Dear Mr. Berko: My wife and I have two questions. Could you please tell us the difference between entitlement spending and discretionary spending? Could you give us examples? Also, could you explain the difference between our national debt and our deficit? Please try to do this without using complicated economic terminology so we don’t have to run to the dictionary. This is for an investment club discussion.
— B.A., Rochester, Minn.
Dear B.A.: Entitlement spending is government-spent funds that can’t be changed without violating the rights of the individuals who claim the funds. We call certain things “entitlements” because individuals have satisfied eligibility requirements set by Congress and are “entitled” to federal government benefits. And thanks to the beclowning of Congress, those benefits always exceed their planned cost. In 2017, our entitlement spending included Social Security ($945 billion), Medicare ($597 billion), Medicaid ($705 billion) and welfare ($444 billion). This totals $2.7 trillion. If our beclowned Congress reduced this spending, it would be political suicide. So we’re morphing into a nanny state because an increasing number of citizens lack the skill sets to provide for themselves. It’s become a fait accompli; technology has advanced to the point at which a growing number of Americans are intellectually ill-equipped to participate in a fast-changing economy. Their earnings capacity will not allow them to buy a home, attend college, save for retirement or pay for health care. They can’t be responsible for themselves. Therefore, the government must become responsible for them. That’s why more and more of the money the federal government spends ($4.1 trillion in 2017) is being consigned to support this growing nanny state. Sadly, many Americans produce less than they consume. And those people must work at reducing their numbers.
Now, after subtracting $2.7 trillion of entitlement spending from the total $4.1 trillion spent in 2017, the remaining $1.4 trillion is called discretionary spending. Here’s what we get for $1.4 trillion. We get the Army, the Navy, the Marine Corps and the Air Force. Then we get government agencies, such as the SEC, the EPA, the ATF, NASA, the VA, the CBO, the SBA, the CFTC, HHS, the DOT, the DOJ, the BLM, FEMA, HUD, the CIA, the FBI, the IRS, the NLRB, TSA, the NTSB, ICE, the NRC, the OMB, the DOL, the Secret Service, Homeland Security and the Library of Congress. This list could continue for pages. It reads like a Boston phone directory. And Americans are getting one heck of a real bargain.
As I said, the federal government spent $4.1 trillion on stuff and things last year. But it collected only $3.6 trillion in taxes. The difference was $500 billion, and that’s the deficit. The deficit is the amount of money the government borrows (selling Treasurys) to cover the difference between the amount of money it spent in a budget year and the taxes it collected. And all those annual deficits added up since the beginning of the republic make up the national debt. When George H.W. Bush was president in 1990, the national debt was only $3 trillion. When Barack Obama was elected in 2008, the national debt was $10 trillion. By December 2009, deficit spending had grown to $2 trillion, and the national debt had risen to $12 trillion. In 2010, deficit spending declined to $1.5 trillion, and the national debt was $13.5 trillion. In 2011, deficit spending declined to $1.2 trillion, and the accumulated national debt stood at $14.7 trillion. In 2012, the end of Obama’s first term, deficit spending totaled $1.2 trillion, and the national debt stood at $15.9 trillion. During Obama’s next term, the national debt reached $20 trillion. So in 2017, for the first time since the Lord made little green apples, the national debt exceeded our $19.3 trillion gross national product. In 2017, we paid over $470 billion in interest on our debt, and interest rates are headed higher. And that’s very scary.
Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 or mjberko@yahoo.com.
