While the previous page has highlighted outlays for national defense, this one will show the composition of federal outlays in more depth.
The basic data for this are from Table 3.2 of the Office of Management and Budget Historical Tables, which gives more detail about composition.
As GDP falls below the long term trend, as it has for the past two years, federal outlays become a larger part of GDP even if they remain fixed. But they have risen somewhat, too, as explained on the previous page.
The "all other" part contains a miscellany of relatively small (less than 1% of GDP, and mostly a good deal less) outlays. Some of them are explored in more detail later.
The federal government has been borrowing more to finance the increased deficits, but interest rates are at levels not seen in 75 years and more and inflation is essentially zero (if not negative), so the cost of borrowing is comparatively low at this point. National defense has been discussed earlier.
Social Security is a big item in outlays, but in the past the receipts from Social Security tax (FICA) have covered it, with a surplus left to increase the Trust Fund. The retirement of the Baby Boom generation is now eating into the Trust Fund because the taxes paid by the succeeding Gen X generation are not enough to cover the Baby Boomers. It is currently estimated that the Trust Fund will be depleted at some point between 2037 and 2041 if no policy changes are made. However, Social Security taxes do continue to cover most of the outlays.
Other income security includes both a variety of other federal and federally-administered retirement funds (which, like Social Security, receive money from contributions made by current workers and their employers) and other programs for some people in economic straits. These include unemployment assistance as well as the programs that were set up by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). PRWORA abolished AFDC and most of what had been traditionally referred to as welfare, but did establish some limited substitutes funded at much lower levels.
Medicare has grown to become a major program. The 1997 decision to bring private insurers into Medicare increased costs, and the 2003 expansion of this into Medicare Advantage increased them still further, but the principal driving force is the continuing increase in health care costs in general. A later chart will address some further aspects of health care cost growth and its impact.
The category I label as other medical outlays includes health programs for federal workers as well as others the government has responsibility for, plus the federal contribution to programs such as Medicaid that help provide health care for the poor. It too is affected by the general growth in health care costs.
15 Nov 2010