Snapshots of the Welfare State

RALEIGH – The Washington-based Tax Foundation has put out a new study of fiscal trends at the federal level. It contains an eye-opening set of pie charts (see here).

The Foundation compares the distribution of federal spending in FY 1963, FY 1973, FY 1983, and FY 1993 as well as a projection of spending for FY 2003. During this 40-year period, you can see dramatic changes in the role of the U.S. government in American life. In 1963, about half of federal spending was devoted to national defense as America confronted the Soviet menace and conducted military interventions in a number of places around the globe. Social Security was the second-largest expenditure, at 14 cents on the dollar, but other programs offering cash or in-kind assistance were a tiny fraction of federal spending.

By 1973, U.S. involvement in Vietnam was trending downward while spending rose for social entitlements, fueled by inflation and congressional expansions of Social Security, Medicare, Supplementary Security Income (SSI) and other programs. National defense had already fallen to 31 percent of the federal budget, Social Security had reached 20 percent, and other entitlement spending (including health, welfare, and federal retiree benefits), was a combined 19 percent.

With Ronald Reagan in the White House in 1983, social spending was surely shrinking and the defense budget surging,right? Not at all. Defense spending had fallen to a quarter of the total, Social Security held its own at 21 percent, and other entitlements – driven primarily by Medicare and Medicaid inflation – had taken off like a rocket, totaling 25 percent of the budget.

In Bill Clinton’s inaugural year of 1993, entitlements had come to comprise the majority of federal spending, including of Social Security (22 percent, again only a slight change from a decade before), Medicare and Medicaid (16 percent), and other income security programs (15 percent).

Now, President George W. Bush is proposing a budget for FY 2003 that would devote a shocking 18 percent to defense – feel free to blame that pesky military-industrial complex. Medicare and Medicaid have now drawn even with Social Security at 22 percent of the budget, making total entitlements (including other welfare programs) almost 60 percent of the total.

As these numbers show, without entitlement reform, there is no way to achieve significant federal tax reduction and to return our government to its proper, constitutional size.