Tuesday, October 14, 2014

The Real, Statistical, Factual Causes of the US Deficit and Debt

A very common and very KEY argument I came across when debating the left is the true and underlying causes of the national deficit, and by consequence, national debt.  Those of us on the right claim it is excessive social spending, those on the left insist it is military spending.  After studying the budget and public finances tangentially, I intuitively knew it had to be social spending.  BUT, I did not know for a fact.  And so I decided to spend my coffee session pulling data from the White House's federal budget data and FRED database to find out, once and for all, what are the true causes of our national deficit/debt.

The issue is not as straight forward as one might thing.  For example, how far back do we go?  1790?  Post WWII?  What percentage of today's debt is caused by which years of deficit the government has run.  In the best efforts of intellectual honesty I looked at the historical "deficits as a percentage of GDP" aiming to find when we started running chronic and serious budget deficits.  I also went post WWII because of the obvious warping effects a global war has on budgets.  And I also chose post WWII because adjusting for inflation and population growth (ie - the majority of today's debt was caused by more recent society, not the 10 million people that lived here 200 years ago).

This resulted in a starting point of 1971.  If you look at deficits as a percentage of GDP it was 1971 that start not only chronic, but significant deficits (and it is here, no doubt, leftists will focus their arguments because the math henceforth is unassailable).

However, before we move forward it is imperative that I issue a trigger warning for any socialists, leftists or democrats reading this.  The following information is factual, math based, and real.  I know these things cause great stress, emotional harm, and psychological damage to leftsits, not to mention are insulting to the leftist community.  If you could have your government-paid therapist or counselor on speed dial, that may help before continuing reading through this article.

So here is the basic data.  The sum of all government spending, by general department from 1971 to 2014, along with their corresponding percentages.

You'll note standard battle lines to be drawn as libertarians and conservatives cite Social Security as being larger than Military spending.  You'll also note the left immediately (and predictably) pointing out "Veterans Affairs" is not included in military spending.  However, the above data needs to be simplified as there are multiple accounts across the general two categories that are being debated as to the cause of our chronic deficits and debt - Military spending and Social spending.  I simplified this chart into four categories.

1.  Social spending
2.  Military spend
3.  Governance (which is appallingly low) and
4. "Other" (where it wasn't governance, social spending, or military.  Namely space agency)

The results confirm what nearly 2 decades of research and common sense would tell you - social spending is by far to blame for the deficits and debt we have today.

But before leftists now scramble to find an excuse (or call their therapist) to explain this reality away, let's us hold on before taking that step and address a tangential issue to this debate that may solve it for both sides - psychology.

You see, in the early days of this blog (and my career) I naively spend hours, if not months, crunching numbers, calculating statistics, and doing so in an intellectually honest manner because I truthfully was concerned about what was truth.  I did not want to have an ideology or a political position and then "force" data to fit my preferences.  I wanted the facts and data to form my political ideology.  However, when presenting data, such as the above, to those on the left, no matter how right it was, no matter how solid and unbiased my ideology, and no matter how apolitical the data was, people on the left simply refused to believe it.

It soon dawned on me the true debate between right and left is not one of facts, data, statistics or reality, but one of psychology.  The left is delusional and puts their religion above all else, including reality.

Therefore, let us cut to the chase.  I know I just wasted the past hour crunching numbers, making charts, and uploading them here.  I know this is going to be as effective as DayQuil on cancer.  So my question to the left is NOT "will you please finally admit you were wrong."  It's going to be;

"Please humor me and entertain me with the mentally ill and cognitive dissonance acrobatics your going to use to explain away this one.  I always get a kick out of watching mentally damaged people ignore reality."

Enjoy that freaking decline.


Anonymous said...

You did waste your time.

The effective method of dealing with the left is to always challenge their motives. Always, always, always. Challenge their motives and eventually you reach a point where they admit they want something for free or they don't want you to have something you have. You'll never change their minds but at least you'll get to define the argument as them trying to justify their envy and hate.

Anonymous said...

An instant classic.
Well done.

Keef said...


It doesn't even look like you took on future unfunded liabilities, which, I think, would bloat the transfer payment category even more.

I realize you just analyzed up through 2014 but I wanted to make that point.

Goober said...

It is important to note that there are many of us that blame BOTH for the deficit.

The logic in saying "NO, SOCIAL spending is a bigger slice of the pie than military spending, so IT is responsible for the deficit and debt!" is sort of shaky.

