Why It’s Tough To Cut Federal Spending

We can start today with a quiz. The following graphic displays 11 budget categories:

Community and Regional Development;   Education, Training, Employment, and Social Services;   Health;   Income Security;   Medicare, National Defense;   Net interest,   Other;   Social Security;   Transportation;   Veterans Benefits and Services

Please select the “bar” that represents each category. The answers follow “Our Bottom Line”:

Where are we going?

To why it’s tough to cut spending.

Federal Spending

The big problem is the mandatory slice of the federal budget. Above, among the five longest bars–Social Security (22%), Health (14%), Net interest (13%), Medicare (13%), and National Defense (13%)–only National Defense is discretionary. The other four are mandatory expenditures. At a whopping 62%, those mandatory categories cannot be touched unless the laws change. And to make it even worse, Social Security and Medicare will be unable to cover all of their obligations during the next decade. So they will need more money or tweaked recipients.

That means we are left with a relatively small portion of the budget that can be cut. Called discretionary spending, that includes the smaller bars on our graphic. It takes us to our highways, education programs, the court system. Even when we cut the “waste,” it is a tiny part of what we spend.

Our Bottom Line: Fiscal Policy

Spending, taxes, and borrowing compose our government’s fiscal policy. The graphic that we began with covers spending through its categories. But also we have the net interest that we owe to everyone that loaned us money because our spending exceeds our revenue. Through the bills, bonds, and notes sold by the federal government, we borrow money. In return for those loans, we have to pay “net interest.”

The answers:

My sources and more: As a source of data for government spending, this U.S. Treasury site is ideal.