Our initial post gave you a backdrop on where we stood as a country per family in the US.
Our next few posts will dig a little deeper into where the federal government is spending our money, but first a quick definition on real vs. nominal values.
Real values over time are a measure of purchasing power net of any price changes over time. They are often used for restating nominal (actual values), thus adjusting that part of value changes that merely offset inflation (a general increase in prices).
A great example is GDP. In 2007 the nominal GDP per family for the US was $119,483. In 2012 we told you nominal GDP was $128,848 per family. Economy better correct… not so fast after adjusting for inflation. After factoring in inflation you can see why the economy feels bad, as we still have not eclipsed the peak output from 2007 after factoring in inflation.
Tonight we are going to take a look at two of the large Federal Outlays on a per family basis, and we have adjusted them to 2010 dollars. These outlays tend to be cyclical, and have been at highs and will be coming down regardless of what our politicians do.
- Defense – The protection of our citizens cost about $5,619 per family in 2012 and was one of the largest expenditures. This figure from the graph below has started to decline in real dollars the last few years, and that pace will accelerate once the wars end. You can see the huge spike after September 11, 2001…. but also note the dramatic drop after the 1st Iraq war ended in the early 1990s. We would expect that pattern to occur again.
- Income Security – This consists of unemployment compensation, housing assistance, food and nutrition assistance and federal employee retirement and disability. You would expect this outlay to surge during recessions, but over long periods of time should remain constant in real dollars. During 2012 this program cost citizens about $4,547 per family. It has started to decline and we expect that trend to continue as employment improves.
We presented the easy ones today… will touch on the problem area’s next… Stay tuned for Part 3!
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