February 2, 1992
"Federal Spending is at a Peak - Ride the Wild Budget"
San Jose Mercury News
By Timothy Taylor
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NO ONE really comprehends the federal budget; it's just too large. The proposed budget for 1993 would spend $1.5 trillion. I don't believe that most people understand millions very well, let alone billions. And trillions are just incomprehensibility multiplied to new orders of magnitude.

To begin coming to grips with a trillion-and-a-half-dollar federal budget, contemplate the following:

A million seconds ago was a week before last Wednesday: about eleven days. A billion seconds ago is when John Kennedy was elected president, almost 32 years ago. And a trillion seconds ago was about 30,000 B.C., when homo sapiens had just extinguished the Neanderthals and was getting around to making flint tools.

Another example?

The page of newsprint in your hand is 23 inches long. A million of these sheets laid end to end would stretch 180 miles, the amount of a 36-mile round-trip commute during a five-day week; or halfway to Los Angeles, if you prefer. A billion sheets of newsprint would circle the globe seven times, or reach three-quarters of the way to the moon. A trillion sheets of newsprint laid end to end would reach from Earth to the sun, and back.

Gaining perspective on a federal budget exceeding a trillion dollars requires a lofty perspective. Don't deign to notice any tax or spending program measured in millions of dollars. Leave behind the world of nickel and dime, $5 billion and $10 billion issues. For a bird's-eye view of the federal budget, one needs to stick to 12-figure expenditures, those tax and spending programs measured in hundreds of billions of dollars.

Each day this week, an article on this page will focus on one such item: defense, interest, assistance for the elderly, personal income taxes, corporate and excise taxes, and the deficit.

The accompanying charts illustrate the rationale for that choice of topics. Judging by how much it spends on each category, the three main jobs of the federal government are assisting the elderly, defense, and paying interest, which together make up 62 percent of the overall budget. The rest of federal spending is divided into an inchoate mass of programs, including $57 billion for bailing out depositors in savings and loans, as well as foreign aid; science, space, and technology; energy; natural resources and environment; agriculture; commerce and housing; transportation; training and employment; welfare; veteran's benefits; administration of justice; community and regional development; and so on.

On the tax side, personal, corporate, social insurance (Social Security and Medicare), and excise taxes make up 95 percent of the tax take. The gap between spending and taxing, projected at $348 billion for 1993, is borrowed money.

Over the postwar period, federal taxes and spending have taken a remarkably constant share of federal spending. The table above shows the level of federal spending and taxes, expressed as a percentage of the nation's gross national product, since 1950. To interpret the table, it may help to remember that in a U.S. economy estimated at $5.9 trillion for 1992, a single percent of that economy is equal to $59 billion.

Taxes have usually ranged from 17 to 19 percent of gross national product. The tax cuts of the early 1980s reduced federal taxes from 19.7 percent of GNP in 1982 to 18.1 percent of GNP in 1982, but since then, the tax take has again crept above 19 percent. Taxes are now toward the upper end of their historical range, but not above that range.

Federal government spending has been above tax revenues for each of the last 30 years, save for 1969. However, outlays have increased gradually over time, from 18-19 percent of GNP in the 1960s, to 20-21 percent of GNP in the 1970s, to 22-23 percent of GNP in the 1980s. As federal spending has grown, so have budget deficits.

The new budget concedes that federal spending will exceed 24 percent of GNP in 1992, the highest level of spending since World War II.

These sorts of percentages may be comforting or unsettling. High federal taxes have clearly not taken over the economy. Spending is on the rise, as it has been for decades, but the increase is not rapid. Moreover, U.S. government taxes remain the lowest of any developed economies. The total government tax take in the United States, including state and local governments, is about 32 percent of GNP. In Japan, Australia, and Switzerland, the tax take is 34 percent. In Canada and the United Kingdom, 40 percent. In France and Germany, about 45 percent.

On the other hand, nearly one-quarter of the gross national product of this supposedly market-driven, capitalist country is allocated by the single enormous bureaucracy of the federal government. And government spending does seem to be creeping up over time.

Decisions about the federal budget are decisions of global importance. When the U.S. government decides to borrow, that makes less capital available for everyone, everywhere. The global economy should total perhaps $22 trillion in 1992, which means the federal government of the United States spends about one of every 15 dollars in the entire world economy.

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