Tax and Budget Myths (1)

As they fight to hold onto their Congressional majority President Obama, Congressional Democrats and their supporters hope to deceive voters with a continuous stream of budget and tax myths.

Myth 1 is heard in several variations usually bellowed by an impassioned candidate or special interest spokesman:

  • “The growing deficits are caused by ever increasing cost of the military and  two wars.”
  • “The immense military, bigger than [fill in the blank] causes the deficit.”
  • “Military spending crowds out ‘investments’ in our people.”
  • “Military spending has grown and grown to the point that we can no longer afford it.”

The chart compares the cost of National Defense, including the cost of Veterans Benefits to a federal budget category: “Payments for Individuals” (P.F.I.)

This excerpt from Treasury Dept. historical tables describes Payments for Individuals:

The basic purpose of the payments for individuals aggregation is to provide a broad perspective on Federal cash or in-kind payments for which no current service is rendered, yet which constitutes income transfers to individuals and families.

…OMB budget document

The key phrase is “no current service is rendered.”  P.F.I. does not include salaries, wages or benefits paid to federal employees, military service members, or contractors, all of whom do provide current services.  This category is made up entirely of cash or in-kind benefits or income transfers including, Social Security, Medicare, Medicaid, Employment training programs, food stamps, social services, welfare payments and unemployment benefits.

This chart demonstrates that the growth segment of the federal government over  the past half-century has been social programs.  Most of the social programs that now consume more than 60% of federal spending were created after 1960.  As spending grew each year to pay for ever expanding benefit programs the fraction of the total spent on National Defense, the federal government’s most fundamental responsibility decreased.

The Treasury Dept. includes Veterans benefits in the P.F.I. category.  For purposes of the chart above we took veterans benefits out of P.F.I. and added them to Military Defense.  Currently, veterans benefits are about 2.5% of total spending

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