By: Brian Riedl
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In the triumphant return to this blog, I am reviewing a "thrilling" book about the fiscal maw and the impending Olympus Mons-es of debt coming the way of the US (and a bunch of the glorious details that make up these gargantuan sums). As one of the literal dozens of people in the US concerned with fiscal responsibility, Riedl's 2021 Chart Book was a fantastic mix of "oh, this is what's been driving the debt over my life" and "this problem won't be addressed until we have a debt crisis - yay." Given this is a book on charts, I will cover the charts I found most insightful; however, if you are reading this and find these charts insightful do please read the chart book, as it is only 118 pages. (You can also view the charts in a better resolution.)
I. Debt, Deficits, & Spending
Here Riedl compiles all of the deficits the US Federal Government has run since 1930, normalized those values to their respective year's total GDP for the US, and expressed that value as a percent. We see that in times of crisis (Great Depression, WW2, Great Recession, COVID Pandemic) the federal government goes deep into the red, which is what we would expect it to do. The one caveat appears to be the 1980s, and those figures will be analyzed later.
This chart depicts all Federal spending and revenue annual values normalized as percent of GDP. Here we see that tax revenues remain relatively consistent as a percentage of GDP, whereas spending has almost always exceeded revenues in the past 60 years. Note the projections for post-2020 spending and revenue come from the Congressional Budget Office (and includes the estimated revenue value should the 2017 tax cuts keep getting extended).
This chart maps out the history of discretionary spending in the US since 1962, again normalized as a percent of GDP. Discretionary spending is all federal spending that goes through the regular Congressional budget and appropriations processes. Typically, discretionary spending is broken down into two parts: Defense and Non-Defense (as it is done here). The Vietnam War and the Reagan Cold War buildup saw large amounts appropriated to defense spending, but since roughly 1994 defense and non-defense discretionary spending have remained roughly equal in their total dollar costs, with pandemic non-defense discretionary spending having a large increase for 2020 and 2021.
The above chart shows the growth in non-defense discretionary spending compared to defense spending, this time in inflation-adjusted 2021 dollars. Averaging the rate of increase from 1990-2021, non-defense discretionary spending's rate of increase is quadruple the rate of increase for all defense/war spending. If you wish to exclude the pandemic spending, in 2018 non-defense discretionary spending exceeded defense discretionary spending (link).
This chart shows the major parts of 2019 federal spending and revenues, which includes figures for mandatory spending. Mandatory spending, which includes most entitlements/social programs like Social Security and Medicare, are spending programs whose expenditures are not subject to the regular Congressional appropriations process and are automatically funded by the government. If the government "shuts down," mandatory spending is not impacted - only discretionary spending is. Here we see social programs dominate the majority of federal spending, while various forms of income taxes encompass nearly all federal revenues.
These pie charts show how the percent of the federal budget mandatory vs discretionary spending has changed from 1965 to 2021. Today, the vast majority of federal spending is mandatory spending.
This chart shows the changes in federal spending among its largest components from 1962-2019 as percents of total federal expenditures. Note that Defense and most of the "Other Programs" category encompasses all of discretionary spending, while all other spending is mandatory spending.
This chart shows the projected breakdown for federal deficits through 2031. Deficits in Social Security and Medicare (which are their associated revenues minus their associated expenditures) are by far the largest factor in determining future deficits. The impact of extending the 2017 tax cuts as well as all other spending program deficits are also shown.
The chart above shows the history of federal spending on all anti-poverty programs in several large categories expressed as a percentage of that year's GDP. Total anti-poverty spending by the federal government has generally increased regardless of what party controlled government, with health care spending taking the lion's share of anti-poverty spending.
The above chart shows current projections in the total cost of interest on all federal debt based on the current 1.9% interest rate. The chart also shows how interest rate increases of 1 and 2 percent would greatly increase federal spending on interest on the national debt. Note that interest payments on the national debt are part of mandatory spending.
