Lack Of Basic Math Skills Hamper Discusson Of Government Spending

Yesterday the Trustees of Social Security released their annual report on the state of the system. To sum up the situation it is not good at all. Due partly to the economic downturn in the U.S. economy inflows into the system have been much reduced. This has led to a prediction that Social Security will go into deficit in 2016. This is a year earlier then last year’s report. The system will also run out of money now in 2037 instead of last year’s 2041 prediction.

In reality the system is also short about $2.1 trillion dollars as that is how much the Federal government owes it in I.O.U.’s. These are supposedly Treasury Bonds that will be paid back at some time. Of course the Federal government is already starting to have issues with selling their regular bonds to finance the current pace of spending. Spending on the Stimulus and the massive budget that has not lived up to expectations yet on top of everything.

To make things even more interesting you have articles like this from Jon Talton in the Seattle Times discussing the Social Security issue and government spending in general. In it he makes the statement “For example, Defense spending by some measures has exceeded Cold War highs.” This is true if you look at the total dollar amount spent — over $680 billion proposed for Fiscal Year 2010. In terms of percent of Gross Domestic Product (GDP) defense spending is no where near Cold War amounts. In fact the percentage has declined enough that some Republicans want to introduce legislation to make defense spending a minimum amount of four percent of GDP.

The reason is simply total Federal spending as well as the country’s economy have expanded greatly over the last forty years. Using the total amount of spending on defense especially in dollars not adjusted for inflation gives a false view of the total defense budget as a whole. Yes it is the largest discretionary spending that the government does, but it pales in size to the entitlement programs which are now going bust at an accelerated rate. There can certainly be a debate about all this spending but it helps to actually do the math correctly.