A reader points me to a critic who thinks that in yesterday’s post about the debt ceiling I played fast and loose with budget numbers:
To me, the most damning part of this article was what the Author determined that our Government would fund. Mainly, Social Security, Medicare, interest debt, and some defense spending. According to the article, these items would take up the entire revenue stream? Yet, by the design of the programs, Social Security and Medicare are supposed to be self sufficient….The truth of course, is that the left is simply being loose with the facts. Social Security and Medicare do not use up as much revenue as this article would like you to believe.
Actually, they use up more. In fact, this whole post is worth a response since most people don’t have a very good understanding of where federal revenue comes from and where it goes. But the basic figures are all easily accessible from the OMB and a few other sources, so here’s a quickie summary for 2011:
- Social Security: Roughly speaking, Social Security is self sufficient. So yes, we can assume that even if the debt ceiling isn’t raised, dedicated payroll taxes will be enough to keep the program going.
- Medicare: Medicare gets about half its financing from dedicated payroll taxes and premiums. However, the non-hospital portion, which costs about $250 billion per year, comes out of the general fund.
- Defense + Veterans Benefits: Using the narrowest definition of national defense, this costs about $900 billion per year.
- Interest on the debt: About $200 billion per year.
So excluding the parts of Social Security and Medicare paid for out of dedicated payroll taxes, here’s what comes out of the general fund: $250 + $900 + $200 = $1,350 billion.
Now for taxes. Excluding dedicated payroll taxes for Social Security and Medicare, here’s roughly where our money comes from:
- Individual income taxes: $950 billion.
- Corporate income taxes: $200 billion
- Other taxes: $200 billion
That comes to $1,350 billion. In other words, aside from payroll taxes, our entire tax base — income taxes, excise taxes, estate taxes, customs duties, everything — is just barely enough to pay for our military, the non-hospital part of Medicare, and interest on the debt. Finis. If you want to fully fund those parts of government, as most tea partiers do, and if you also want to force an immediate balanced budget by not raising the debt ceiling, as most tea partiers do, you literally have to zero out the entire rest of the federal government. No Medicaid, no FAA, no border patrol, no FBI, no embassies, no highways, no disaster relief, no SEC, no court systems, no prisons, no national parks, no CIA, no school lunches, no medical care for children, no SNAP, no flood control, no student loans, no medical research, no nothing. You get Social Security, Medicare, the military, and interest on the debt. That’s it.