That's like sumdood with piss-poor finances saying that the reason he's going into debt every month is because of his mortgage payment, because it's the biggest payment he makes every month.

He won't, or can't, consider the fact that the three new car payments and the jet ski payments and the amount he spends on clothes and a cleaning lady and golf matches is also contributing, because they are all smaller expenses than his mortgage, so it must be his mortgage.

And since he has to have a house, the mortgage can't go, right? So he's just going to keep going further into debt, and never fix the problem.

That's stupid logic.

I know that's not the point you were trying to make, but the argument of "NUH-UH, it was YOUR (insert political sacred cow here) that put us into debt, not MY (insert political sacred cow here) that did it!"

It's the classic "either or" logic flaw. Things are rarely "either or."

They are usually "including."

BOTH the amount we spend on our military, AND the amount we spend on social wealth transfers, is way too damned high, and every time we demand a look, all the politicians can do is come up with things that they can cut which are "too small to make a difference, so why bother?"

None of them recognize that when you come up with a thousand of those "too small" programs, you take a sizable chunk out of the budget, wihtout even giving up one single thing related to (insert political sacred cow here).

Anonymous said...

You might want to note somewhere that the amounts shown are $millions (I assume)

nate w said...

If you can't beat em join em. My biggest customers are NASA and the DoD.

Xenophon said...

Given the amount of pork in the Defense budget, probably 40% of that could count as income transfer as well.

leeholsen said...

one of the things that is amazing is the rate of increase in govt. dept. budgets over the years, particularly the last 15. i went into it in detail in my first book, but you can also see it if you search on the heritage's federal spending by the numbers reports.

Marcopohlo said...

Okay, let's get to the arguin', and not from a leftist perspective.

Lots of economists - of which I am one - argue that at base, social spending can be seen as a bribe paid by holders of capital (and let's broadly define that to include things like home ownership or intellectual capital or workforce experience or photogenic faces) to those who don't, and who, because of circumstances (including, say laziness) don't see any chance of changing that.

Seen in this way, social spending is the domestic equivalent of defense spending - properly done, it keeps those who don't have stuff from storming the gates of those who do.

If that's true (and I look forward to arguments on this point) then the real arguments about soical spending are: "is it working? and will it continue to work?"

My own view is that social spending should function in such a way as to ensure that those receiving it stay out of trouble. Which means that social spending should be designed to promote socially acceptable behaviour - getting up in the morning and going to work (even if it's useless work), rather than hanging out in front of the 7-11 or watching soap operas all day.

So: change the social spending so that we can have more sculptors, or interpretive dancers, or folk singers, or even people digging ditches and filling them in again. Sort of like that portion of defense spending that's spent on swabbing the deck and marching up and down the parade ground, rather than actually defending the country.

And lots of people wouldn't mind so much, I don't think, if social spending actually were only as wasteful as defense spending. (Side idea - maybe there should be a large organization, similar to the armed forces, that does this. Just a thought.) As long as it kept the hippies off their lawns.

sth_txs said...

If we simply followed the US Constitution none of this would be an issue. Both parties are scum and should be called The Government Party.

Abolish foreign aide, cut the military to 1/4 and truly defense, abolish scum agencies like the ATF, EPA, DOE, and a number of others. That would be a good start. No need for an income tax either if the Constitution were followed.

Anonymous said...

I though the main real problem with the debt was compound interest.

Captain Capitalism said...


I agree, it is "defense" in that matter.

Unfortunately, it won't work for it is nothing more than "danegeld" AND because of mold theory. Throwing bread at mold only creates more mold.

Anonymous said...

I'm wondering where this fits in, but many of the omnibus laws passed in the past 20 years are little more than jobs programs for selected "non-profits."

I.e., the Patriot Act contained grants for states to "beef up" their local homeland security offerings, the Violence Against Women Act gives out a shit-ton of money to various college/county "family justice centers," as long as they do the government's bidding, as laundered by the Justice Department and/or HHS.

Heck, even the CDC, which you might need to fight Ebola, has been spending an assload on issues like obesity, smoking, guns in the home... think I saw streetlights.

So, while the number of "Federal Employees" is largely unchanged since the '90s, the number of people whose "careers" are solely dependent on gubmint monies are at unprecedented levels.

And if you eliminated all those grants, the general public would of course see no reduction in services.

