Taking advantage of democracy’s flaw.
It’s a lot less work, isn’t it, just to scream out, “Tax and spend! Tax and spend! Welfare alert! Welfare alert!”?
To read the full text and the email exchange that prompted this, click “Keep Reading”.
Subject: new policy
Date: Thu, 21 Feb 2008 14:15:17 -0500
Just thought you all should know, this is something that I recently found. This is Barrack Obama’s plan to reduce global poverty with a bill that would contribute $845 Billion from U.S. taxpayers. So, in other words, instead of just paying for the welfare costs of people here in the U.S., you’d now be paying for welfare in Uganda or China or Sudan.
I’m sure his heart is in the right place, but this is exactly the type of increased taxes that we will face under this guys leadership. It’s not enough that Michigan is fighting high unemployement and poverty, the people that do work are now going to have to pay for the welfare of someone in Sudan!?!
I’m sure as president, he’ll find to cut money from the war on terror, but you can bet your bottom dollar that it will not go to fund this. So, in other words, we’re all going to have to go around paying more in taxes while dodging planes flown out of the sky by terrorists. Sounds great to me, when do we start?
I’m all for providing to charity and helping fight worldwide poverty, but perhaps we should be allowed to make our own choices on if we want to donate, who to donate to, how much to donate and where to donate it?
Subject: Re: FW: new policy
This kind of policy stuff is so difficult to parse out.
I have always been a little confused about the way money flow works worldwide; we receive money from many countries and we receive goods and services, also. Our debt to various countries (including Venezuela, who gives us natural gas and from whom we get oil) is also really confusing.
I am glad that you are paying attention to the financials of the candidates. To get the big picture, take into account tax cuts and tax incrases, subsidies for various things (corporations, other goods), pork and other wasteful spending, debt, etc. Also, spending doesn’t always show up in the places that you think it will; military spending isn’t always totaled up under the pentagon, for instance.
It is really hard to parse out the hidden and long-term costs of things like cutting funds to certain areas; for instance, if we cut certain programs, will there be long-term consequences that cost us in the long run? (Your favorite topic here.) How much do we invest in global issues? If we don’t, how will that affect our relationships and our access to places and things?
I’d love to know more about what you think on these issues; this made me decide that I’m going to investigate a bit more…
Sent: Friday, February 22, 2008 3:13 PM
Subject: Fwd: Re: FW: new policy
Any great words of reason I can share with people when discussing federal financial issues? Not asking for information, just perspective.
In general, if you’re reading something about a bill in Congress, or about how much money an existing government program costs, you shouldn’t take blog posts (or mainstream media, for that matter, because even their fact-checkers make mistakes because they’re human beings) at face value, but instead go do some research and make up your own mind.
So, if you were to research the “Obama bill” (actually a bill co-sponsored by Chuck Hagel, who isn’t know for leftist tendencies), you’d find that the bill does not automatically spend $845 billion, or even require the President to demand $845 billion from Congress. The Global Poverty Act wouldn’t require Congress to do a thing, it just requires the President to develop and implement a “strategy” to “further” the UN goal of 0.7% of GNP as foreign aid, through programs that already exist. (Notably, a number of these programs were proposed and enacted under, or promoted by, the current Administration.) This doesn’t mean the U.S. must spend the money, it doesn’t even mean we have to achieve the goal, it just says “The US committed to this as a policy back in 2000 and has reaffirmed it over the last seven years, so now the President is required to report back to Congress on how we’re doing.” The programs cited, which are intended to “further the goal,” all require annual Congressional appropriations. That means regardless of what the President proposes in his (or her) budget request, Congress can decide, each year, if it wants to increase funding for those programs to meet the goal. If not? Well, then, they’ve made that policy choice, which is their job and within their rights.
How can you do this yourself? For this case, just go to thomas.loc.gov, which is the official Library of Congress site for proposed and enacted legislation, and look up the bill by typing in “global poverty” under “search bill text” in the middle of the page. (In this case, you’d want the latest Senate version of the bill.) You can find out what the bill really says and analyze it to see if you agree with the blogger’s (or newspaper writer’s) interpretation, or the interpretation of the quoted people in articles.
More generally, regarding the assertions on the budget and tax aspects…
A little perspective.
There’s no doubt that $845 billion is a LOT of money. $10 million is a lot of money. But in the Federal budget context over a 14-year period, it’s really not a tremendous amount, and in the context of the largest areas of government spending, it’s pretty small. (Whether or not the budget SHOULD be as big as it is, is a completely different, very long conversation, so for purposes of the current discussion, let’s assume we’re okay with it for now.)
Have you ever looked at the pie chart on the hard copy of the tax forms you get every year? It’s the one that shows how much of your money is going to different places, and basically, it shows that the category that many programs favored as “hot-button” issues – foreign aid, veterans’ care, community development, housing, etc., which are part of “discretionary spending,” which will be discussed later – comprise only about 1/3 or less of the budget pie.
