

We watched a film in class about why so much of federal spending goes to the military. If you are interested in exploring this issue, I have some links to recommend.

The website for the film we watched.

Eisenhower's 1961 farewell address.

A report on what we are doing wrong in Afghanistan from the Campaign for Innocent Victims in Conflict.

If you get a chance, watch Afghanistan Year 1380.

Study military contracts at the Military Industrial Complex website.

War resisters' website discussion of how much of our federal spending goes to defense.

More about the federal budget.

The White House's page about defense policy.

A radical perspective from Alexander Cockburn on the death count in Iraq.