The Federal Budget

[Scarpia]

Just stumbled on this very useful web page made available by the Washington Post.  I found out about it in the context of an article drawing attention to the fact that the average American has no idea of what is in the budget.   This interactive page represents the size of the various items in the supply and debit side, and if you click on an item you get a history of that item from 1982 to 2012.   Things are expressed in inflation-corrected dollars.  It is a bit frightening.  Make sure you're sitting down when you click on Medicare

http://www.washingtonpost.com/wp-srv/special/politics/30-years-spending-priorities-federal-budget-2012/

One thing to keep in mind, the figures are in absolute dollars, not per capita.  The population has increased 30% since 1982, so if something is constant in the budget, that means it has been cut 25% per capita. 

[Todd]

Make sure you're sitting down when you click on Medicare

The Administration of Justice box is interesting.  The numbers are "small," but what does it mean and why is it growing so fast?  I assume federal prison outlays are in there, but what else, I wonder?

I would be surprised if most reasonable people didn't already know that entitlements in general, and health care spending in particular, represented the largest and fast growing segment of the budget, and with expanded drug coverage a few years ago and the expansion of coverage under so-called Obamacare, the health care numbers are going to go up and up and up until appropriate measures are taken.  What those are, well, that's another topic isn't it?

[Scarpia]

The Administration of Justice box is interesting.  The numbers are "small," but what does it mean and why is it growing so fast?  I assume federal prison outlays are in there, but what else, I wonder?

I would be surprised if most reasonable people didn't already know that entitlements in general, and health care spending in particular, represented the largest and fast growing segment of the budget, and with expanded drug coverage a few years ago and the expansion of coverage under so-called Obamacare, the health care numbers are going to go up and up and up until appropriate measures are taken.  What those are, well, that's another topic isn't it?

When asked what percentage of the budget goes to foreign aid, Americans answer somewhere between 15% and 27%, depending on who does the poll.   Actually it is less than 1%, and the US devotes a smaller fraction of its GDP to foreign aid than any other developed country.

I'm not sure the average American knows that Medicare and other medical expenditures have increased by a fact of 5 since 1982.

[Todd]

When asked what percentage of the budget goes to foreign aid, Americans answer somewhere between 15% and 27%, depending on who does the poll.   Actually it is less than 1%, and the US devotes a smaller fraction of its GDP to foreign aid than any other developed country.

I'm note sure the average American knows that Medicare and other medical expenditures have increased by a fact of 5 since 1982.

True enough, but note how I wrote the phrase "reasonable people," which clearly excludes a large chunk of the population.

[mc ukrneal]

If you like that, you may find this interactive budget from Nov 2010 NYT interesting. You can balance the budget in the way you want to. Some of the possible trade-offs were interesting and may complement the WP article. Link: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?scp=1&sq=balance%20the%20budget&st=cse

[drogulus]

     It's pretty much what I thought. The rapid growth of nondiscretionary spending, especially for health care, is squeezing out discretionary spending, which is the investment part of the budget, the most vulnerable to sky-is-falling politicking. So energy, high technology, new infrastructure, basic and applied science, space exploration and anything else that doesn't represent consumption by constituents gets the shaft. This guarantees that we will be poorer in the future, less able to carry a big deficit load. This is what deficit hawks never understand. The tiny investments we do make represent our future ability to pay for what we want. We should spend more on investment, and if we need to cut we should also increase taxes so the cuts won't be too steep.

[Todd]

If you like that, you may find this interactive budget from Nov 2010 NYT interesting. You can balance the budget in the way you want to. Some of the possible trade-offs were interesting and may complement the WP article.

Hey, that is fun.  I was able to get the 2015 budget to a $4 billion deficit and the 2030 to a $60 billion surplus, and all without gutting the military, directing government funds to so-called "investments," cutting other discretionary spending too much, and with only a few tax increases on higher income people.  A national sales tax, really?  No way.  The bank tax?  A purely political tax if ever there was one, so no way.  Conversely, a carbon tax makes a great deal of sense to me.  A big bump in the gasoline tax makes sense too, though that wasn't listed.  Ultimately, though, the only way to control the deficit is to reign in entitlements.  I will note that I do not like some of the options, and would certainly like to see changes to some of the proposals, but if people are willing to compromise, results are possible.  Of course, I'm not a politician, so I don't have to appease Tea Party nut jobs or public unions who feed at the public trough, so it's easy for me to make these calls.

