Thanksgiving weekend seems like a good time to ponder the big picture.
Here are a couple of potentially helpful articles. From Newsweek:
The United States has spent nearly $6 trillion on wars that directly contributed to the deaths of around 500,000 people since the 9/11 attacks of 2001.
Brown University’s Watson Institute for International and Public Affairs published its annual “Costs of War” report Wednesday, taking into consideration the Pentagon’s spending and its Overseas Contingency Operations account, as well as “war-related spending by the Department of State, past and obligated spending for war veterans’ care, interest on the debt incurred to pay for the wars, and the prevention of and response to terrorism by the Department of Homeland Security.”
The final count revealed, “The United States has appropriated and is obligated to spend an estimated $5.9 trillion (in current dollars) on the war on terror through Fiscal Year 2019, including direct war and war-related spending and obligations for future spending on post 9/11 war veterans.”
This could explain why many Americans aren’t all that thankful. The economy has grown, but $6 trillion of the growth has been spent on something that does not make us better off.
The federal government spends about $4 trillion per year. Of that, somewhere around $3 trillion is what economists call transfer payments. A transfer payment is when the government just takes money from one person (through taxes or borrowing) and gives it to somebody else. Social security, Medicare, Medicaid, welfare payments, farm programs, corporate welfare, and the like are all transfer payments which simply redistribute money.
Middle-class benefits are an entirely different story, however. The bottom 75% of households by income pay only about 13% of all income taxes. If we define the middle-class as the 70% of households below the top 10% and above the bottom 20% of households by income, the middle-class only pays about 29% of all income taxes, according to IRS data.
Because the middle-class doesn’t pay much in taxes and because they are the largest in number, there is no way to pay for generous benefits for that many people. Today, the middle-class is collecting around $2 trillion per year in federal transfer payments. Yet, even accounting for payroll taxes, they are only paying taxes of $1 or $1.1 trillion per year (29% of all individual income taxes and about 50% of all payroll taxes). Thus, the rich are already fully paying for all the benefits to themselves and to the poor, plus around half of the benefits to the middle-class.
Another reason why we might not be thankful is that many of us expect more than is theoretically possible given the size of our economy. Also, a huge amount of these transfer payments is devoted to subsidizing an inefficient health care industry. So beneficiaries of Medicaid, Medicare, and Obamacare subsidies are not actually benefitting as much as we might expect given the spending levels.