What The US Government Spent Its Money On Last Quarter
The most vocal justification provided for the disappointing Q4 GDP print by the mainstream was an increase in US government "austerity" resulting in a decline in the government contribution to the economic bottom line in the last quarter (or first fiscal quarter of 2013). Ironically, both total spending and total debt issuance in the past quarter increased, which means that far from being austere, the US actually spent more, not less, i.e., the opposite of austerity.
And while it is true that Defense spending declined by a tiny amount in the past quarter compared to the year ago, it was more than offset by a surge in Medicare and Medicaid, as well as Social Security, or, as they are better known, welfare. And, as the CBO yesterday showed, these two components of US spending, which together account for half of all US spending and which couldn't be funded by all US revenues even if the government spent $0.00 for all other programs, which will soar in the coming years as US society ages, as more workers retire, and as more are reliant on Uncle Sam for the payment of every bill. So the next time someone say that the US has a defense spending problem and nothing else, show them this chart.
Oh, and those concerned about the decline in interest payments on a year over year basis, don't be. Here is the OMB's forecast for what US interest expense will be in the next decade. Needless to say, it is growing fast to quite fast...
... although since by 2022 the Fed will own all US debt and promptly remit it to the Treasury, a condition most prominently observed during the Weimar hyperinflation, it is arguable that the US will have bigger problems by 2022 than what the debt interest payment is.
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