This is what deficit hawks never understand. The tiny investments we do make represent our future ability to pay for what we want. We should spend more on investment, and if we need to cut we should also increase taxes so the cuts won't be too steep.

I disagree with this.  I do not buy into the notion that the federal government should "invest" a whole lot outside of military (including space) and infrastructure projects.  The US has never lacked for ample private investment, both foreign and domestic, in all areas of the economy, does not now, and almost certainly will not in the future. 

[Scarpia]

I disagree with this.  I do not buy into the notion that the federal government should "invest" a whole lot outside of military (including space) and infrastructure projects.  The US has never lacked for ample private investment, both foreign and domestic, in all areas of the economy, does not now, and almost certainly will not in the future.

That depends on what you define as "infastructure." 

Technology companies in the US since the second world war have benefited greatly from the US government investment in science and technology.  Private research and development only kicks in when scientific/engineering discoveries are relatively advanced and successful implementation is likely.  The ideas found in industrial research labs can almost always be traced back to more basic research funded by the US government.  Beyond that, engineers in US industry are trained by scientists and engineers who are supported by Federal research funding, and who have often been drawn to the US from overseas by the greater opportunity here.   Support for academic scientific and technical research has been waning and the lead the US enjoys over other countries has been disappearing.   We are at a stage where the technical gadgets that drive economic growth are assembled overseas, largely from parts made overseas.  When these devices are designed by companies in China, Korea or India, rather than in the US, what will the US bring to the table? 

[DavidRoss]

If you like that, you may find this interactive budget from Nov 2010 NYT interesting. You can balance the budget in the way you want to. Some of the possible trade-offs were interesting and may complement the WP article. Link: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?scp=1&sq=balance%20the%20budget&st=cse

Done!  $10 Billion surplus in 2015 and $84 Billion surplus in 2030. See http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=cz6kq0k0

I question their figures*, but the general idea is right.  What surprised me most is that with judicious spending cuts and tax increases, Medicare eligibility age need not be raised and military readiness need not be compromised.

And I'm with Todd on most counts, including a preference for some options not on the table.

*For instance, how is it that a one-time 5% federal civilian workforce pay cut saves $14 billion short run, $17 Billion long run, but a 10% permanent workforce reduction saves less, $12 billion and $15 billion?  Also, remember that the CBO must work with the figures Congress provides them.  Physician surveys indicate that 25% of medical costs are for "defensive medicine"--serious tort reform would eliminate this substantial wasted expense, far more than the $8 billion and $13 billion suggested.

[Todd]

That depends on what you define as "infastructure." 

I mean basic infrastructure, like roads.  As to science and technology, the area most responsible for advances in that broad "area" since WWII has been military R&D.  I'm all for the federal government funding R&D in military and space programs.  I'm far more skeptical of things like alternative energy R&D, for instance.  I must also say that I'm not terribly concerned about the lead the US has in certain areas.  From an end user perspective, does it matter if the innovation is American or British or (gasp) Russian or (Gasp!) Chinese?  The thing is that much innovation is owned by corporations, which is good or bad, I suppose, depending on your viewpoint, so the nation of origin is not as important as it once was, and the rise of Asian countries does not portend doom for the US.  If anything, it offers new opportunities.

Oh, and I will admit to supporting federal outlays in medical research.  Bill Gates can't fund it all.

[drogulus]

Hey, that is fun.  I was able to get the 2015 budget to a $4 billion deficit and the 2030 to a $60 billion surplus, and all without gutting the military, directing government funds to so-called "investments," cutting other discretionary spending too much, and with only a few tax increases on higher income people.  A national sales tax, really?  No way.  The bank tax?  A purely political tax if ever there was one, so no way.  Conversely, a carbon tax makes a great deal of sense to me.  A big bump in the gasoline tax makes sense too, though that wasn't listed.  Ultimately, though, the only way to control the deficit is to reign in entitlements.  I will note that I do not like some of the options, and would certainly like to see changes to some of the proposals, but if people are willing to compromise, results are possible.  Of course, I'm not a politician, so I don't have to appease Tea Party nut jobs or public unions who feed at the public trough, so it's easy for me to make these calls.



