When tax season rolls around, it's only natural for taxpayers to wonder just what their hard-earned federal tax dollars pay for, anyway.
Washington will spend $25,117 per household in 2008 -- the highest total since World War II, and an inflation-adjusted $4,300 more than in 2001. The federal government will collect $21,604 per household in taxes. The remaining $3,513 represents this year's budget deficit per household, which, along with all prior government debt, will be dumped in the laps of our children.
Washington will spend this $25,117 per household as follows:
Social Security/Medicare: $8,668. The 15.3 percent payroll tax, split evenly between the employer and employee, covers most of these costs. This system can remain sustainable only if there are enough workers to support all retirees, which is why it risks collapsing under the weight of 77 million retiring baby boomers. If nothing is done, taxes eventually will need to rise by $12,000 per household (adjusted for both inflation and rising incomes) to pay all promised benefits.
Defense: $5,204. The defense budget covers everything from military salaries to operations in Iraq and Afghanistan to the research, development and acquisition of new technologies. Lawmakers drastically reduced defense spending following the collapse of communism in the early 1990s. The 9/11 attacks reversed this trend, and the inflation-adjusted $1,794 per household increase since 2001 has returned defense spending closer to its historical levels.
Antipoverty programs: $3,752. Nearly half of this spending subsidizes state Medicaid programs that provide health services to poor families. Other low-income spending includes: Temporary Assistance for Needy Families (TANF), food stamps, housing subsidies, child-care subsidies, Supplemental Security Income (SSI) and low-income tax credits. Despite recent rhetoric about "cuts for poor," federal antipoverty spending now tops 3 percent of GDP for the first time ever, and state and local governments add another 2 percent of GDP.
Interest on the federal debt: $2,090. The federal government is $9.6 trillion in debt. It owes $5.4 trillion to public bond owners, and the rest to other federal agencies (mostly to repay the Social Security trust fund, which lawmakers raid annually). Despite rising debt, record-low interest rates have limited costs. As interest rates rise back to normal levels, these costs will spike.
Federal employee retirement benefits: $935. This spending funds the retirement and disability benefits of federal employees, including the military.
Veterans' benefits: $742. The federal government provides income and health benefits to war veterans. Spending is up 47 percent since 2001.
Health research/regulation: $692. This spending is up 44 percent since 2001, and much of this growth is concentrated in the National Institute of Health. The category also includes the Food and Drug Administration and dozens of grant programs for health providers.
Education: $578. Education spending is primarily a state and local function; 9 percent of the total comes from Washington. Federal education spending has surged 47 percent since the 2001 enactment of the No Child Left Behind Act. Most federal dollars are spent on low-income school districts, special education and college student financial aid.
Highways/mass transit: $455. Most highway and mass-transit spending is financed by the 18.4 cent per-gallon federal gas tax. Washington subtracts an administrative cost and sends this money back to the states with numerous strings attached. Some economists suggest it would be more efficient to let states collect this tax and decide how to spend the money themselves.
Justice administration: $396. Justice spending includes federal attorneys and prisons, as well as law enforcement grant programs. New homeland security costs have added $100 per household to justice spending.
Unemployment benefits: $320. Unemployment costs fluctuate based on the number of unemployed Americans.
Natural resources/environment: $305. This includes national parks, federal lands, water projects and environmental clean-up.
International affairs: $298. This includes foreign economic and military assistance, operation of American embassies abroad, and contributions to organizations such as the United Nations. International spending has nearly doubled since 9/11.
The programs listed above cover $24,435 per household. The remaining $682 is allocated to all other federal programs, including regional development, farm subsidies, social services, space exploration, air transportation and energy.
Taxpayers must decide for themselves if they're getting their money's worth.
Brian Riedl is the Grover M. Hermann fellow in federal budgetary affairs in the Roe Institute for Economic Policy Studies at The Heritage Foundation (heritage.org).
First appeared on the McClatchy Tribune wire