I was thinking about the amount of money that the federal government spends every year, and realized that the numbers get so big it may be tough for a lot of people to grasp. For instance, a million dollars seems like a lot to most of us, and the 2012 federal budget was $3.7 trillion, which translates to 3,700,000 million. Of the 118,000,000 households in America, over 3% could be handed a million dollar check every year by the federal government, instead of the spending that happens. 37 million American households, over 31%, could be handed a $100,000 check from the federal government each year with the 2012 level of spending. That means that in the span of 3 years, virtually every American household could he handed $100,000 by the federal government, in lieu of other spending. I decided it would be an interesting thought experiment to see if America would be better off handing out 37 million $100,000 checks each year to American households, instead of spending that money in the current ways.
This will not be scientific, and it may require a slight suspension of disbelief, but I think it will reveal a lot about the waste that goes on in our government. I know that this would actually just amount to the redistribution of wealth, but the results would probably be better in terms of what gets done with the money. In reality I would not want this to happen, and I know it would be unconstitutional, but just bear with me and we’ll see what we can learn. The first thing that we need to assume however, is that in the absence of federal spending, the states would be able to handle all the necessary responsibilities of the federal government–protecting the border, repelling invasions, courts, and forming interstate law. And also let’s assume that this would not alter the behavior of Americans so that they work less, thus decreasing the amount of federal tax revenue–in reality this would not happen in a vacuum and there would be all sorts of unintended consequences.
First of all let’s narrow our window for which households will be eligible to receive a $100,000 check each year. Let’s cut out the top 10% of households so that only those earning fewer than $118,000 each year will be eligible for the government check. This leaves us with 106,200,000 households that could receive a check. And for fairness sake we will say that you cannot receive another check, before everyone eligible has received one, ensuring all those eligible recieve a $100,000 at least once every 3 years (37 million x 3 = 111 million). Now about 45% of American households each year would have an income of $100,000 or more (and over the course of every 3 years, each American household will have an annual income of over $100,000 at least once). We have barely started our thought experiment and already we have solved poverty in America–even dividing the money evenly between 3 years puts a household with no income other than the government check well above the poverty line. We just eliminated the need for about a fifth of the federal budget that is spent on various welfare programs.
Now let’s see if this money can take the place of other government programs besides welfare. Statistics show that American households with income between $100,000 and $200,000 give about $3,400 to charity each year. This means that every year an additional $125.8 billion will be given to charity (37 million x 3,400 = 125,800,000,000).
Educational institutions receive about 13% of charitable donations, so an extra $16.35 billion will go schools and education. Now remember, we will not have federally funded education under this scenario, so this money will go towards private schools, or provide scholarships, or assist states with public schools. Also remember that no household is below the poverty line in this scenario, so there would be far fewer people who could not afford to send their kids to private school. Still, some may need assistance, and this money will provide that.
Human services charities receive about 12% of charitable donations, so an extra $15.1 billion will be spent on human services every year. This number is dwarfed by the current levels of spending on Social Security and Medicare, but we must remember that there are no “poor” households in America now. Most people will be able to afford to have their aging parents live with them. Other households now have the means to put a little money away each year for retirement, tackling the root of the problem, and greatly decreasing the need for entitlement spending for years to come. $15.1 billon is still a lot of money however, so anyone that falls between the cracks can be assisted with charity, and not suffer in their old age.
32% of charitable donations are given to religious institutions, meaning every year an extra $37.76 billion will go to various churches and religious organizations. This money can be used to assist families with emergency medical bills, to help the elderly, and to provide education in private religious schools. Religion institutions take on a lot of responsibility on the community level for making sure that no one is forgotten by society, and with this extra cash flow they could easily deliver resources to those who truly need them (which will be a much smaller number of people since we already raised every household to above the poverty line).
That leaves another $59.6 billion in extra donations to charity each year. Let’s say that money is donated to local police forces, state government programs, and other programs to help assist the states with their roles where the federal government used to assist. The entire Justice Department spends about $16.3 billion annually, so don’t worry we will still be just as safe with the states handling the courts. Since individual states would be less equipped to raise huge armies and agree with other states about overseas intervention, our current defense spending levels would be unnecessary, because the military would do only what it is supposed to do, repel invasions and respond to legitimate threats–not police the world. The rest of this money could be donated to programs which assist the states in playing nice–building highways, and other things which involve multiple states.
So we have already eradicated poverty, funded education and elderly care, and made sure the states are fully equipped to carry out any responsibilities of the federal government. So far, our thought experiment is showing that there must be a substantial amount of waste in the federal government, in order to not satisfy their goals for educating, helping the poor, and taking care of the elderly. And, we haven’t even started talking about how each household will spend their money (other than charity) to improve the economy. Check back tomorrow for Part II.