I disagree with this.  I do not buy into the notion that the federal government should "invest" a whole lot outside of military (including space) and infrastructure projects.  The US has never lacked for ample private investment, both foreign and domestic, in all areas of the economy, does not now, and almost certainly will not in the future. 

      Public investment is not a scam, or misnomer or any other scare-quote justifying thing.

      It isn't the amount of private investment that counts, it's the targeting of public investment towards new projects that private investment then builds on. There are no private initiatives that replace interstate highways, continent-crossing railroads, satellite communications, the internet. All of this is created by government, though it uses private enterprise to do much of it. The point is you can't replace this with private initiative. Private enterprise follows from public enterprise. At least this is the case where private enterprise is productive. In countries with no public infrastructure private enterprise does not fill the gap. In order for capitalism to work government has to build things for the future. I don't know how to tell what this is, and the people who decide don't know, they just head for the future by doing what hasn't been done, by exercising their imagination. Since it works, and nothing else does, we should keep doing it.

[drogulus]

     When the economy is good and budget shortfalls are less scary we should fund every new project we can, the more the better. Probably our batting average will fall as we get towards the bottom of the list but the rewards will more than make up for it. The enemy is the narrow-minded way of thinking that says we can't afford to build for the future. This is almost literally crazy.

     I'm not impressed by the example of Carters energy initiative. We should expect to fail our way to success.

     The best popular writer about "Anglo-Saxon economics" is Walter Russell Mead. His book God and Gold: Britain, America, and the Making of the Modern World gives a historical perspective on how Britain and America diverged from the Europeans.

     

[Scarpia]

I mean basic infrastructure, like roads.  As to science and technology, the area most responsible for advances in that broad "area" since WWII has been military R&D.  I'm all for the federal government funding R&D in military and space programs.  I'm far more skeptical of things like alternative energy R&D, for instance.  I must also say that I'm not terribly concerned about the lead the US has in certain areas.  From an end user perspective, does it matter if the innovation is American or British or (gasp) Russian or (Gasp!) Chinese?  The thing is that much innovation is owned by corporations, which is good or bad, I suppose, depending on your viewpoint, so the nation of origin is not as important as it once was, and the rise of Asian countries does not portend doom for the US.  If anything, it offers new opportunities.

Oh, and I will admit to supporting federal outlays in medical research.  Bill Gates can't fund it all.

I am referring to research in Mathematics, Physics, Chemistry, Biology, Computer Science, and in the applied sciences that are attached to these basic sciences, and the engineering disciplines that interface to these applied sciences.  For example, Silicon Valley is what it is not only because the technology they use is often developed at Stanford, or Berkeley or LBL, but because of the flow of highly trained people that come from Stanford University and Berkeley.  If the best science is being done somewhere else, the best people will be trained somewhere else and will recruited to work somewhere else.   Would Apple, Google, Microsoft, Intel, Texas Instruments, Agilent, etc, be what they are if all of the best research labs weren't here and drawing the best scientists from all over the world to work here? 

[DavidRoss]

Hmmm...some quick calculations.  Federal payroll, 2.15 million @ $125,000 = $268,750,000,000 per annum.  If 10% cut were achieved by 2030, the savings that year alone would be $27 billion in constant dollars.  Thus the Times' figure of $15 billion saved in 2030 is low by half.

[Todd]

Public investment is not a scam, or misnomer or any other scare-quote justifying thing.

And who wrote anything along the lines that it is? 

I stated quite clearly that I support certain types of government funded R&D, including military R&D, which has long represented a large part of total government outlays in this space.  I'm also not quite sure the railroads in the US offer a particularly good model to hold up for those espousing more government investment.

