Congressional Spending Problem in Easy to Understand Format; It's Only Make Believe

Since 2000, how much has your average hourly wage gone up?

If you are in the upper crust, the answer may be staggering. If not, perhaps the following chart more closely resembles your experience.

Average Hourly Earnings 2000-2012



Just the Facts Ma'am

• The average hourly earnings was $13.75 on January 1, 2000.
• The average hourly earnings is currently $19.84.
• Since 2000, average hourly earnings are up 44.29%

Bear in mind, those are averages. Don't be surprised if you are much worse off because of distributional skew (huge wage increases at the high end pull the average up).

Moreover, the above chart does not reflect sales taxes, property taxes, state income taxes, gasoline taxes, fees, etc., all of which are way higher now than in 2000. In other words, the chart reflects average hourly wages, not spendable income.

Actual spendable income is up far less than 44%.

It's a peculiar thing how the CPI does not properly account for tax hikes.

While pondering those thoughts, please consider federal spending.

Federal Spending

The following table will show without a doubt the purported "revenue problem" in Congress, is without a doubt really an "out of control spending problem".

Department	2000	2012 estimate	Percentage Increase
Legislative Branch	2,871	5,253	82.97
Judicial Branch	4,057	7,581	86.86
Department of Agriculture	75,071	150,680	100.72
Department of Commerce	7,788	11,326	45.43
Department of Defense--Military Programs	281,028	688,254	144.91
Department of Education	33,476	98,467	194.14
Department of Energy	14,971	38,998	160.49
Department of Health and Human Services	382,311	871,836	128.04
Department of Homeland Security	13,159	60,443	359.33
Department of Housing and Urban Development	30,781	56,788	84.49
Department of the Interior	7,998	11,241	40.55
Department of Justice	16,846	34,556	105.13
Department of Labor	31,873	127,157	298.95
Department of State	6,687	29,937	347.69
Department of Transportation	41,555	84,135	102.47
Department of the Treasury	390,524	579,618	48.42
Department of Veterans Affairs	47,044	129,186	174.61
Corps of Engineers--Civil Works	4,229	9,184	117.17
Other Defense Civil Programs	32,801	51,991	58.50
Environmental Protection Agency	7,223	9,352	29.48
Executive Office of the President	283	414	46.29
General Services Administration	74	1,083	1363.51
International Assistance Programs	12,087	25,554	111.42
National Aeronautics and Space Administration	13,428	17,637	31.34
National Science Foundation	3,448	8,281	140.17
Office of Personnel Management	48,655	87,462	79.76
Small Business Administration	-421	3,157
Social Security Administration (On-Budget)	45,121	188,552	317.88
Social Security Administration (Off-Budget)	396,169	638,509	61.17
Other Independent Agencies (On-Budget)	8,803	53,199	504.33
Other Independent Agencies (Off-Budget)	2,029	-5,120
Allowances	..........	125
Undistributed Offsetting Receipts	-173,019	-279,289	61.42
(On-budget)	-105,586	-151,066	43.07
(Off-budget)	-67,433	-128,223	90.15
Total outlays	1,788,950	3,795,547	112.17

Problem in a Nutshell

• Average salaries are up 44%.
• US spending is up 112%.

The idea behind this post comes from a friend, Bob Gudas.

The numbers are from OMB Historical Tables. The spreadsheet is from Table 3.1 Outlays by Superfunction and Function: 1940-2017.

I downloaded the excel spreadsheet, hid all columns except 2000 and 2012, then calculated the percentage difference discarding a few columns where the numbers were negative or the calculations infinite.

Military Spending

Wages are up 44%, military spending is up 145%, total outlays are up 112%.

Let's dig deeper.

What are veteran's affairs programs and homeland security? By any rational measure of sanity, those programs constitute defense spending.

How much of NASA is really defense spending? How much of department of education spending is free tuition for those putting in military service? What about the department of state? How much of the cost of building the embassy in Iraq and other places is buried there?

Let's go further yet and investigate the 2012 OMB budget. Specifically, consider the separate budget item of $96.7 billion for "Overseas Contingency Operations".

Where was that line item in 2000?

What about the "National Intelligence Program" at 52.6 billion? Is that not defense?

Let's ignore all of that and simply total up Defense, Homeland Security, and Veteran's Affairs.

• 2000 Total (281,028 + 13,159 + 47,044) = 341,231
• 2012 Total (688,254 + 60,443 + 129,186) = 877,883
• Percentage Increase 157%

I suggest defense spending is out of control, as is nearly everything else.

Medicare and Medicaid

Medicare and Medicaid are not broken out in the spreadsheet, so here are the numbers from the Fiscal Year 2013 Budget (which contains the most current estimate of 2012 spending), and the Fiscal Year 2002 Budget (which contains actual spending for 2000).

Medicare 2000: 200,588
Medicare 2012: 480,202

Medicaid 2000: 117,744
Medicaid 2012: 283,597

Medicare spending is up 139%
Medicaid spending is up 140%

Where's the Problem?

All things considered, what's the bigger problem? Failure to collect more taxes, or out of control spending?

