Welcome back gang! And Happy New Year!
Last week we divided up federal spending into 4 components. If you can generally understand these 4 components, you understand 60% of the budget. That puts you on far better footing than most voters. Whether you want to shrink or grow the budget, learning about it will help you vote aligned with your goals.
60% of all of our federal spending comes from 4 categories. Social Security, Medicare, Medicaid, and Defense. Last week we did a quick review of the “other” section and in the 300 level we will dive in deeper.
Social Security ($1.2t)
Social Security is our social pension system. We’ll talk more about this in the 200 level but basically if you or your spouse worked in the US for 10+ years, you become eligible for a lifetime, inflation adjusted pension starting between age 60-70. As you can imagine, with 10,000 baby boomers turning 65 every day, the federal government sends out a lot of payments to these households.
Medicare ($983b)
Medicare is our nations version of a universal health system only it is explicitly for people over the age of 65. Just like your health insurance at work, people pay a Medicare premium, and when they go to the doctor, Medicare helps pay. Medicare is a huge program and while it is great for the people on it, there’s no denying it is costing our country a lot of money. There’s talk of expanding Medicare to everyone, and that might not be as expensive as it sounds because we currently only cover the most expensive people in the nation to insure, that being the elderly. But unless our nation can manage to stop paying extremely more for health care compared most other highly developed nations, Medicare for all will inevitably cost us a lot of money, just like Medicare for those over 65 does now.
Medicaid ($589b)
Medicaid is our nations version of a universal health system for low-income people. Who counts as low income? Apparently about 20% of Americans do. Nearly all people earning less than 133% of the poverty level are covered under Medicaid. The programs costs are split between the states and the federal government. The $589b is the federal cost. States can partly design the program within their state, and the federal government contributes massively to the cost. General health insurance for low-income people makes up the bulk of the spending, but long-term care expenses for the elderly are very significant too.
For a digressive and partly opinionated rant on healthcare read below, otherwise please happily continue to Defense:
I believe getting our cost of health care down to that of other developed countries should be a considerably higher national priority and a much more talked about issue. There are many countries around the world with better healthcare outcomes than the USA that have far cheaper costs than we do here. The kicker is, some of those countries use a universal healthcare system, some use a private healthcare system, so our national debate about which one of those to use, feels counterproductive. There’s good evidence that either private or public can work far better than what we have now.
That’s not to say our entire system is bad. At the very highest ends of care, we typically are where you want to be treated. But unless you find yourself with some unique cancer or disease that so happens to require the latest and not yet well practiced treatment, don’t expect much benefit. And when it comes to research, new procedures/treatments, and new drugs, there isn’t really a close second, the USA does really well. However, we are paying roughly 5x more for care than most developed nations with often worse outcomes. That number includes both private and public spending and totaled $3.8 trillion in 2019. Imagine only spending $760 billion or putting $3.04 ($3.8t/5=$760b) trillion back into the economy and getting better healthcare outcomes…
If we got our healthcare costs down to near averages, we could spend a trillion more on education, put a trillion more into paying off the national debt, and give consumers a trillion dollars of walking around money, annually.
To learn more about why we spend egregious amounts of money on health care I can’t recommend this article by Atul Gwande enough: The Cost Conundrum | The New Yorker
End rant
Defense ($760b)
Defense is the third largest area of spending. And yet, the first that sounds like a traditional government role. The US spends a lot of money on defense and by any measure we have a very large and well-equipped army. Is it large and well-equipped enough? That’s not really for me to say. $760b makes up around 38% of total defense spending globally, China is #2 on the list with $293b, but I would question the accuracy of that number.
Your feelings on how large our defense budget should be gets into your opinions on what role our armed forces should play in the world and what degree of victory you expect in a whole range of possible confrontations.
Congrats!
You just completed the 100 level courses! If you’re a democrat or republican, you likely are now among the most knowledgeable members of your voting party. For those that want to dive into the weeds on some of the “other” programs, I’ll see you in the 300 level. But up next, the 200 level.
In 200 I’ll dive into the details on the major programs that we’ve already covered. I will continue to keep it general, but if you really want to understand the next level, I recommend you check that out.
See you in the 200 level!
Hey gang!
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Table of contents:
Federal Spending 104