Government is just a check-writing machine
But few funds really go to help the less fortunate
What is the government’s primary function? If you look at the debates that rage each year when the president’s budget comes out, you’d think it was defense spending. Or food stamps. Or cancer research. Or student loans.
Any proposed changes to those programs make headlines. Just as President Donald Trump’s 2020 budget did. It would, we were told, “slash domestic spending,” “cut science and medical research,” and “eliminate funding for arts,” while boosting defense spending.
But look beyond the headlines at the actual document, you’ll learn that those are all squabbles over crumbs. The one thing the federal government does above all else is write checks. Lots of checks. Nearly $3.2 trillion worth of checks. Each and every year.
Buried in a separate volume of the annual budget are “Historical Tables,” which provide rich detail on how the government has spent taxpayers’ money going back as far as 1789. Three of these tables track “payment for individuals” — defined as “federal government spending programs designed to transfer income (in cash or in kind) to individuals or families.”
It doesn’t include things like salaries paid to federal workers or services rendered to the federal government.
According to the Trump budget, the government will hand out $2.6 trillion directly to individuals or as payments for services on their behalf this year. An additional $568 billion will go out as “grants to states,” which then pay the money out in the same way.
In other words, 70% of everything the federal government will spend this year will amount to writing checks to benefit individuals. That’s up from 28% in 1968 and 50% in 1991. At $3.2 trillion, these federal money transfers will equal the entire economies of Canada and Mexico combined.
Why the USA borrows $1 trillion
Here’s another way to think about it: This year, the government will collect a little more than $3.4 trillion in revenue. It will hand all but $200 billion of that back in the form of direct payments to individuals or as payments for services on their behalf.
It will then borrow nearly $1 trillion to pay for everything else the government does — military, roads, parks, environmental protection, law enforcement, research, education.
This amounts to a vast shift in the role of government — from one that focuses on actual government to an enormous wealth transfer engine.
There’s nothing inherently wrong with that. Who would object to the government shifting money from the wealthy to the less fortunate? Except that’s not what happens. What’s remarkable is how little of all this money goes to the poor and downtrodden.
Just $102 billion of that $3.2 trillion will go to provide food and nutrition assistance money to the needy, and only $196 billion on other public assistance programs. Direct payments to help offset the cost of education, training and employment services will add up to only $77 billion.
By contrast, the federal government will hand out $88 billion worth of pension checks to retired civil servants.
The vast bulk of all the money paid to individuals will, in fact, go to the middle class, and even the upper middle class, largely through Social Security and Medicare — programs for which even the richest Americans receive benefits. Almost 12% of retirees collecting Social Security checks have incomes $100,000 and over, according to the Social Security Administration. A 2011 report by then-Sen. Tom Coburn, R-Okla., found that millionaires were collecting $9 billion in retirement checks from the federal government.
Robbing Peter to pay Peter
Medicare results in “net transfers from the poor to the wealthy,” both because of how it’s paid for and the fact that wealthier retirees tend to live longer and spend more on health care, according to a study published by the National Bureau of Economic Research.
In recent years, one of the fastest growing check-writing programs in the federal budget has been in the category of “veterans benefits and services,” which aren’t means tested. The Department of Veterans Affairs writes more than $64 billion in disability checks to veterans — almost triple the amount spent in 2000 — and most of those checks go to vets who have jobs.
In short, while there is no doubt that redistribution of wealth is going on — the richest 1% pay 39% of federal income taxes — the fact is that much of what the federal government does today is rob Peter to pay …. Peter.
Instead of fixating on tweaks to relatively tiny federal programs, perhaps the public and their elected representatives should spend some time contemplating whether having the federal government recirculate trillions of dollars into and out of the same pockets makes any sense at all.