I am referring to research in Mathematics, Physics, Chemistry, Biology, Computer Science, and in the applied sciences that are attached to these basic sciences, and the engineering disciplines that interface to these applied sciences.  For example, Silicon Valley is what it is not only because the technology they use is often developed at Stanford, or Berkeley or LBL, but because of the flow of highly trained people that come from Stanford University and Berkeley.  If the best science is being done somewhere else, the best people will be trained somewhere else and will recruited to work somewhere else.   Would Apple, Google, Microsoft, Intel, Texas Instruments, Agilent, etc, be what they are if all of the best research labs weren't here and drawing the best scientists from all over the world to work here?

Yes, I understand how all that works.  Four questions: 1.) How much have total budgets decreased in the last (choose your period)? 2.) How much total funding at universities comes from the federal government, how much from state government, how much from private donations?  3.) What proportion of spending has been the result of defense spending, whether under the auspices of DOD or DOE funding, or some other entity?  4.) How much is spent by corporations on R&D?

I appreciate and understand the role of investment both in research and in more immediately practical areas, but I confess that when I see statements that investment is decreasing to dangerous levels, or something similar, I sense a bit of Chicken Little thinking. 

[Scarpia]

Yes, I understand how all that works.  Four questions: 1.) How much have total budgets decreased in the last (choose your period)? 2.) How much total funding at universities comes from the federal government, how much from state government, how much from private donations?  3.) What proportion of spending has been the result of defense spending, whether under the auspices of DOD or DOE funding, or some other entity?  4.) How much is spent by corporations on R&D?

I appreciate and understand the role of investment both in research and in more immediately practical areas, but I confess that when I see statements that investment is decreasing to dangerous levels, or something similar, I sense a bit of Chicken Little thinking.

Regarding the numbers you asked for, precise figures would require some research.  But in the last 10 years the NSF funding of basic research has decreased in inflation corrected dollars.  NIH has held more or less steady since the initiative to double it during the Clinton Administration.  So these agencies have had no growth in a period when the GDP grew by 30%.   DOE basic energy research which used to pay for a large chunk of basic research is essentially gone.  The Office of Naval research, which also used to pay for a lot of basic research in nonlinear dynamics, etc, has also vanished.   Now they only pay for weapons.  A typical measure of prosperity in science is the proportion of grant requests that are approved.  Scientists used to complain that it was worse than 1 in 3, then it sunk to an unprecedented 1 in 10.  In some programs it closer to 1 in 20 grants approved.   The "pay levels" are at the worst levels since the funding agencies have existed.

At universities, the vast majority of funding is from federal support.  Even rich universities with big endowments will only provide a new hire a "start-up package" which is intended to last 2-3 years until the researcher establishes federal funding.  After that the researcher can expect between 1/2 and 3/4 of his or her salary paid by the institution in return for teaching undergraduates and nothing else.  The graduate students, researchers on temporary contracts and technicians that actually do the research are paid 100% by external grants, and all equipment and materials must be paid by external grants.  The university will also collect a 30-50% "overhead" on the research grant to provide services, such as lab space, janitorial services, electricity, heat, etc.  I would say at least 90% of support for university research is Federal.

[Todd]

A typical measure of prosperity in science is the proportion of grant requests that are approved.  Scientists used to complain that it was worse than 1 in 3, then it sunk to an unprecedented 1 in 10.  In some programs it closer to 1 in 20 grants approved.   The "pay levels" are at the worst levels since the funding agencies have existed.

So in other words, as with most other special interest groups, research scientists complain about not getting enough public money.  Of course arguments can be made as to why R&D really deserves more money, and why it is more important than this or that competing interest, but then again other groups seeking public money do the same.  As I've stated before, I'm not opposed to all federal funding for R&D, but from my perspective it certainly appears that those involved in R&D constitute just another special interest group (or more accurately, groups). 

[drogulus]

I'm also not quite sure the railroads in the US offer a particularly good model to hold up for those espousing more government investment.

     This is the kind or sneering attitude that drives me up the wall. You really have to forget a whole lot of history to reduce the American experience with creating a continental republic to Amtrak's search for a reason to exist. Yes, some public investment will turn out to be nothing more than servicing a pampered constituency. I don't care. My worry is that the same attitude is used to smother all of the projects, and that exactly what's happened.

