Why the Debt Is So Complicated

 

Why is the Debt so Complicated

The debt is directly related to the federal budget and our leaders’ inability to manage a budget. The budget is more than a document, it’s a set of priorities for our country and it covers everything we do. Here are some more information to help you understand our debt and the complicated topic that is the budget.

Healthcare - (Medicare and Medicaid)

Healthcare is by far the biggest driver of our deficits over the long-term primarily due to the retirement of the Baby Boomers and healthcare cost that rise at more than double the growth of the economy. As a result, the Urban Institute estimates current Medicare beneficiaries receive $3 for every $1 they paid into the system.

  • In 2012 we will spend $803 billion or 23% of the budget on Medicare and Medicaid. In 2022 that number will be $1,656 trillion or 33% of the budget.(7)
  • By 2020 the U.S. will spend over $4 trillion a year on healthcare, 49% will be paid by the government. (1)
  • 1/3 of healthcare spending can be attributed to unnecessary treatments.(1)
  • In the U.S. we spend 2.5 times more on healthcare than any other industrialized nation but rank 36th in overall life expectancy.(1)
  • According to the McKinsey Global Institute, administrative costs account for 21% of excess costs.(1)

Social Security

Social Security is a great program that needs to be preserved for all generations. As a result of people living longer and retiring earlier, people in the system will only be receiving around 75% of promised benefits starting in 2033. (2)  

  • In 2012, we spent $726 billion or 22% of the budget on Social Security. In 2022 that number will be $1,350 trillion or 27% of the budget.(7)
  • In 1960 there were 5 workers for every retiree. Today we have 3 workers for every retiree, and by 2035 there will only be 2 workers for every retiree. (2)
  • Today workers retire 3 years earlier then when the program was created. (3)
  • The average U.S. worker spends 20 years in retirement.(3)

Taxes

Last year our taxes revenue for the government amounted to $2.3 trillion yet Congress decided to spend $3.54 trillion. Low tax revenue is primarily the result of multiple tax cuts over the last decade and a very bad recession. This is obviously a problem and a situation that can’t continue. (5)

  • Tax expenditures amount to $1.1 trillion a year.(3)
  • Most of our tax revenue comes from individuals not corporations. In 2012, those numbers were $1.13 trillion and $242 billion, respectively.
  • At 73,608 pages, our tax code is overly complex and out of date. As a result, we bring in less revenue and are less competitive at attracting more business.(6)(3)

Spending

Discretionary spending is comprised of most government programs outside of entitlements (Medicare, Medicaid and Social Security) and interest payments. This includes defense, transportation, energy, research and development – virtually every other government department and program. Discretionary spending is often called the investment side of the budget because it relates to things will have future benefit.

  • In 2012, we spent $651 billion, or 18% of the budget, on defense. We spent $620 billion, or 17.5% of the budget, on non-defense discretionary programs.(7)
    • In contrast, mandatory spending consumed $2.1 trillion, or 59%, of our budget in 2012.
    • The Government Accountability Office estimates that every year the government spends between $100 and $200 billion on duplicative programs.(8) 2354


Sources:
(1)    http://www.bullfrogfilms.com/guides/monme2viewerguide.pdf
(2)    http://www.ssa.gov/oact/tr/2012/tr2012.pdf
(3)    http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
(4)    http://bipartisanpolicy.org/sites/default/files/BPC%20FINAL%20REPORT%20FOR%20PRINTER%2002%2028%2011.pdf
(5)    CBO
(6)    http://www.cch.com/TaxLawPileUp.pdf
(7)    http://www.cbo.gov/sites/default/files/cbofiles/attachments/08-22-2012-Update_to_Outlook.pdf
(8)    http://www.gao.gov/new.items/d11318sp.pdf

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