Understanding the Real Use of Federal Tax Revenue: Beyond Military Expenditures and Social Welfare

The pervasive narrative surrounding Federal tax revenues often revolves around common expenditures like military funding and social welfare programs. However, a deeper dive into how federal tax revenues are allocated reveals a more complex and, in some cases, concerning picture.

Interest on National Debt

At the heart of federal tax revenues is the interest on the National Debt. This allocation is perhaps the single most critical aspect of federal spending, as it dictates the nation's borrowing capabilities and, in turn, its fiscal policy. By paying interest on the debt, the government ensures that it can continue to borrow and spend. This cycle can be dangerous, as increasing debt can lead to higher interest rates, higher taxes, and an overall strain on the economy.

The Problem with Medicaid Spending

The second significant area of federal tax revenue allocation is related to Medicaid, a matching grant program under the Affordable Care Act. Despite the declining number of individuals on Medicaid due to job acquisitions, there is a concerning trend of increasing Medicaid spending. This increase is attributed to various factors, including bureaucratic costs, pharmaceutical and insurance companies, and hospital and IT expenses. The core issue here is the ever-growing bureaucracy and the untargeted distribution of funds, which often leads to overspending.

Other Major Expenditures

Other major categories of federal expenditures include the military, government salaries, infrastructure, and social security. Let's break these down:

Military Expenditures

The military receives a significant portion of federal funding, including premium health insurance for politicians, security for the president, and pensions for members of Congress. Additionally, there is a wide range of expenses related to weapons, including the cost of MOAB (Massive Ordnance Air Blast) bombs and the resources needed to print federal regulations.

Infrastructure and Social Welfare

In terms of infrastructure, the federal gas tax is supposed to fund road maintenance, but it often falls short. The same applies to the postal service, which also relies on tax revenues. Furthermore, there are numerous social welfare programs like food assistance, TANF (Temporary Assistance for Needy Families), health insurance for the poor, elderly, and children (Medicare, Medicaid, and CHIP), and Social Security, all of which necessitate significant tax revenue. While Social Security was intended to be self-sustaining, its funds have been integrated into a general fund, subject to Congress's discretion.

The Reality of Fund Distribution

As evidenced by the above, federal tax revenues are not compartmentalized into distinct pots for specific purposes. Instead, they are widely distributed and used as needed. When funds are primarily funneled through income taxes and other fees, it creates a scenario where the government can borrow and spend beyond what is actually collected in taxes. This practice might, paradoxically, lead to a larger deficit, as the government pays for current expenses with future taxes and borrowed money.

The Solution: Adapting to a More Sustainable Fiscal Model

To ensure fiscal stability and a more transparent allocation of resources, it is crucial to reassess and reform federal spending policies. This includes:

Corrective measures for Medicaid to balance spending on necessary services while reducing bureaucratic costs. Targeted military spending that focuses on efficiency and value for money. Improving the infrastructure of tax collection and expenditure to ensure that resources are allocated effectively and transparently. Ensuring that social welfare programs are sustainable and adapted to changing economic conditions.

Ultimately, a more sustainable model would prioritize fiscal responsibility and streamline the allocation of federal resources to better serve the needs of the nation.