II. Proposed Spending and Taxes
The above table depicts all of the potential revenue the federal government would receive if a litany of American Progressive tax increases went into effect (over the next ten years). Note that even if all of these were to pass Congress, the projected revenue these taxes would raise would not cover the currently projected federal deficit for those ten years (ignoring potential spending increases Congress is currently considering).
This table depicts the savings that could be acquired from enacting various tax proposals to address the shortfalls for Social Security and Medicare. Note that the most impactful proposals (10% increase across all incomes) are also the most politically challenging.
The above table lists all of the new spending (over the next decade) President Biden proposed while running for president in 2020, which is roughly $11 trillion.
As the chart above shows, Biden's campaign proposed roughly $2 trillion in new taxes. For comparison, Hillary Clinton proposed roughly $2 trillion in new spending and new taxes in her 2016 campaign.
The above table depicts the rough maximum and minimum costs various Progressive spending proposals would have over the next decade. Note these would be on top of the costs for existing federal programs.
This chart shows that the largest benefactors from Progressive proposals to make public college "free," forgive student loans, and repeal the State and Local Tax (SALT) Cap would overwhelmingly be high income individuals and relatively high income families, not the impoverished people and families Progressives claim these proposals help.
III. More on US Taxes
Since the following charts will cover federal taxes, here is again the chart comparing federal revenues to federal spending.
This chart shows that there has been no correlation between the value of the highest income tax rate and revenues collected through income taxes (as a percent of GDP). The highest tax rates have largely decreased since the 1950s (where it was around 90%) to roughly 70% throughout the 70s to roughly 40% since 1990. Meanwhile, income tax revenues have stayed between 7.2% and 8.2% of GDP (broken down by decade in the chart).
This chart shows how US corporate taxes compared to corporate taxes from other nations in the Organization for Economic Cooperation and Development (OECD).
Before the 2017 tax cut to the corporate tax, the US had the highest corporate taxes in the OECD by far. After 2017, US corporate taxes are now slightly above the OECD average of all other member nations of 23% for 2020 and 2021.
Here is the table that shows the proposed revenues from various potential tax hikes that could be used to address deficits to Social Security and Medicare (largely the same table as earlier).
IV. The US Tax Code
The above chart shows how the burden of taxes has fallen on each income quintile from 1979-2018. The top quintile tax burden almost consistently increased while the other four quintiles's tax burdens almost consistently decreased.
This chart shows that the tax burdens for each quintile when tax refunds are incorporated into each quintile's tax burden.
This chart shows the history of the "progressivity ratio" for each quintile and the top 1% for the US since 1979. As the footnote for the chart says, the "progressivity" ratio takes all individual income taxes paid by a group and divides that by all the individual pre-tax income earned; this helps to control for income inequality.
V. About the 1980s, Bush, and Obama
The above chart shows that the driver of the deficit in the 1980s was not tax cuts but rather increased spending (and compares these values to the preceding three decades).
This chart breaks down where the spending increases in the 1980s originated: primarily with Social Security, Medicare, and interest on the national debt.
The above chart shows that the collapse of the Soviet Union resulted in the 1980s defense buildup roughly paying for itself through reductions in defense spending in the 1990s.
The table above shows the huge growth in deficits that occurred under President Bush.
This table shows the growth in deficits that occurred during the Obama Presidency.
VI. Conclusion
I tried to comment as little as possible and let the numbers speak for themselves. I share Riedl's concerns for the absurd fiscal irresponsibility that is currently plaguing the nation while also knowing the nation has zero interest at present at tackling said irresponsibility. The last thing I will say on the matter is this: it is noteworthy that the spending increases that occurred during the Great Recession triggered the start of the "Tea Party" movement that was ostensibly about federal fiscal irresponsibility, yet the deficits of the last five years that roughly equaled or surpassed those in the Great Recession did not trigger a call for fiscal responsibility in the country.
Lastly, if you made it this far through the dozens of charts I copied you should go read Riedl's Chart Book. He has literally many dozens more of charts that help paint the current, past, and future fiscal landscapes in even greater detail.
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