An In-Depth Look At the Federal Budget

"This week, the president announced the creation of a panel to look at the federal budget. As such, it seems appropriate to look at the federal budget in detail to get a sense of what's there. All of the information contained in the graphs that follow is available from the CBO. Please click on all images to see a larger image. Also, all data starts in 1970 and goes through fiscal 2009."

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http://www.fivethirtyeight.com/2010/02/in-depth-look-at-federal-budget.html

"So, what does all of this tell us about the US budget?

1.) The total federal debt/GDP ratio and interest rate payments (both on a percent to total expenditures and percent of GDP) are manageable at current levels. All of this has been aided by a two decade long decrease in interest rates. It's doubtful that will continue given the current pace of expenditures. Most importantly, given the current rate of spending and debt growth, changes will have to be made once we are out of the recession for sure. And that's where the real political problem lies.

2.) While mandatory spending has remained constant as a percent of GDP, it's increase to about 60% of the current federal budget is perhaps the biggest problem the US faces going forward. And as the percentage increase in medicare payments indicates, medical payments are a primary reason for the problems the country faces at the federal fiscal level.

3.) The argument that the US is taxed to death is wrong. On a percent of GDP basis the US is taxed at moderate rates.

4.) I'm surprised how unimportant estate and gift taxes are to the overall scheme of things. Even before the generous estate tax credit of the last few years (essentially exempting estates worth less than $3.5 million), estate and gift taxes are remarkably unimportant from a total revenues perspective. It's obvious they serve another purpose such as the theoretical prevention of dynastic wealth transfer."