Last spring, Cardi B asked some pointed questions about what Uncle Sam is doing with all her tax money. I rounded up the receipts.
If you ask folks what sets the United States apart from other wealthy countries when it comes to government spending, the first thing they usually say is defense. It’s not a bad guess. For the last 70 years or so, the American military has been providing a security umbrella for its allies in Europe and East Asia. That burden carries with it a hefty price tag.
I also assumed that defense spending was the biggest reason Americans don’t have nice things like affordable college, universal health care, or high-speed rail. In Part 1 of The Bargain we saw that America spends as much per person on government as Germany—a welfare state that offers a more generous array of these public programs and basic services.
I was wrong. The biggest chunk of government spending in America isn’t defense, it’s health care. It’s bigger at the federal level. It’s a lot bigger at the state and local level, where most government spending in America happens. And most surprising of all, we spend more on health care than Germany, Sweden, or any of the other welfare states with universal coverage. A lot more.
No wonder Cardi B walked out of her tax attorney’s office last year fuming and asking for receipts. It took a while to get everything together, but here they are.
Federal Spending
According to data from the National Priorities Project, in 2017 the average American paid $14,520 in federal taxes. At $3,456, defense was only the second-largest item on this bill.
Weighing in at $4,328, health spending is the biggest expenditure on our itemized tax receipt. It soaks up nearly 30 percent of all federal income tax dollars.
Another startling figure that pops out is the national debt. After health care and defense, interest payments on the debt is our third-largest public expenditure at the federal level. This should be a cause for alarm. Projections show that interest payments on the national debt may exceed defense spending as soon as 2023.
Yet federal government spending is only part of the story.
Federal + State + Local
Here’s a fun fact. As of the last census there were 89,004 local governments in the United States. This figure includes counties, municipalities, townships, etc. Tack on another 50 states and a couple of territories and we see that, when it comes to government in America, the feds are just the tip of the iceberg.
Same goes for government spending. If you follow the money trail, you usually end up at the state and local level. Of the approximately $7 trillion Americans spent on government in 2017, federal government expenditures accounted for less than half once you factor in intergovernmental transfers–the money feds send to the states to administer programs like Medicaid.
So how does the story change when you tally up all this public spending across federal, state, and local government?
What we find out is that health care spending is a much bigger elephant still. Out of the $22,083 per person that Americans spent on government in 2016, we dedicated about 24 percent, or $5,380, to health care.1 This is almost triple what we spent on defense.
The second-largest spending category is social protection. These are programs that insure citizens against the destructive side of markets by providing a safety net for out-of-work Americans, the disabled, and the working poor. Included here are government contributions to the Unemployment Insurance Program (UIP) and our public pension system—Social Security. This figure also includes Trade Adjustment Assistance (TAA) for workers who’ve lost jobs because of free trade agreements. Lastly, it includes welfare benefits like Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP), aka food stamps. About 20 percent of all government spending, or $4,4860 per person, goes to these social safety net programs.
Education and miscellaneous government services (including payments on the national debt) come in third and fourth, respectively. Defense spending just barely squeaks past economic affairs and into the number five slot, at around 9 percent of total government expenditures or $2k per person.
How Do These Spending Priorities Compare?
Sizing up total government spending in the US against other wealthy countries, the biggest outliers are health care, defense, and social protection. We spend far more on health and defense, and far less providing a safety net to catch citizens when they fall on hard times.
As we saw above, more than 24 percent of federal, state, and local government dollars went to health care in the United States. By comparison, the average country on this list allocated only about 16 percent of public funds.
This is the shocker. Unlike most of the countries listed here, America lacks a truly universal health care system. Yet, somehow we spend the most on this sector by a significant margin–24.4 percent of all government dollars. In Sweden, for comparison, only 13.9 percent of total government spending goes to health care. This works out to about $2k less per person than the United States.
The second-biggest outlier is defense. In 2016 Americans spent 8.4 percent of all government dollars on national defense, compared to an average of 3.4 percent. We spend between two- and four-times as much as these other wealthy countries.
When you compare public expenditures across all the different functions of government, the biggest casualty of America’s standout spending on health care and defense is social protection.
At 20 percent of total government spending, we spend only about half as much on social safety net programs as many other wealthy economies. This means there are fewer public resources available to help American families when hard times set in.
Adding Up the Receipts
When you take stock of these differences in government spending priorities across wealthy countries, some puzzling questions emerge.
Under America’s bargain we spend much more on government health care than even the most generous of welfare states. Yet we don’t have a robust system of universal coverage to show for it. Why are these other countries able to deliver more services for less money? Are they skimping on quality, or are Americans simply paying more for less?
We also spend a lot more on defense. Two- to three-times more compared to our allies. What do we make of this? Is US defense spending a symptom of bloated budgets? A by-product of the military industrial complex that Eisenhower warned us about some 60 years ago? Or is it the logical result of legitimate strategic threats, combined with free-riding, buck-passing allies who refuse to pay their fair share in confronting those threats? What are America’s security requirements in the 21st century, and how can we meet them without bankrupting the country?
Lastly, what about social protection? What responsibility does government have to provide a safety net when people get old, factories close, or accidents happen? Are there ways government could strengthen these social safety nets without undermining other spending priorities?
The Bargain will tackle each of these questions in turn, starting with the biggest fish. In Part 3 we find out who has the best health care system in the world, and why it isn’t us.
