Crows in November
Minneapolis attorney Gregg J. Cavanagh weighed in on the politics of government spending, complaining that we live in an “allocation nation,” one in which most don’t pay their fair share. It is a problem, he argues, because tax payers don’t understand the problem, especially the inefficiencies, and Democrats are eager to capitalize on that. Republican wisdom and leadership, however, can set us on a more efficient and just course.
While Cavanagh has some stats correct, his overall analysis is wrong and his conclusions misleading and simple-minded.
Cavanagh suggests — based on total annual federal, state, and local tax expenditures exceeding $6.6 trillion — that anyone paying less than $54,000 in annual taxes is enjoying a subsidy from other tax payers. These numbers represent the proportion of the total of annual government spending and I suppose Cavanagh is right in that regard when he says “a majority of American households do not pay anywhere near their pro rata share of government spending.”
Right off the top we have problems with Cavanagh’s pro rata analysis. When measuring who pays what in taxes against what they receive in government spending, the amounts vary greatly depending on where you live. Just looking at Federal spending and measuring benefit based on what state a person lives, someone living in Texas receives a greater “subsidy” than a person living in New York.
But let’s stick with Cavanagh’s numbers — in the end they don’t matter much anyway — he is critical of this apparent subside because he seems to think that households receive at least $54,000 of direct government benefit they would not otherwise receive if it were not for the “tremendous inefficiencies” of government programs.
Cavanagh’s argument goes off track early and often, primarily by conflating all government spending into one pot and then correlating it directly to household support. He tells us, for example, that “about 52 percent of American households receive benefits from one or more government programs” to expose these so-called spending inefficiencies. That argument is misleading.
Let’s look at Federal spending. In fiscal 2013 the Federal Government spent over $3.5 trillion. About half of that spending went toward Medicare, Medicaid, and Social Security. Keep in mind that a full third of federal tax revenues come from Social Security taxes, which are capped; it is supposed to be a fully-funded obligation. However, over the years, political issues have muddled the funding of these programs. These should be benefits paid to tax payers who have contributed via taxes to the budgets for these services. There’s nothing wrong in that.
Another 18% of Federal spending pays for defense and about 30% goes toward other mandatory spending, everything from education, food assistance, environment, energy, infrastructure, transportation, and other necessary business of the government.