Today’s Rorschach Test: The Federal Government’s Money-In and Money-Out Numbs

Monday, December 10, 2012 at 11am
By John Friedman

And here’s to you, you billions and trillions of dollars that is the federal government’s Money-In and Money-Out. A nation turns its lonely eyes to you.

Do you know what those numbers look like?

Most people do not.

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One of the most long-lived financial sites aimed at self-directed investing folks is The Motley Fool; it’s been around for nearly twenty years, which makes it about a hundred years old in financial-site-years.

A few days ago one of the Fools at Motley Fool (and, yes, that is what they call themselves endearingly), named Morgan Housel, posted some numbers for how much money the federal government has coming in and how much it has going out.

I cannot vouch for the accuracy of Morgan’s numbers. Morgan sites his sources as “Office of Budget and Management; Federal Reserve; author’s calculations” and also adds that his category of “Income security” equals “unemployment benefits, food stamps, etc.”

There is a lot of room in there for some judgement calls and some values-added-in, but I’d be surprised if there is anything stark-raving-mad about the way Morgan put these numbers together. Also, Morgan very helpfully provided some benchmarks for how today’s numbs compare to the averages for those numbs since 1960 (remember: there is a lot of hanky panky that can happen with the choice of starting dates and the like, but nothing here jumps out as a purposefully-chosen number)(that said, a lot of folks go back to 1944, the beginning of FRED-time for many data series)

Thank you Morgan for a great presentation! And for doing some heavy lifting, not the least of which is digging up all those long-term averages, and then there’s also the part about putting together a table that loads well onto various screens, big and small.

*  *  *

Here is how Morgan sees the federal government’s Money-In (largest to smallest):

 

As shown here, at least at this level of analysis the federal
government’s Money-In is fairly simple — just five items

 

And here is Morgan’s take on the federal government’s Money-Out (also largest to smallest):

 

By comparison, the federal government’s Money-Out is a many-headed thing,
with each line item here representing a whole lot of people
and interests and sharp-elbowers

 

Yup, if you start with the Money-In and subtract the Money-Out, you see a roughly trillion dollar deficit.

*  *  *

Morgan also includes a table of what are wonkily known as tax expenditures, which is financial-wonkese for tax deductions that reduce the tax bills of those who use them, and therefore are, in a wonky way, very much like federal government Money-Out (also going from largest to smallest):

 

Each line item here represents a kind of spending
for which the government provides a tax break.

 

Most of these tax expenditures are creatures of the 1040 — they lead to a decrease of personal income taxes paid by BLBHBs — paid by biological, living, breathing human beings, e.g., social security benefits (which for most folks are largely or entirely un-taxed) and retirement contributions (Roth accounts have just not caught on — we are all so instant-grat folks, aren’t we?). But some go mostly to business, such as accelerated depreciation of equipment (don’t ask . . . )

 *  *  *

As an antidote to the mind-numbing that comes about from talking heads spewing characterizations of numbers-based issues without ever backing up those characterizations with the actual . . . um . . . numbers, in here I often do just the opposite: I set out some numbs and then ask you what you see. You can think of this as a numbs-based mind un-numbing.

In here I call these Rorschach Tests, named after the testing technique developed by Hermann Rorschach, a rather dapper fellow by my estimation (click that link to see). In fact, I use this approach often enough that I no longer have to look up the spelling of Rorschach.

Rorschach Tests involve a subject looking at ink-blot sorts of things, who then tells the tester what the subject sees in the ink-blots, at which point the tester figures out exactly what it is that makes the subject tick. Or so the theory goes.
*  *  *

The tables above represent, I suspect, the grandest Rorschach Test I’ve put forth in here so far.

Some folks see some of these line items as horrific. Some see some of these line items as the most wondrous of all human responses to the question of how to further our overall well being. And then some folks see all of the line items as one or the other — as all horrific or as all wonderful.

So what do you see?

Are you surprised by anything in there, either because a certain line item is bigger than you thought or because it’s smaller? And do you understand what each of the line items represents (if not, fear not, because you are not alone: the tax code is wicked incomprehensible for most folks, and I am not, in this piece, helping to guide you through that particular layer of complexity).

And what would you cut/increase/modify/obliterate/gargantuate/etc.?

That’s a tough question, especially at the numbers level — at the level of cold, hard facts.

*  *  *

I just returned from Washington D.C., a city I’ve visited frequently over the past two years. I’ve gotten to know it pretty well.

When in D.C. I hang out with a lot of architects, many of them rather big deals in some way. We talk . . .

Architects focus most of their thinking on the built environment. When doing so, they are usually referring to buildings and streets and houses and the like — the physical world we inhabit, as modified by all of us BLBHBs — the world in which we live, as modified by people-kind, by all of us biological, living, breathing human beings.

Personally, when I think about the built environment, I add another important element to the concept: I add the non-physical world in which we live, by which I mean the society within which we all reside every moment of every day. We did build that.

And when I’m in D.C., I see that society we’ve built as wonderfully beautiful (though, ironically enough, building-wise I see D.C. as not that great, with one 12-story boxy office building after another . . . ).

So as I walk on the National Mall between the White House and the United States Capitol, I see 300 million-plus people within our immediate world who, collectively, now and via their ancestors, created something truly beautiful — far from perfect, yes, but still truly amazing, with many of its imperfections having a whole heck of a lot to do with how it became so truly amazing in the first place, and also having a lot to do with what we BLBHBs are really, truly like deep down inside.

And then, expanding my seeing still further, I see 7 billion-plus people the world over, and I see something more wondrous still, as all of us BLBHBs certainly do have a lot of different ways of organizing ourselves.

Many uglinesses, this place we call home, but far more which is beautiful than ugly, with the ratio getting better all the time

 

 About 1200 words (about a twelve-minute read sans linked–to content)

 

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