So what’s taking up the other 2/3? The head of GAO did a bunch of presentations on the future state of the budget due to a number of factors. You can see one here. http://gao.gov/special.pubs/longterm/wakeuptour.html
Go to the “full presentation” PDF near the end of the page, and check out slides 2, 3 and 4. Those slides give some important pie charts, including a slightly expanded one of the tax form version.
Some hardcore numbers:
The President’s 2009 Budget estimates that the deficit in 2009 would be $407 billion, assuming certain proposed policies (including some savings packages). That means if Congress took the Budget verbatim and passed it, with no changes, and everything worked out as expected, we would spend $407 billion more than we’re going to take in during the 2009 fiscal year, starting October 2008. This deficit alone is almost half of the $845 billion the article estimates would have been the cost of spending 0.7 percent of GNP…over a 14-year period, from 2002-2015, cited as the applicable time for achieving the UN goal of reducing poverty by half. So in just one year, we are overspending almost half of what we could have spent over a 14 year period. Just for the record, there was no background on the calculation of the $845 billion, so we’ll take that at face value, though spending estimates always include underlying assumptions with which others from all sides of the political spectrum can take issue.
In fiscal year 2007, Congress provided about $40 billion in “budget authority” (that is, the authority to enter into to commitments to pay for things, even if the money ends up getting spent a year or more later – like signing a contract to buy something, and paying when you receive the merchandise) for international affairs programs in its annual appropriations bill for the programs (“discretionary” spending), and others, cited in the bill as helping to further the policy goal. So yes, if the Global Poverty Bill in fact requires $845 billion in spending, Congress would have had to provide another roughly $65 billion per year to actually achieve the goal, and that’s a lot on top of only a $40 billion base. (Since we clearly haven’t spent even $65 billion per year over the 2002-2007 period, we’d have to spend a lot more in 2008-2015 to get to $845 billion, but again, that’s another conversation.)
All of these numbers are small, however, compared to the long-term commitments we’ve made on “entitlement” programs (that’s a technical budget term meaning stuff that Congress has already approved money for, and that goes out the door automatically, in the absence of new legislation). These programs aren’t subject to the annual Congressional appropriations process; the largest part is health care spending, on programs like Medicare and Medicaid, though there are others that add up to a sizable chunk. So these are where the real costs lie, and they’re the major reason why taxes would need to be increased, benefits decreased/delayed/targeted differently, or other spending cuts made. But going back to that budget pie, you can’t deal with this problem just by attacking the “discretionary” piece within which the foreign aid spending lies. Mathematically, you’d have to eliminate all (or at least a lot) of that discretionary spending, a large chunk of which is the Defense Department). This statement doesn’t factor in others’ arguments that we can grow the economy sufficiently over time to reduce the problem, that tax cuts stimulate economic activity, or that there are flaws in the assumptions about future use of the programs. It just takes the numbers as they are, because those are what Congress uses when they’re debating the costs of various policy choices.
Just for Medicare, in 2007, spending was $371 billion. Yes, you read that correctly. And in 2009, even with proposed savings (that require Congress to act) of nearly $15 billion, the estimate of spending is $408 billion.
Medicaid and SCHIP add $197 billion and $224 billion in 2007 and 2009, respectively.
For a point of comparison, let’s look at another high Administration priority, which takes up a big chunk of the pie (go back to the GAO slides) – money spent, or that the Administration is requesting, for the Defense Department. $302 billion in 2007, $479.5 billion in 2008, $515.4 billion in 2009. (This discussion deliberately avoids the issue of “war spending” for a variety of reasons, so suffice it to say that the 2008 and 2009 numbers are the minimum amounts enacted/requested.)
So you can see that entitlements, plus DoD, alone cost the government around a trillion dollars per year. Lots of others have noted that the costs of entitlements are increasing rapidly because of the increase in healthcare costs (for lots, and lots, of reasons, not all of them “bad,” though that subset depends on your perspective), the increase in users of healthcare services, and the smaller number of people paying into the system through payroll taxes.
Would another $65 billion per year for foreign aid be the sole trigger for a tax increase? Hard to say, but since annual spending has generally increased by more than this amount every year, and there hasn’t been an income tax increase in years, it seems unlikely. As for the notion that all the foreign aid money goes directly into the hands of foreign dictators – the budget shows that a lot of it flows through assistance and credit programs, not directly to countries’ leaders, though people clever enough to stay in power for a long time in autocratic regimes are likely clever enough to figure out how to fill the coffers through these programs. And it’s definitely not clear how many, or which, of these programs make a fundamental, structural change in the economic circumstances of the country, or whether they just prop up a flawed economy, or whether they’re useful strategically in foreign policy so we should just keep them. These are all difficult questions which require lots of thought, research, and weighing of options. But this is what policy choices are all about.
Here are the sources:
Budget of the United States Goverment, Fiscal Year 2009: Summary Tables, S-3
Analytical Perspectives, Budget of the United States Government, Fiscal Year 2009: Table 27-1
There are many other tables in these documents.
Another good source to learn more about how the budget is structured and presented is the supporting document (also on the website) The Budget System and Concepts. Not a quick page-turner, but it gives definitions for things that are shown in the tables and puts things into context.