US Federal Budget by Family – Part 3

Today we are going to touch on the major “flash” points in the Federal Outlays that pose the biggest problems to our nation.

In Part 1 we discussed the Federal Revenues, Outlays/Expenditures and broke it down into a Household or Per Family Basis to make it easier to grasp the Trillion dollar deficits into what it means for your household.

In Part 2 we discussed the two areas of the Federal Outlays that have reached cyclical highs, and will start to decline regardless of what the clowns in DC decide to do for the remainder of 2013.

Any company or household over time has to grow expenditures at a slower pace than they grow revenues.  That is the problem in our opinion (and neither political party wants to address it)…. government revenues over time have growth roughly in line with inflation, but these following Federal Outlays are expanding at an unsustainable pace:

• Social Security – It is now the number one government expenditure.  In inflation adjusted dollars it accounted for over $6,100 per household.  The pace of growth has really accelerated since 2008, and shows no signs of slowing.
• Medicare – It has been on a rapid ascent for over 20 years.  On an inflation adjusted basis this outlay has more than doubled from $1,774 in 1991 to $3,801 per household in 2012.
• Health – Over 80% of this is Medicaid, but also includes health research and training. Again, on an inflation adjusted basis this outlay has more than doubled from $1,208 in 1991 to $2,837 per household in 2012.

These three Federal Outlays will dominate our county’s spending if they continue to appreciate at this same rate.  In nominal (actual) dollars last year these three outlays amounted to $13,418 per household or 43% of all of government spending.  In 1991, these same three outlays represented  33% of all government spending.

Our next piece will focus on what I call the “nuclear” Federal Outlay that is currently stable, but could be the game changer…. Interest Expense.

Once again, we are not picking sides but stating FACTS to hopefully educate people on the current environment.  We hope breaking those Trillion dollar numbers into what it means to your household helps frame it in figures you can grasp.