I recently saw an analogy between the national budget and a household budget. I actually really liked it for it did break things down quite simply and it made the point (contrary to the creator’s intent) that many liberals have been crying about for years. I am not a hardliner liberal, but in this case I agree with them. This is the graphic I saw:

cliff

I really liked this analogy of the US national budget and a single family budget. As I pondered it, I asked myself “how do you make a budget when your costs are too high for your income?” The answer most financial advisers suggest is to start by moving high interest debts to low interest debts and paying them off as fast as possible. In the case of the national budget, the interest rate is flat, so this step to managing a household budget doesn’t apply at the national level. The next step a financial adviser will tell you to take is to look at your biggest expenditures first and try to cut out the fat. This frees up more money for you to pay down your debts faster. If that means you only have one cell phone for two parents for a year, you do it, because in a year you will be in a much better financial situation. At the national level, it means being able to keep the government open with a balanced budget so we can meet our financial obligations and not send the country into another depression.

The following table is the 2013 national budget for the United States sorted from largest to smallest:

Agency Total
Department of Health and Human Services including Medicare and Medicaid 940.9
Social Security Administration 882.7
Department of Defense including Overseas Contingency Operations 672.9
Net interest 246
Department of Agriculture 154.5
Department of Veterans Affairs 139.7
Department of the Treasury 110.3
Department of Labor 101.7
Department of Transportation 98.5
Department of Education 71.9
Department of State and Other International Programs 59.5
Department of Homeland Security 55.4
National Intelligence Program 52.6
Department of Housing and Urban Development 46.3
Department of Justice 36.5
Department of Energy 35
Other spending 29.5
National Aeronautics and Space Administration 17.8
Department of the Interior 13.5
Department of Commerce 9
Environmental Protection Agency 8.9
Army Corps of Engineers Civil Works 8.2
National Science Foundation 7.5
Disaster costs 2
Small Business Administration 1.4
Corporation for National and Community Service 1.1
Total 3,803

Now, looking at this you might say, “Chop Medicare/Medicaid and Social Security first since they are the largest.” And while the numbers don’t lie and they are indeed the largest figures in the table, Medicare/Medicaid and Social Security shouldn’t even be on this list in the first place. Why? Because, Medicare/Medicaid and Social Security are already funded! Their funding comes straight out of your paycheck. So how did they get on this list? Because those assholes perfectly pleasant folk in Washington have been including it for years and years in order to borrow from these programs’ surpluses to pay more towards the next largest item(s) in this table – primarily the Department of Defense. Don’t believe me? Numbers don’t lie… How did DoD spending get so big? Why don’t you ask your congressmen and senators over the last 40 years. Good luck getting a straight answer though.

Now I have to say one thing here. I am pro DoD spending. I’m not trying to blame the Department of Defense for the nation’s woes. I am pointing the finger at those who make our budgets. I have spent time in the military as an enlisted man in the Army Infantry. I have spent time as a civilian contractor for the Navy as a Software Engineer. I have always been an advocate to the troops/sailors/airmen and our veterans and their families. Far, far too little of our military and national budget actually goes to them. However, the amount of waste I saw while working for the Navy disgusted me… I only saw a small portion of it. Triplicate (and greater) nearly identical multi-million dollar programs managed by managers simply for the sake of management, lack of meeting goals and deadlines, as well as low quality products plague a very high percentage of the money that is in the DoD budget.

But I digress…

So, getting back to managing our budget and cutting expenses, what are the biggest expenditures in the table? According to the table, the ones costing more than $500 billion are Medicare/Medicaid, Social Security, and the Department of Defense. So let’s examine each of these for ways to trim the fat.

Medicare/Medicaid and Social Security:

As I explained a little earlier, these programs are already funded! Their costs are paid by separate “taxes” that come out of everyone’s paychecks. I’m sure minor cuts could be made to streamline the offices and management of these programs, but the benefits they offer to Americans are already paid for. To take them away would be akin to the Enron scandal and the theft of so many pensions. Still, we should continue looking into cutting the management costs of these programs. Congress should cut 2% from the management pieces of their budgets every year to allow for gradual and bearable streamlining of their management. One other place to save money is reducing fraudulent claims by doctors and patients. Cracking down on Medicare/Medicaid fraud are important, but making it harder or impossible to commit the fraud in the first place is where the true savings could be made in this respect.

Proposed savings: 2% of management costs plus savings by reducing/eliminating fraudulent claims. Total – Unknown. I would guess the savings would be anywhere between 10 and 40 Billion Dollars.

Department of Defense:

From first hand experience I can extrapolate the vast amount of waste there is in the DoD. If I were in charge I’d cut 5% of the entire budget and reallocate another 2% from the Department of Defense to the Department of Veterans Affairs. This would equate to a 10.5% increase in spending on veterans in the first year alone. I’d also shift another 2% within the Department of Defense and require it to go towards increased pay and benefits for our active duty military members and their families. That’s just the first year. Many programs would be slashed or cut altogether, but the more vital ones to our security would survive. I would make yearly cuts, perhaps not as great as the first year’s, based on investigations done into the current level of waste. The last thing I’d want to do would be cripple the military, but the large government contracting companies that rape the system must be reigned in. They do do good work, but it often comes at far too high a price tag.

Proposed savings: 5% of total DoD budget plus 2% more to go to the Department of Veterans Affairs. Total – 33.6 Billion Dollars

Summary:

As you can see, the total proposed savings from my rather generous cuts to the top three budget items that make up 65.6% of the entire budget maxes out at 73.6 Billion Dollars. If we extrapolate this percentage of savings (2.9%) over the rest of the budget, you see we could potentially save 110 Billion Dollars by cutting at pretty sharp angles the line items we already have in place. This number is a far cry from the new debt we will accrue from not having a balanced budget of 1.65 Trillion dollars. We would need to cut this amount 15 times from our budget to achieve a balanced budget. The cuts required to make this happen are simply impossible to make without crippling the military and abandoning the elderly and the disabled.

So what is our hypothetical family to do? In this situation there are only two options. Declare bankruptcy or make (significantly) more money. How does a nation make money? Taxes. That is another discussion, but the only solution to our problem is unavoidable.

Postscript: I would have loved to go through the whole list, but I am a simple blogger with little enough free time in my days. I may come back to this and add to it in future days, but for now I have to wrap up this post.

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