US Budget: 40 Years in the Wilderness

We beg your indulgence, dear reader, for this weekend departure from the usual contents of our blog. We try not to do this very often, but news of The Controversy between evolution and creationism is scarce at the moment. We focus on that as part of our larger concern for preserving the philosophical and political principals of the Enlightenment, upon which our civilization depends, so this isn’t too far off-topic for us. We can’t forget that if we lose our freedom, there isn’t much else that matters.

Analyzing the federal budget isn’t a job for amateurs, so we’ll approach the subject in the most general way, looking for concepts and trends, not green-eye-shade details. We’ve chosen to compare two budgets that are 40 years apart — 1970 and 2010. Forty years is a nice, scriptural number, evocative of wandering in the wilderness.

The trends we’re discussing here started before 1970, and they continue after 2010, but those two years are convenient milestones for our purposes. It wouldn’t be fair to go back another ten years and use 1960 as our beginning, because the government was totally different back then. We weren’t yet involved in the Vietnam war, although the Cold War with the Soviet empire was certainly in full flower. The federal budget in 1960 was almost unrecognizable by today’s standards. Other then expenditures for general government, national defense, and foreign aid, there wasn’t much else except for Social Security. There were other “social” expenditures for health, education and welfare, but those were minor compared to today. It was a good year, but not for our purposes today.

All of our budget figures come from this official US government source. There are zillions of tables there. In order to view the big picture, we’re using their Table 3.1 — Outlays by Superfunction and Function. We’re assuming that the category descriptions are roughly comparable from year to year.

We’re not adjusting the old budget figures for inflation, because the tale we’re telling is revealed in the percentages, not dollar amounts. You can make adjustments for inflation if you like. Using the Bureau of Labor Statistics Inflation Calculator, what you could buy for $1.00 in 1960 would cost $1.31 in 1970 and $2.78 in 1980 — and $7.37 in 2010. Yes, our currency is as sound as the dollar.

The figures for 1960 (the year we’re not using) start at page 49, and for a flash of quaint nostalgia, the figures are presented in millions of dollars — not billions. In 1960 the entire budget was $92,19M — that’s right, less than $100 billion. National defense was $48,130M, which was 52.2% of the whole budget, and 9.3% of Gross Domestic Product (GDP). Cold War, remember? Human resources cost $26,18M, or 28.% of federal outlays, and 5.1% of GDP. Interest on the national debt cost $6,947M, 7.5% of the budget, and 1.3% of GDP.

The radically different budget in 1960 (by today’s standards) helps to emphasize the long-term trend, but we’ll stick with 1970 for our starting point. That year is more like today’s in budgetary terms, and it gives us poetic license to speak of 40 wilderness years. It’s useful, however, to bear in mind that the farther back we go, the more obvious the trend appears.

In 1970, like now, we were at war. It was a year after we first landed a man on the moon. The medicare program had already been established (started in 1965), and that was only part of Johnson’s “Great Society” program (which also included his “War on Poverty”), so we had a fair amount of social spending in the budget. Inflation, which raged through the subsequent Carter years, was getting started — the result of Johnson’s “Guns and Butter” method of financing both the war and the Great Society by printing money instead of raising taxes (or — gasp! — cutting non-defense spending).

The 1970 budget figures are on page 50 of the link we gave you. “Human resources” includes Social Security, medical & other health programs, as well as education, income security (welfare), and veterans benefits. These are the original (not inflation-adjusted) figures, and to keep it simple we’re leaving out “Physical Resources” (energy, transportation, etc.) and Other Functions (international affairs, agriculture, general government, etc.)

For 1970 the federal budget was $195,649M (more than double what it was in 1960).

• Defense was $81,692M, 41.8% of the entire budget, and 8.1% of GDP.
• Human resources was $75,349M, 38.5% of the entire budget (up from 28% in 1960), and 7.4% of GDP (up from 5.1% in 1960).
• Interest on the debt was $14,380M, 7.4% of the entire budget, and 1.4% of GDP (roughly the same percentages as in 1960).

Now let’s look at the figures from 2010, forty years later, found on page 55:

The federal budget was $3,091,340M (yes, that’s three trillion)
• Defense was $590,357M, 19.1% of the entire budget (way down from 41.8% in 1970, because other parts of the budget were way up), and 3.7% of GDP.
• Human resources was $2,023,583M (two trillion), 65.5% of the entire budget, (it was 38.5% in 1970) and 12.8% of GDP (it was 7.4% in 1970).
• Interest on the debt was $279,982M, 9.1% of the entire budget (up from 7.4% in 1970), and 1.8% of GDP (up from 1.4%).

What about the national debt? Those figures (in millions) for the end of each fiscal year are at page 127:
• For 1970: $380,921M, which was 28.0% of GDP
• For 2010: $10,954,389M (ten trillion), which was 69.4% of GDP. In forty years, although the economy was growing, the debt climbed from less than 30% of GDP to almost 70%.

And that debt figure doesn’t tell anything close to the whole story. It’s just treasury borrowings. It doesn’t include commitments that have been made and that will need to be honored.

So class, what do we learn? We’ll leave that for the comments.

Copyright © 2011. The Sensuous Curmudgeon. All rights reserved.

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15 responses to “US Budget: 40 Years in the Wilderness

  1. Gary Jones

    Human resources includes Veterans benefits and Social Security?
    Veterans benefits are a cost of current and past wars – they are large and will be getting larger (~20% of returning veterans from Iraq had some degree of permanent disability).
    And why was Social Security included – it has been running a surplus since inception. It seems inappropriate to list it as an expenditure. That surplus has been used to purchase Treasury bonds (a part of the ‘deficit) and balance the Federal Budget since the 1960s.

