April 14, 2005
By Brian M. Riedl
The April 15 tax deadline provides taxpayers the opportunity to
examine how their elected officials will spend their hard-earned
Washington will spend $22,039 per household in 2005 -- the highest
inflation-adjusted total since World War II, and $4,000 more than
in 2001. The federal government will collect $18,248 per household
in taxes. The remaining $3,791 represents the budget deficit per
household, which, along with all prior government debt, will be
dumped in the laps of our children.
Here's a breakdown of how Washington will spend that $22,039 per
Social Security/Medicare: $7,245. The 15.3 percent
payroll tax, split evenly between the employer and employee, covers
most of these costs. This system can remain sustainable only if
there are enough workers to support all retirees, which is why it
risks collapsing under the weight of 77 million retiring baby
boomers. If nothing is done, taxes will need to be raised by the
current equivalent of $5,200 per household by 2030 and $13,500 per
household in 2050 to pay all promised benefits. The unpredictable
costs of the new Medicare drug entitlement could add thousands more
to each household's tax bill.
Defense: $4,451. The defense budget covers
everything from military salaries to operations in Iraq and
Afghanistan to the research, development and acquisition of new
technologies. Lawmakers drastically reduced defense spending
following the collapse of communism in the early 1990s. The 9/11
attacks reversed this trend, and the $1,500 per household increase
since 2001 has returned defense spending to its historical
Low-income programs: $3,559. Nearly half of this
spending subsidizes state Medicaid programs that provide health
services to poor families. In line with economy-wide health-care
trends, Medicaid costs are rising 9 percent per year. Other
low-income spending includes: Temporary Assistance for Needy
Families (TANF), food stamps, housing subsidies, child-care
subsidies, Supplemental Security Income (SSI) and low-income tax
Interest on the federal debt: $1,582. The federal
government is $8 trillion in debt. It owes $4.7 trillion to public
bond owners, and the rest to other federal agencies (mostly to
repay the Social Security trust fund, which lawmakers raid
annually). Record-low interest rates have reduced the interest
payments by $1,000 per household since 1998. As interest rates rise
back to normal levels, so will these costs to taxpayers.
Federal employee retirement benefits: $838. This
spending funds the retirement and disability benefits of federal
employees, including the military. Interest from federal trust
funds covers part of this spending.
Education: $627. Primarily a state and local
function, 9 percent of education spending comes from Washington.
Federal education spending has surged 100 percent since the 2001
enactment of the No Child Left Behind Act. Most federal dollars are
spent on low-income school districts, special education and college
student financial aid.
Health research/regulation: $614. Health research
spending has doubled since 1999, and nearly all of that growth has
been concentrated in the National Institute of Health. This
category includes the Food and Drug Administration and dozens of
grant programs for health providers.
Veterans' benefits: $606. The federal government
provides income and health benefits to war veterans. Spending is up
51 percent since 2001.
Highways/mass transit: $388. Most highway and
mass-transit spending is financed by the 18.4 cent per-gallon
federal gas tax. Washington subtracts an administrative cost and
sends this money back to the states with numerous strings attached.
Some economists suggest it would be more efficient to let states
collect this tax and decide how to spend the money
Justice administration: $361. Justice spending
includes federal attorneys and prisons, as well as law enforcement
grant programs. New homeland security costs have added $80 per
household to justice spending.
Unemployment benefits: $338. Unemployment costs
fluctuate based on the number of unemployed Americans. Recent costs
have ranged between $220 per household in 2000 and $526 per
household in 2003. This year, unemployment costs are decreasing as
job growth continues.
International affairs: $284. This includes foreign
economic and military assistance, operation of American embassies
abroad, and contributions to organizations such as the United
Nations. International spending has doubled since 9/11.
Natural resources/environment: $275. This includes
national parks, federal lands, water projects and environmental
Agriculture: $271. Despite rhetoric about
supporting small family farms, the vast majority of farm subsidies
are distributed to large farms with average household incomes over
The programs listed above cover $21,441 per household. The
remaining $598 is allocated to all other federal programs,
including social services, space exploration, air transportation
and community development.
Taxpayers must decide for themselves if they're getting their
is Grover M. Hermann Fellow in Federal Budgetary Affairs in the
Thomas A. Roe Institute for Economic Policy Studies at The Heritage
Distibuted Nationally on the Knight-Ridder Tribune wire
The April 15 tax deadline provides taxpayers the opportunity to examine how their elected officials will spend their hard-earned tax dollars.
Brian M. Riedl
Grover Hermann Fellow in Federal Budgetary Affairs
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