Wednesday, September 19, 2012
Federal spending per capita has increased sharply under President Obama, accelerating a trend that began during the Bush years (change!). Note the contrast with spending under previous Democratic administrations and recall that candidate Obama in 2008 promised a net spending cut.
Now let's take a look at what all that spending is going towards:
Once upon a time government spending was focused on providing public goods such as roads, a police force and national defense -- you know, the kinds of things Elizabeth Warren associates government with. Now it's a wealth transfer mechanism.
Meanwhile, as government spending grows, fewer and fewer of us are paying federal income tax. It's interesting to note that from 1950-2000, the percentage of tax returns with zero tax liability never went above roughly 28 percent or below 16 percent, most of the time hovering between 20-25 percent. It's now over 40 percent. Two inflection points are obvious: in 2008 during the advent of the Great Recession and after 2001 following passage of the Bush Tax Cuts for the Rich™.
Yes, that's right -- Republicans are in large part responsible for the big increase in the number of those not paying federal income tax. Perhaps this does not receive much attention because Republicans are not eager to blame themselves for this situation and Democrats do not want to admit that the Bush tax cuts helped anyone besides the rich.
All that said, it is true that many of those with zero federal income tax liability are subject to federal payroll taxes, which were designed as dedicated revenue streams to fund Medicare/aid and Social Security (although FDR also had another purpose in mind for the latter). But there's a problem with that:
As can be seen in this chart, those payroll taxes aren't generating enough revenue to cover the benefits that are slated to be paid out. Thus, those who only pay payroll taxes are not even covering the future liabilities they are generating, while also contributing nothing towards defense, federal courts, cowboy poetry and other vital federal functions. That's a problem.