    And how about that deficit as a percent of GDP? Could it be that it is a larger part of our GDP because the recession has reduced tax receipts and reduced the GDP? Japan has a deficit that is 200% of its GDP and is borrowing money at less than 2%. Let’s not get hysterical when we are still in a recession. I’m damned suspicious of those who would cut education and Pell grants to save our children from the deficit.

  2. I have a brother who is a chartered accountant. I do not know the colour of the sky in his world but he seems comfortable altering reality with a few calculations.

  3. tildeb says: “he seems comfortable altering reality with a few calculations.”

    That must be nice.

  4. SC says:

    In 1970, like now, we were at war, and a Democrat (Johnson) was President.

    A Republican, Nixon, was elected in 1968 and was president in 1970.

    The debt is high, and needs to be managed. However, the growth in interest is much less than the growth in other “human resources” expenditures. More can be achieved by reducing overall annual expenditures than by specifically focusing on the debt.

    At the end of the day, what is important is the value we obtain for the taxes we pay. It’s not necessarily bad to tax and spend, if the result is a significantly higher quality of life. What is bad is to tax and spend wastefully.

  5. Ed says: “A Republican, Nixon, was elected in 1968 and was president in 1970. ”

    Aaaarrrghhhhh! I’ll fix it immediately. It never happened!

  6. I thought you might be engaging in a little historical revisionism….which is popular these days. 🙂

  7. @Gary Jones:And why was Social Security included – it has been running a surplus since inception. It seems inappropriate to list it as an expenditure.

    It’s an expenditure because it sends out checks to people, using money collected by taxes on other people. The Supreme Court ruled long ago that Social Security taxes are taxes like any other, to be spent however the government sees fit.

    That surplus has been used to purchase Treasury bonds (a part of the ‘deficit) and balance the Federal Budget since the 1960s.

    i.e., the sruplus was spent long ago, and the government has kindly printed IOUs to itself promising itself to pay the money back. If the government wishes to continue to pay SS benefits, they must raise taxes or borrow the money exactly as much money as they would if the “trust fund” did not exist.

  8. The explosion in deficit-driven spending is not unlike the Controversy, IMO, because both are produced by “magical thinking” in which mounting evidence contrary to one’s point of view is explained away or ignored. Both left and right in America are fixated on certain ideas about how and what we should spend our — or more accurately, our borrowed, largely Chinese — money. Those ideas may or may not still be relevant to where the country is today, but they appear to blind those who believe in them to evidence that, just maybe, we should be recalibrating some of our national habits.

    There’s also remarkably little critical thinking that I can see on either side about what we get for that spending. Instead, there seems to be a fixation on gross spending levels (cut money from the budget for X and you must be against X — never mind whether the money’s spent in a way that actually makes any difference in the real world.) Looming over it all is a political process in which scoring tactical points appears to have completely replaced any sense of obligation to the nation’s long-term health or welfare. This is not a partisan critique — I think both sides are equally bad. There are plenty of oxen to be gored on both sides of the political divide here.

    Anyway, before I slip into a full-on rant and go completely OT, my original point was that whether it’s ID or the budget, we could use a little more critical thinking and some careful consideration of the actual evidence and a little less adherence to preconceived ideas. Who knows, maybe doing that could prevent us from going further down our national blind alley.

  9. SJR says: “Anyway, before I slip into a full-on rant …”

    That was my temptation as I was writing the thing, so all I did was present the figures. The budget appears to function like a Rorschach test.

  10. The Republican/Democrat slipup is telling. History doesn’t repeat itself, but it often rhymes. In a perfect mirror symmetry to 1964 and 1968, for 200 and 2008, we had a Republican president who led a grotesque expansion of government power (and expenditure), followed by a Democrat who tacitly thought that this was ducky and gave us more (far more) of the same.

    The labels have as much meaning as the Blue and Gold team color wars we used to have in summer camp.

  11. @SJR: Not to detract from your larger point but this

    our borrowed, largely Chinese — money.

    is a common misconception.

    The US public debt is $14 trillion. Of that, $4.5 trillion is money that the government’s left pocket owes its right pocket, such as the Social Security “trust fund”, which the government under current law will need to find in the future to meet its obligations and should be included in the other $45.8 trillion in unfunded Social Security and Medicare obligations that are not included in the public debt, but for political reasons we all seem prefer to play semantic games with it, apparently. Of the $9.6 trillion that the government ACTUALLY has borrowed from someone other than itself, China only holds $1.6 trillion. China may be the LARGEST foreign holder of US government debt, but it does not hold the majority or anything like it.

    The majority of the $9.6 trillion is held by American investors, mutual funds, pensions, insurance companies, etc.

    It has always struck me as odd that no one who thinks we owe most of the money to China, ever wonders where China got $7+ trillion to lend.

  12. Ed: “I thought you might be engaging in a little historical revisionism….which is popular these days, ;-)”

    As is the prehistorical revisionism of the anti-evolution movement. But peddlers of that scam are rather subtle about it lately. Instead of saying “Y or Z happened instead of X” they just say “X didn’t happen” or “we don’t really know that X happened.” They know that Y (YEC) and Z (OEC) didn’t happen, or at least that there’s no evidence to back either up, and that they contradict each other too boot. So why risk exposing that?

  13. Sorry, that was me messing up the format. I also noticed that I have to re-enter my name each time, whereas before it appeared automatically.

  14. Frank J says:

    I also noticed that I have to re-enter my name each time, whereas before it appeared automatically.

    I don’t know how that works. I’m always logged in, so none of that affects me.

  15. @Gabriel Hanna:

    You’re right — good catch. I think the urge to use a rhetorical flourish got the best of me.