Memes of Misinformation: Federal Spending

Unraveling the controversial, socio-economic and political issues behind those annoying social media memes

Julio C. Castañeda Jr.

• Publisher: Vernon Art and Science Inc.
• Year: 2017
• ISBN:
  9781622733200
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Communication Policy
• Index: Politics & International Relations

In this first installment of the Misinformation series, the author tackles complex socio-economic and political topics related to the economy of the United States, such as the federal budget, wasteful spending, the national debt, unemployment and social security. By breaking down each subject into layman’s terms, the author clearly and concisely presents, in an unbiased manner, the facts behind the fake news, half-truths and general misinformation from the annoying headlines and memes cluttering social media on these volatile subjects.

Final words

We have covered considerable ground on the state of affairs in Washington and the factors that have affected budgets and spending. We started as an aspiring nation 240 years ago, with mostly a state-driven economy and budgetary process. Our founding fathers insisted on allowing the states to make their own decisions. Over the first 80 years, the nation expanded quickly, and the country found itself divided. The Civil War raised the stakes on the Union, and the post-conflict government doubled in scope and size as the country rebuilt. The nation continued to grow as did the need for more federal involvement to establish the necessary economic infrastructure, which steadily increased the budgets and spending. The final tipping point came after the Roaring 1920s exposed all the weaknesses of a nation in dire need of governmental intercession in the form of social reform and financial oversight. A man destined for greatness emerged to redefine our country’s future from the polio-driven discomfort of a wheelchair. Against overwhelming financial odds from The Great Depression, and then literally fighting for the future of the world during WWII, the US emerged victoriously, and along the way, FDR established the federal system as we know it today.

In the final analysis, no matter what person or which party presided over our nation, it seems that events of greater importance have molded the spending patterns of the federal government. Wars, as we noted, have had an enormous influence on our nation’s debt and deficits, continually ratcheting the bar on spending. The War for Independence brought a hefty price in debt, which took nearly 60 years to pay off. A determined Andrew Jackson took it upon himself to eliminate the national debt, only to see his efforts go to waste in short order. The Civil War, World War I, and then World War II raised the stakes on the debt into the hundreds of billions of dollars. The Korean War, Cold War, Vietnam War, the First Iraq War and then, more recently, the Afghanistan War, the Second Iraq War, and the ongoing War on Terror have driven the national debt to the brink of the $20 trillion mark.

Similarly, large-scale economic events have also had an impact on federal budgets and spending, both positive and adverse. Post-war periods typically brought phases of extended economic prosperity, as the country focused on rebuilding, most notably the Roaring 1920’s and the Baby Boomer era after WWII. In the second half of the 1990s, unprecedented tax revenue from the dot-com bubble and tech boom almost generated the first surplus since 1969. On the downside, The Great Depression, The Great Inflation, and the Great Recession have gone down in history as significant markers that shaped the fiscal policies of our nation in the 1930s, 1970s, and 2000s.

Since its founding in 1913, the Federal Reserve, we found, has had a profound and lasting influence in shaping the national economic destiny, also for both good and bad. The initial (and dreadful) response to the market crash of 1929, exacerbated the conditions that extended what could have stopped at a deep recession into a decade-long Great Depression. In the 1970s, the abandonment of the Gold Standard, a counter expansionary monetary policy, a never-ending war and global oil shortages, set off a series of events that led to stagflation then The Great Inflation, peaking with double digit unemployment and interest rates hovering near 20%. Finally, deregulation in the 1990s directly caused the housing bubble a decade later, imploding the market and pushing the economy into the Great Recession.

Our analysis showed that ultimately one factor drives the size of the economy – the exponential growth of the population of the US. More people translates into more consumption, investment, and spending into the economy, which means more production. Regardless of the economic ups and downs over the last 240 years, our nation’s economy always bounced back to what seems like a predetermined exponential trend. Therefore, in order to fairly analyze and compare different administrations, we employed the often-used financial methodology of baselining the annual budgets and spending relative to the GDP, while also normalizing for monetary inflation. This technique leveled the playing field so that we could equitably assess and contrast economies across changing times and life during different epochs.

Using this method, we found three distinct eras in the historical budgetary process of the US going back to Revolutionary War. In the pre-Civil War era, the federal budget floated at ~2% of the GDP. From the Civil War until The Great Depression, the government spending increased to ~4%. Then FDR raised the stakes five-fold to the current level of the modern economy, ~20%.

Try as we may lend credence to the political machinery of Republicans and Democrats claiming fiscal and social supremacy, in the end, our investigation proved conclusively otherwise. The budgets, spending and debt compiled by both parties have not differed in the least, going all the way back to their founding presidents, A Lincoln and A. Jackson. It seems no matter which party controls the White House, the budgets and overall spending follow a pre-ordained path.

Not only the overall spending but, surprisingly, also how the GOP and Dems spent money did not differ statistically. Sure, a few presidents temporarily altered the status quo in discrete areas, such as FDR’s New Deal, Johnson’s War on Poverty, R. Reagan’s Star Wars military spending, or B. Obama’s Affordable Care Act. However, in the overall scheme of budgets in the trillions, a few billions here or there hardly even registered a significant blip in the overall statistics of the spending timeline.

When we broke down the ten federal budgetary categories by administrations since FDR, we stumbled upon several startling facts. Defense spending has dropped significantly since it peaked at 17% of the GDP during the Second World War, reaching steady state at ~5% since the turn of the 21^st century. Pensions, Health Care and Welfare, have continued to grow steadily since FDR and currently account for about 70% of the mandatory spending. Considering the size of the national debt, not surprisingly, Interest now ranks as the fourth highest of the ten buckets. Education and Transportation each earned a pitiful ~1% of the GDP in annual budgets. It is no wonder that our schools and country’s infrastructure are in dire need of an overhaul.

We also found how foreign entities own about a third of our debt, with China and Japan owning the largest chunks. The Federal Reserve, in turn, owns 13.6% of the debt, mostly from quantitative easing actions since the 2008 market crash. However, the ever-growing pink elephant in the room continues to raise concerns – we owe IGH ~30% of the debt as of 2015. This never-ending thirst to ...