Where Does Taxpayer Money Go?

The U.S. federal government is a vast abyss of obscure departments, agencies and divisions. It currently spends about $3.8 trillion/year for which U.S. taxpayers are held payable.

Do you ever wonder where all your money is going?

For example, most people don’t know the fiscal cliff deal just completed contains about $96 billion in temporary new spending unrelated to the fiscal cliff itself. That amount is five times more than the first year revenues got from raising the base tax rate for the rich. Yet, raising taxes on the rich dominated the headlines.

How can ordinary citizens keep tabs on wasteful government spending?

Being a mammoth bureaucracy, when it comes to spending money, the federal government doesn’t have just one place to look. It has three:

Lets look to see what roll each played in the fiscal cliff deal.

Each organization serves a different master. Every time new legislation comes along affecting spending, one or more of these three organizations will produce a 10-year budgetary cost impact analysis for it.

Office of Management and Budget

Within the separation of powers, the executive branch (the President) is responsible for creating and submitting a budget to the legislative branch (Congress). The legislative branch is responsible for allocating funds for the President’s budget.

The OMB assists the President in all matters related to budgeting, spending and policy. It is the oldest of the budgeting organizations. It was created during the Harding Administration in the early 1920s. The OMB Director is a member of the President’s cabinet.

The OMB produced a budget policy cost analysis of the fiscal cliff legislation so that President Obama could then claim $737 billion in deficit reductions in speeches:
Deficit Reduction in the American Taxpayer Relief Act of 2012 (H.R.8)
– White House Office of Management and Budget, 1/1/2013

What is ridiculous is that, on the same day, the CBO produced an analysis showing the deal would add nearly $4 trillion to the deficit!

Its most fascinating stat is that the tax increase on the rich (+capital gains change) will only raise $18 billion in 2013. President Obama won’t tell you that part in speeches.

The Joint Committee on Taxation

The JCT was formed a few years after the OMB. Though non-partisan, it operates directly under the supervision of both houses of Congress.

In each two year session of the House, the JCT is chaired the first year by the Chairman of the House Ways and Means Committee and vice-chaired by the Chairman of the Senate Finance Committee.

In the 2nd year the roles are reversed.

As the name would imply, the JCT is intimately involved with every aspect of tax legislation. Change taxation and the JCT gets involved. Staff work directly with members of Congress.

For example, the fiscal cliff deal made changes to tax law. Therefore, the JCT did its own analysis of the tax part of the legislation. That analysis can be found here:
Estimated Revenue Effects Of The Revenue Provisions Contained In An Amendment In The Nature Of A Substitute To H.R. 8, The “American Taxpayer Relief Act Of 2012
– Joint Committee on Taxation, 1/1/2013

What it did that nobody else did, was identify the exact $$ cost of many of the individual pork barrel spending items.

From it we learn that the Puerto Rican rum runners get $222 million, teachers got $406 million for classroom supplies and NASCAR got $78 million.

JCT analysis did not include the $30 billion of new spending for extended unemployment benefits because that did not require changes to tax laws.

The Congressional Budget Office

The CBO is the new kid on the block.

It’s also non-partisan, but more comprehensive in its function.

The CBO came out of a squabble between the Executive and Legislative branches of government over budgetary authority during the Nixon Administration. Congress was then firmly established as the spending authority.

From that dispute, the CBO was formed to provide comprehensive cost analysis to Congress for all legislative spending bills. JCT only analyzes tax changes.

The CBO gives the 10-year total cost analysis of every spending bill in Congress.

For example, the fiscal cliff deal was Congressional bill H.R. 8 amended by the Senate on New Year’s Day. The CBO cost analysis for it is found here:
Budgetary Effects of H.R. 8, the American Taxpayer Relief Act of 2012
– Congressional Budget Office, 1/1/2013

It is here we learn that it will add $4 trillion to the deficit over 10 years… a sort of “grand bargain” in reverse.

Though comprehensive, it lumps all costs of each section of a bill into one line item. Thus, individual pork barrel items are not usually priced out individually. For the fiscal cliff deal most of those are in the $63B section called “Title III – Business Tax Extenders” and two other sections. The JCT report gives more detail.

Conclusions

There you have it. The first places to go look to find out how the federal government is spending your tax dollars in new bills. None are easy to navigate, but the data is out there.

The OMB serves the President. The JCT, supervised by Congress, handles all matters involving tax law changes. The CBO provides Congress comprehensive cost analysis on legislative spending bills. The CBO and JCT are non-partisan. All serve different functions.

Another little wrinkle is, if sequestration happens, the OMB will decide where specific cuts will be made, not Congress.

There are a lot more other places hidden within the nooks and crannies of big government for spending information, but these are the three main places to start with.

The federal government spends about 24% of GDP. That is a lot of mula and its all your responsibility to pay for it.

Our citizen obligation is to watchdog federal spending. The OMB, JCT and CBO are good places to start watching.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Jan 8, 2013, in Business, Debt crisis, economics, Economy, Government, news, Opinion, Politics, Taxes, Thoughts. Bookmark the permalink. Leave a comment.

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