It's Only Make Believe

Regardless of your answer to the preceding question, one thing is for certain: The purported effort to balance the budget is nothing more than an exercise in make believe.

With a tip of the hat to Conway Twitty I offer this musical tribute.



Can we get President Obama, Ben Bernanke, and John Boehner to do remake? If so, we need background vocals. I propose Nancy Pelosi, Dick Cheney, Hank Paulson, Barney Frank, Tim Geithner, along with international rock stars Angela Merkel, Shinzo Abe, and Mario Monti.

We just need one slight change in the lyrics.

People see us everywhere.
They think "we" really care.
But myself, I can't deceive,
I know it's only make believe.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

"Wine Country" Economic Conference Hosted By Mish
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Boehner Scraps Fiscal Cliff Plan "B", Futures Plunge; Why the Surprise?

Lacking Republican support, House speaker John Boehner scraps Fiscal Cliff Plan "B", not that it ever had a chance in the first place.

Representative Rob Bishop of Utah says "The odds go up that we go over the fiscal cliff".

S&P Futures



S&P futures are fluctuating around -20 points or so, but are up 30 points from the initial massive reaction.

Boehner Scraps Fiscal Cliff Plan "B"

Please consider House Scraps Vote on Boehner’s Tax Plan Lacking Support

House Republican leaders canceled a planned vote tonight on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million amid stalled budget talks.

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Boehner, an Ohio Republican, said in a statement. “Now it is up to the president to work with Senator Reid on legislation to avert the fiscal cliff." Harry Reid, a Nevada Democrat, is Senate majority leader.

Boehner said he will call President Barack Obama, said Representative Steven LaTourette of Ohio. A House leadership announcement said the chamber will hold no more votes until after the Christmas holiday and will return "when needed."

"The odds go up that we go over the fiscal cliff," said Representative Rob Bishop of Utah, a Republican. Texas Republican Joe Barton said, "It was just too big a hill to climb."

Why the Surprise?

Does anyone find the cancellation of the vote a surprise? If so, why?

As I have pointed out for days, "Plan B" had no chance of passing the Senate, so it made no difference even if it passed the House.

Here is a clip from a post I did on Tuesday titled Boehner Floats Fiscal Cliff "Plan B".

Significant Differences

• There is a huge gap between $400,000 and $1,000,000 on tax hikes.
• There is a huge gap between $400 billion and a $trillion on entitlement cuts.
• Boehner wants a debt-ceiling deal to include spending cuts for every dollar upped.

Nothing has changed since Tuesday, at any point. Yet, for some reason the market seems surprised by all of this.

For the conspiratorial folks, this is a Wall Street staged event to get Congress to do what it wants.

Regardless, assuming the futures hold, this may be one of the biggest "bull traps" in history.

Nothing would surprise me at the moment, including a "green" open tomorrow morning or a gap down that takes out the low on the overnight futures at 1391, nearly a 60 point plunge from Thursday's close.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Euroskepticism on Rise in New EU Members

The Financial Times reports Newest EU members go cooler on euro.

The enthusiasm for the euro is cooling among the EU’s newest members in eastern Europe, as Latvia’s prime minister warned that his citizens are turning against the single currency.

Valdis Dombrovskis, who led one of Europe’s toughest austerity programmes in part to keep Latvia’s euro membership hopes alive, says he faces a struggle to get the Baltic republic into the single currency by the 2014 target.

“Five years ago before the eurozone crisis everyone wanted to enter the euro, but we weren’t economically ready. Now that we are ready to enter, many have become sceptical,” said the centre-right leader.

Bulgaria, which like the Baltic states has pegged its currency to the euro for a decade and is one of only three EU countries that currently meet the Maastricht entry criteria in full, has recently made clear it has no short-term plans to move towards membership.

Boyko Borisov, prime minister, told the FT recently his government had no plans to join until the eurozone crisis was over. The EU’s poorest country should not have to help fund bailouts of richer states, he said.

“I think for the time being it would be unfair to join the eurozone and to support countries where pensions are higher than the pensions of our people,” he said. “How can we tell Bulgarians, we will take from your pensions in order to pay pensioners in Greece, Spain or Italy?”

In Poland, public opposition to euro adoption has edged up slightly as the eurozone crisis has deepened, with a new opinion poll sponsored by the finance ministry finding 56 per cent of Poles were against joining, up 3 percentage points from a last year.

Petr Necas, the [Czech] premier, has said that his country will not join during this government, whose mandate expires in 2014, and not until 2020 at the earliest, subject to approval by a referendum.

Vaclav Klaus, the eurosceptic Czech president, has called the European Stability Mechanism “a monstrous and outrageous thing” and said this month he would not sign the EU treaty amendment creating the eurozone rescue fund.

Why any country would consider joining the eurozone now is beyond me. Yet, in spite of the fact that 56% of Polish citizens are against the idea, the Polish government intends to ram this mess down their throats anyway.

The Czech president has the right idea, that the ESM is a "monstrous and outrageous thing". Moreover, nannycrat agreements like the ESM are bound to get worse as the Spanish, Italian, and French economies implode.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com