Posts Tagged ‘taxes’

Here’s something to think about:

In 1917 the breakdown in consumption for a typical family ( 38 year old working father, non-employed mother, 13-yr old boy and 8 yr old daughter ) was:

Food – 41%
Housing – 27%
Clothing – 18%
Healthcare – 5%
Transportation – 3%
Other – 7%

By 1987 this had changed to

Housing – 33%
Transportation – 26%
Food – 19%
Clothing – 5%
Healthcare – 4%
Other – 12%

You might ask: how do we reconcile this with the 17-20% of GDP ( ~$8K per person ) that we are spending on healthcare today? First, it’s interesting to note that the average citizen took the money they saved on food and clothing (the basic necessities of life) and ploughed it straight into bigger houses, more expensive cars and (probably) an increased level of entertainment. Along the way, though, we gradually socialized the cost of healthcare so that despite saving 20% of our consumption on food (not to mention the saving on clothing), we are now unable to find that same 20% to pay for our healthcare.

However, I don’t think it is a problem, per se, that we are spending an increasing amount on healthcare. It seems as though it’s a trend that is irreversible and given the continuing decline and commoditization of the other line items in the typical family budget, it shouldn’t come as a surprise. Healthcare is one of the industries where we continue to spend R&D dollars for new products and an expanded menu of options is inevitable.

The real problem is that neither “the American people” nor their elected representatives and the Chairman, are willing to put aside the $8K per person per year that we’re currently inclined to spend. The future price of US 10 yr notes is left as an exercise for the reader.

US consumers need to break their bondage to bling. On the other hand, there is talk of public debt in the US rising from 40% of GDP to 80% and even higher over the next ten years. For perspective on where this would fall on the spectrum of public debt, take a look at the CIA factbook figures on public indebtedness by country.

Bear in mind, that government spending as a percentage of GDP is about 25%.  That means that the public debt will be rising from 160% of public spending to 320% of public spending. That’s some pretty hefty leverage from a government in an age when most “American people” have concluded that leveraging oneself to the hilt is no longer a core component of the American dream.

In very rough numbers (good enough for government work) for 2009:

US GDP: $15 trillion

Federal Government spends 20% = $3 trillion

Breakdown of the $3 trillion

• 20% Defense
• 20% Medicare/Medicaid
• 20% Social Security
• 10% Interest on Debt
• 30% Everything else

The full budget (and historical trends) is available online. Despite the din, not much has changed. The inexorable rise of medicare / social security continues, though. Medicare and social security represented 20% of the federal budget in 1971. Today they represent 40% and growing…