NCPA - National Center for Policy Analysis

Grasping the Federal Budget

April 20, 2011

Taxpayers might have strong feelings about government spending, but most have no idea what the huge, abstract numbers in the federal budget mean to them personally.  So most of us pay our taxes, vote on occasion, and let the politicians deal with the dollars, says Emily Skarbek, a research fellow at the Independent Institute.

But how can we understand how much those nine- and twelve-zero government programs really cost us?  Skarbek set out to answer that question recently as part of a team affiliated with the Independent Institute.

  • Consider a hypothetical Philadelphia area resident who is 37 years old, has a college degree and earns $45,565 annually (Philadelphia's average per-capita income in 2009).
  • Based on current tax rates and a projected life span of 80 years, that person will pay more than $420,000 in taxes to finance federal government spending over the rest of his or her lifetime.
  • If invested over the next 43 years, that money could be worth much more than $1 million.
  • Of their hypothetical worker's $420,000 in taxes, $58,658 will pay interest on the federal debt.
  • Administrative costs and personnel benefits will cost him or her $22,972.
  • He or she will pay $53,146 to finance national defense; $52,238 for Medicaid; $32,746 for welfare; $84,272 for Medicare; and $85,637 for Social Security.

Federal spending is out of control partly because most taxpayers don't understand how much government really costs them over their lifetimes.  And politicians talk only of billions and trillions -- abstract numbers that are difficult to comprehend.  But those huge numbers do mean something.  They mean families must struggle to pay not only their own bills, but also the government's, says Skarbek.

Source: Emily Skarbek, "Grasping Budget's Billions and Trillions," Philadelphia Inquirer, April 14, 2011.

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