Xenophon said...

You build pork barrels?

Xenophon said...

A mere three years after the (hologram of liberty) known as the Constitution had been ratified by the Founding Lawyers, the father of the country is at the head of standing army invading a state to put down national tax evaders in the Whiskey Rebellion and four years later the Federal government outlaws seditious speech. It all goes directly downhill from there.- Bill Buppert

Anonymous said...

Interesting that you started in 1971...the year in which Nixon closed the gold window.

Red Knight said...

Okay, time for some "cognitive dissonance acrobatics".

What if there had been no military spending at all? That about 16 trillion which is military+veterans is about the size of the current US federal debt. Take into account that part of the debt is due to compound interest on earlier military spending, and it's pretty safe to say that chucking away that 16 trillion from historical spending would mean no debt at present day, everything else equal. Ergo, it's because military spending took place during the time that the US federal government is in debt.

DA-DAA! said the Joker when he made the pen disappear.

Of course, you can change "military spending" for "social spending" in the above argument, and it works too, even better, leading to a large surplus. Or, you could say that the problem is that the government has had too little revenue, and that if it had just raised the difference in taxes, there would be no debt, ergo, the low tax rate is at fault.

Deficits happen because revenues and expenditures mismatch. Lack of revenue does not in itself cause a deficit, nor does high spending, it depends on how one compares to the other. Blaming either in isolation is a fallacy, assigning blame to either is like that classical Zen riddle about what is the sound that one hand makes when clapping? Which there is no meaningful answer to, since the sound is an emergent effect that requires both hands to be there.

And that's the thing. Nothing causes the deficit in itself, it's the combination of the variables in the equation (tax revenue, social spending, military spending) that does, and any one of them could be held at its current level while simultaneously having no deficit if one or two of the others were changed to compensate.

This might sound like a bunch of intellectual masturbation and irrelevant pedantry, but it needs to be said. If this blog post stayed at just saying "social spending is way the biggest component of government spending, so that's where we should look to cut to balance the budget", then it would have a good point. But it goes beyond that, asserting objective causation of a particular effect (the debt) by a single cause, which is logically impossible since the effect in question is one that requires multiple causes in the first place.

Anonymous said...

"BOTH the amount we spend on our military, AND the amount we spend on social wealth transfers, is way too damned high,"

You don't understand how reality and biology works. You have to pay the tribute, wether you like it or not.

If you cut spending in social wealth transfer you will have no choice but to increase spending in the military because there will be civil war at home.

On the other hand, if you increased social wealth transfer and stop meddling with world affairs, you could drastically cut military spending.

One way or the other, market economies requires that wealth transfers be made or else there is always blood in the street.

Captain Capitalism said...

Red Knight,

Any admission the Soviets or...you know...Belize would have been able to invade us and take over without a military?

Anonymous said...

Captain Capitalism,

We could emulate Switzerland.

Switzerland does not have an army, Switzerland IS an army. Every able bodied man and woman is considered part of the reserve forces.

We could outsource the military business to technology, automation, drones and severely cut costs.

If automation works for the manufacturing industry, I don't see how it cannot work for the killing and destruction industry.

Zachriel said...

Where is interest on the debt?

AB Nihilist said...

Thank you Cappy for taking the time to do the statistical number crunching to prove what we conservatives already know, and what liberal socialists refuse to believe. You are absolutely correct, liberal dogma trumps everything, including facts and reality.

Keep it up brother.

Ryan Fuller said...

I saw a comment the other day that nailed it down pretty well: "The US government is an insurance company with an army. Everything else is secondary."

Anonymous said...

Capn, I don't see why that would be an admission from me, I haven't taken any side on what the cause of the deficit is. Yeah, zero military spending would be unfeasible, but that's a red herring. The statements "Spending item X is a cause of the debt" and "Spending item X is absolutely necessary" are not mutually exclusive.

But seriously, the essence of the leftist position of blaming military spending is, as far as I can tell, not its size compared to other spending items, but rather the notion that such a big military budget is unnecessary and wasteful, and that military spending is way beyond the point where its marginal utility is negligible. The US military budget is almost the size of all other military budgets in the world combined. If ignoring all other NATO countries, the US outspends the entire non-NATO world by a large margin. Even the second-largest military budget in the world, that of China, is just about one eighth of that of the US.

-Red Knight (because for some reason, blogger doesn't let me post under a name atm)