Friday, July 23, 2010

How much did the government spend last year?(there are 4 correct answers)

How much money did the government spend last year?  You would think that would be an easily answerable question with only 1 correct answer, but there's actually four.    It's important to understand why there are 4 correct answers and the distinction between the different figures.  If you can't, then you can be swindled by pundits and political groups fudging their numbers to make them sound more or less shocking.
Here are the 4 correct answers.
  • 4,397,478$ trillion dollars
  • 3,727,371$ trillion dollars
  • 3,517,681$ trillion dollars
  • 3,000,665$ trillion dollars
So how are each of these technically correct?  Let's start from the bottom and go up.
The bottom two numbers are easy to explain.  The bottom number, 3 Trillion, is the total number of on-budget outlays.  Where as the second from the bottom, 3.5 trillion, is the total number of off-budget outlays.  As I've noted before, off-budget accounts are Social Security and the Postal Service.  Each of these things are supposed to fund themselves, therefore, they are considered "off-budget".

To understand the top 2 numbers you have to understand the concept of an "outlay".  An outlay can represent an account either spending or receiving money.  Congress authorizes certain accounts to make money.  Anyway that the government makes money that isn't a tax is called a negative outlay.  Negative outlays can be selling government land, a business-like transaction, like selling stamps, or could even be interest received on a trust-fund or investment.
These accounts that make money are still considered "outlays" even though they are negative.  Therefore, when the government reports it's total spending it adds up all of its outlays and, as you'll remember from algebra class, when you add a negative number you subtract it from the total.  So how much the government spends is offset by these negative outlays.  The top 2 answers are the total government outlays with the negative outlay accounts removed.

In 2009, the total on-budget spending (with negative outlays removed) was 3.7$ trillion dollars - which doesn't include Social Security or the postal service.  The total including both on and off-budget spending(with negative outlays removed) is the top number, 4.4$ trillion dollars.

So now that you see how there's 4 different numbers, you may see how they can be fudged to fit a political agenda.  For instance, let's say you wanted to shock people with how much the government spends, you could tell them that the federal government spent 4.4$ trillion dollars last year, but only brought in 2.1 trillion in tax receipts.  That would be factually correct, but would misinform people making them thing there is a 2.3 trillion dollar deficit.
Another way a pundit could swindle you is, let's say a politician wants to decrease spending in an area.  He might compare it's spending as a percentage of the entire government.  Now that person would put the percentage against the 3 trillion so that it looks like a larger percentage of the budget is going to one particular program.  Of course if the same politician wanted to increase spending on a program he would do the opposite and compare it to 4.4 trillion to make it seem like a minuscule percentage of government spending.
This is something that should be kept in mind anytime a group reports spending as a percentage of total spending.  Try to find which number they are using to figure out the percentage.  When I report my numbers on this site, I'll try to always be clear which figure I'm using.
Leave a Comment