Numbers Crunch Post

Alright a few days ago I wrote a post in which I presented some data regarding the the American tax dollar and how it was spent. Although this was not the intended focus of the piece, the numbers certainly got it. At this time I, first and foremost, would like to apologize. Looking back, I should have explained the numbers a little better, so in response to all the readers who are insistent the numbers are incorrect and that I am wrong, I will take the time today to explain the numbers in detail and hopefully convince some you out there that the data is correct.

Now, before we look at the numbers we have to understand one simple fact, a fact that I think is the main concern behind those whom feel that the data I presented is incorrect. We have all been spoon fed the numbers, numbers like defense is 19% of what we spend and Social Security is another 30% and Medicare/Medicaid taking along another 20%. Now these are just approximations of course but fairly accurate ones. I think someone responded to my post with similar numbers, but looking at the data, I am not one to be fed and have to take a closer look at the information presented.

Now, when we look at American tax dollars we think of the big three named above, primarily because those are what we see taken from our paychecks. Don't beat yourselves up its perfectly rational assumption, albeit an incorrect one. Here we go:

Social Security/Medicare/Medicaid- throw those number out the window! Yes "entitlements" are taken of your paycheck and mine too; however, these programs cannot be counted as tax dollars simply because they do not serve the primary function of a tax dollar. In theory, these are investments in ourselves, we pay into medicare and social security because we are supposed to be getting that money back when we are of age or in need. Furthermore, money paid into SS or Medicare will never go to paying solders, building roads or education, why, because that is not their purpose. If Medicare and SS did not exist, again in theory, that money would still be in our paychecks. They are what I call specific taxes simply because they serve a specific purpose.

The Federal Income Tax, contrary to the aforementioned programs, is not a specific tax. These dollars are taxes in the purest forms; this tax is what generates the revenue that runs the country. The income tax pays for things like defense, wages for all three branches of government, education, roads, and some social programs. Everything that is not related to Social Security and Medicare/Aid is paid with the income tax, which is why its the bigger portion taken out of your paycheck. So now that we have the distinction better explained, I hope, we can move on to the numbers crunch.

Approximations of Fiscal Year 2011

Projected Income Tax/General Revenue: Approx 3 trillion dollars *this does not include entitlement taxes

Some one quoted the White House as a source and the White house has the defense budget at approx. 964 billion, right?

So lets take 964 Billion/3 trillion = approx .213 or 21.3% of the income tax, well I have been fed this number too and here is the problem with it.

This budget number is for current military, meaning things like the Veterans Affairs and healthcare for veterans is not calculated into this number, the bill for that is $60 billion. That $60 billion also does not include any public funds spent on veterans or immediate family that collect public benefits, such as social security.
Homeland security, judging by the title, can be added to the defense part of the check for approximately another $4.3 billion, bringing the bill to approximately1.02 trillion

Now we can include NASA because its primary function is to launch military satellites but I don't want to be accused of using a technicality, so we will skip that 19 billion for now.

Adding the budget of the Army core of Engineers of 5 billion and National intelligence of 75 billion, the little things start to add up.Compounding the budget is the huge chunk that comes from 750 U.S. military bases in 50 nations, not including Iraq and Afghanistan, and approximately 255,000 service members stationed abroad. There are 116,000 in Europe and nearly 100,000 in Japan and South Korea.

Like everything else this money has to be financed and the interest alone to borrow this money comes to roughly 4-500 billion dollars, so now we are at about 1.608 trillion dollars:

$964 B + $60 B + $4.3 B + $5 B + $75 B + $500 B = 1.608 trillion dollars, 1.608 trillion / 3trillion  = 53.6 or approx 54% of the federal income tax.
*as a note I did not include NASA in this calculation

One more thing to note, although Homeland Security does get a piece of the defense budget, it is one of few things that gets a share of nearly every aspect of appropriations. Meaning it gets a share of defense, general government and physical resources, meaning that the 4.3 billion, quoted above, is actually quite a bit more.

Now the 3 trillion number comes from general revenues like the income tax, ad-valorem taxes, business and corp taxes along with charges and fees, add them up and we get approx 3 trillion dollars. If we simplify the numbers just a bit and use just income tax revenue and the given defense budget we get something very interesting:

Income tax 2011- 1.6 trillion=====>  964 billion / 1.6 trillion = .602 or 60.2%

So you see looking at it as we should we get the numbers that I originally proposed. As a bit of trivia, as defense spending began to increase in the Vietnam Era in the United States, the budget was then reformatted to include the entitlement programs to make the defense spending seem smaller than it was, I guess it worked.