     As for military R & D, I'm totally for it, especially in the way Eisenhower perceived it, as a way to get something worthwhile done that might not get funded without a military rationale, like the interstate highways. Of course once you understand this the military purpose becomes shaky. But that's politics, doing good things for bogus reasons so as not to upset the unenlightened. Yeah, tell them its for mobile missile launchers, or to evacuate cities. Machiavelli would approve!

[Scarpia]

So in other words, as with most other special interest groups, research scientists complain about not getting enough public money.  Of course arguments can be made as to why R&D really deserves more money, and why it is more important than this or that competing interest, but then again other groups seeking public money do the same.  As I've stated before, I'm not opposed to all federal funding for R&D, but from my perspective it certainly appears that those involved in R&D constitute just another special interest group (or more accurately, groups).

Well, I find that view puzzling, to say the least.  The federal dollars that are being cut do not personally enrich established scientists, they pay for the research they do and allow new scientists and engineers to be trained.  If you think that scientists and engineers are not economically valuable you can cut federal support for scientific and engineering research and scientist and engineers with disappear from the US economy.   But I think if you look at the employees of Google, Apple, Intel, Microsoft, you will find that virtually every member of their technical staff was trained with direct support from federal research grants.    If the best engineers of the future are trained in India, Korea, China that's where the Apples, Intels, Microsofts of the future will pop up, and in the US we'll be assembling their products and making their socks.   

[Todd]

This is the kind or sneering attitude that drives me up the wall. You really have to forget a whole lot of history to reduce the American experience with creating a continental republic to Amtrak's search for a reason to exist. Yes, some public investment will turn out to be nothing more than servicing a pampered constituency. I don't care. My worry is that the same attitude is used to smother all of the projects, and that exactly what's happened.

Gee whiz, you certainly are just a bit condescending.  And presumptuous.  I wasn't referring to Amtrak at all, but rather to post Civil War railroad construction.  (Please, do point out where I mentioned Amtrak.)  The railroads were critical to the development of the US, but there was a not inconsiderable amount of graft and rather extreme exploitation associated with it.  The positives outweigh the negatives, absolutely, but I'm not sure that holding up 19th Century government policy is particularly valuable now.  In fact, I know it's not.  Your comments on military R&D are also charmingly condescending – no one else but you had any idea that the Interstate Highway system had its genesis in military concerns, specifically Eisenhower's rather bumpy cross-country journey decades before.  Thanks for pointing that out.  You seem to be incapable of understanding that people can be just as aware as you of the history of this country and how the economy works, yet come to different conclusions.

Well, I find that view puzzling, to say the least.  The federal dollars that are being cut do not personally enrich established scientists, they pay for the research they do and allow new scientists and engineers to be trained.  If you think that scientists and engineers are not economically valuable you can cut federal support for scientific and engineering research and scientist and engineers with disappear from the US economy.   But I think if you look at the employees of Google, Apple, Intel, Microsoft, you will find that virtually every member of their technical staff was trained with direct support from federal research grants.    If the best engineers of the future are trained in India, Korea, China that's where the Apples, Intels, Microsofts of the future will pop up, and in the US we'll be assembling their products and making their socks.

Hey, you want more public money for R&D, I get it, but all manner of interests vie for public money, and all provide rationales for why they deserve not only existing funding, but even more funding.  I will say that your response contains more than a whiff of hyperbole.  Cutting public spending does not mean that engineers and scientists will disappear from the US economy, nor does it mean that we'll be assembling neat little products for the Chinese.  Even eliminating it altogether wouldn't result in that.  That's a reasonably good scare tactic, and some people may buy it, but I don't.  Your response is something I would expect a good lobbyist to say or write. 

Also, perhaps you can answer a question I asked earlier: from an end user perspective, why does it matter where innovation originates?  Were I to buy an iPad or something similar, would it really matter if it was designed in the US and manufactured in China (or wherever iPads are made), or vice versa? 

Perhaps I'm in a distinctly small minority, but I'm excited about the prospects for world civilization generally, and for the ease of my life specifically, due to the ever growing number of scientists and businesspeople and entrepreneurs all across the planet.  I see it as a good thing.