There has been a great deal of discussion about the role of spending in the current deficits of the federal government. Since the most commonly referenced deficit, the unified deficit, is equal to federal revenues minus federal outlays, deficits are affected by all items that affect revenues and outlays. These items include tax rates, economic activity, and spending. Regarding spending, I have posted a number of graphs and tables that look at spending since 2000 at the following links:
Outlays in Billions of Current Dollars
Outlays as a Percentage of GDP
Outlays in Billions of 2000 Dollars
The graph at the first link shows the total outlays and receipts since 1950. The actual numbers from which the graph is generated can be found at def05.html. The rapidly increasing deficits since 2000 appear to be chiefly due to a steep drop in receipts. From 2000 to 2004, receipts will have dropped from 20.9% of GDP to 15.7% of GDP, their lowest level since 1950. Meanwhile, outlays will have risen from 18.4% of GDP to 20.2% of GDP. The projected drop in receipts of 5.2% of GDP is nearly three times the projected rise in outlays of 1.8% of GDP. Further information on the drop in receipts can be found at recsrc.html. The remainder of this article deals with the rise in outlays, most of which occurred between 2001 and 2004.
The second link above shows the outlays as a percentage of GDP. This is a useful measure of the stability (or lack thereof) of the growth in receipts and outlays. Because wages tend to grow at the same rate as the GDP, receipts tend to remain at the same percentage of GDP, given that tax rates and economic activity stay at the same relative level. If outlays can likewise be kept at the same percentage of GDP, then the budget can be kept at the same level of balance.
From the two graphs, it appears that most of the rise in outlays between 2001 and 2004 were in Defense, Health, Medicare, Income Security, and Education. In fact, the table at the bottom shows that, of those outlays that were in excess of the growth in GDP, 60% of them were for Defense, Medicare, and Health (of which Medicaid comprised 76% in 2000). That rises to 73% of excess outlays if Education and International Affairs are included. If Unemployment Compensation, Housing & Food Assistance, and Other Income Security are included, that rises to 85 percent.
Now, if revenues grow with the GDP and the budget is currently balanced, outlays can grow with the GDP and the budget will remain balanced. If the budget is running a deficit however, such a growth in spending will insure continued deficits. For that reason, it's also instructive to look at how spending is growing in constant (inflation-corrected) dollars. This is shown in the graphs and tables at the third link above.
From the two graphs, it once again appears that most of the rise in outlays between 2001 and 2004 were in Defense, Health, Medicare, Income Security, and Education. However, Social Security is also seen to be a factor. The table at the bottom shows that, of those outlays that were in excess of inflation, 63% of them were for Defense, Health, Medicare, and Social Security. Similarly to before, that rises to 74% of excess outlays if Education and International Affairs are included. If Unemployment Compensation, Housing & Food Assistance, and Other Income Security are included, that once again rises to 85 percent.
The graphs and the tables show a marked change after 2004, however. From 2004 to 2009, there is projected to be a double-digit real (inflation-corrected) increase in Medicare, Health, Social Security, Net Interest, and Energy and a single-digit real increase in Veteran's Benefits, Federal and General Retirement and Disability, General Science, and Other Income Security. No other outlay, including Defense, is projected to keep up with inflation. As a group, all other outlays (excluding Undistributed Offsetting Receipts) are projected to decrease from $851 billion to $772 billion (inflation- corrected), a drop of 9.2 percent. Excluding Defense as well, the real decrease is projected to be from $432 billion to $367 billion, a drop of 14.9 percent. The largest percent decreases in real outlays are projected to be in Commerce and Housing Credit (98%), General Government (35%), and Community and Regional Development (33%).