Misunderestimating Our Governmental Economy.

Over the last year or so, the elephant in the room has been our pending budget crisis. So I thought I might post a couple things in relation to any conversation on the subject that everyone should know.

Here is a graph (h/t The Daily Dish) of what citizens say they want cut versus the actual federal budget:
So when talking about spending cuts it is important to know what the main drivers are in our fiscal picture. As you can see above, the overwhelming majority of respondents want to see foreign aid cut. Yet you see how tiny a piece of the budget it is. Basically I think Dr. Krugman, once again gives a succinct way of viewing the basic issue:

The basic picture of the federal government you should have in mind is that it’s essentially a huge insurance company with an army; Social Security, Medicare, Medicaid — all of which spend the great bulk of their funds on making payments, not on administration — plus defense are the big items.

Unless we are willing to seriously address Medicare, Medicaid and Defense spending we have no hope of solving our budgetary issues. It absolutely is going to take some combination of spending cuts and tax increases to dig out this hole.

-Cheers