Treasury’s February budget statement is a great reminder that our
“government” is much less a government than it is a sort of financial
clearing house. To recap:
A full 75% of government spending is made up payments under
Social Security, Medicare and Medicaid, interest on the debt, government
employee benefits, and defense. Take away defense, and you’re left
staring at a huge portion of the government that delivers a single
service… checks in the mail.
It’s hard not to be at least a little sympathetic toward the remaining
25% of the government, which funds the justice system and other
possibly useful things that could be more adequately described as
“services.” But of course even this portion does a fair share of writing
checks. No less than 43% of the Department of Education’s spending in
February was student aid checks. A majority of spending at the Housing
and Urban Development was rental assistance checks. And more than
80% of the Department of Labor’s spending in the month took the form of
If it were just the government handing us back our own money, it
might not be a big deal. But it is a big deal. Government is an inefficient
middleman. Government decides who gets money and who doesn’t. And
more importantly, government involvement allows the collective “us” to
pay ourselves more than we put in, since the government can take on
huge levels of debt.
This trick has to stop working at some point. Treasury’s statement
today revealed a staggering $764.5 billion deficit in the first five months
of fiscal 2009. The government already uses 8% of all its spending to
pay interest on the growing debt, and it will surely rise to 10%, 12% or
higher in the years ahead.
Many perceive government as an entity that is “doing things.” But
really, government is our sugar daddy. Here’s hoping your withdrawal
symptoms aren’t too bad if and when the government can no longer get
you a fix.