How Uncle Sam Spends Our Money

By: 
Al Jacobs

At this moment in time – the opening week of 2019 – the government of the world’s most prominent nation is locked in controversy over the expenditure of five billion dollars. The cause of the fracas relates to a demand by President Donald Trump that the federal legislature authorize the sum so he may build a wall between the U.S. and Mexico to stop illegal border crossings. He contends: “The Democrats, much as I suspected, have allocated no money for a new Wall. The problem is, without a Wall there can be no real Border Security – and our Country must finally have a Strong and Secure Southern Border.” Thus far Congress is not accommodating him.

For those of us whose net worth does not quite reach into the 10-figure category, this may seem like a lot of money. However, when viewed from the perspective of the federal government’s annual receipts, five billion is little more than pocket change. According to the 2019 federal budget, the anticipated revenue for the fiscal year Oct. 1, 2018 through Sept. 30, 2019 will be $3.422 trillion. The sum the president is demanding therefore amounts to a bit over one-tenth of one percent of the funds due to come in. You might expect the two sides involved will quickly negotiate some sort of compromise, but as we know the nation is now involved in what is billed as a partial shutdown of all government activities. What’s really going on?  Is the wall actually of consequence?  Is the amount of money truly of concern?

Perhaps it’s time to take a closer look at what traditionally goes on under the guise of national policy and revenue oversight. Anyone with an inkling of what’s involved in the spending of the trillions of dollars the federal government extracts annually from its citizens recognizes the programs and policies approved are dictated by politics … and not necessarily partisan politics. Whenever large sums of dollars flow, they will go to those parties with the ability to influence the decision makers, irrespective of whether anything of consequence is accomplished.

There’s nothing unusual about this; it goes on everywhere. As a typical example, see how my home state of California managed to blow most of the $9.95 billion from general obligation bonds approved by voters in 2008 for the construction of a high-speed rail project. Since its approval, the project proceeded exactly as its backers anticipated. Untold sums of money went to favored parties for planning, design, studies, environmental reports and the myriad of other boondoggles inherent when government funds exist.

It’s been clear from the beginning California’s high-speed rail could never be economically feasible, and all its supporters, from former Governor Brown on down knew this from the onset. But despite this, its promotion will not end because of one unfavorable legislative hearing, or ominous predictions of disaster, or for any other setback it may experience. As long as there are funds in the till to be passed around, the efforts will continue. Only when all the money is gone will the project end.

We now witness a partial federal shutdown, which commenced at midnight on Dec. 22, over some token money for a wall. It continues as the competing sides play one-upmanship in an attempt to mesmerize the public. Many of the departments and agencies affected claim they’ve reached a breaking point in their ability to go on with minimal disruption. They contend they’re running out of carryover cash and time to prepare checks for the midmonth pay period. The Office of Management and Budget maintains that no federal employee – including those still working without pay – can be compensated for the pay period spanning Dec. 23 to Jan. 5 until the shutdown ends. Furthermore, starting Jan. 1, the Agriculture Department declined to issue new loans for rural development or grants for housing, community facilities and utility companies. Payments are no longer being processed for agricultural research and education projects. Statistics routinely published on commodity and livestock production, as well as economic projections, ceased, as well as U.S. Forest Service work to prevent wildfires, along with staffing for ranger stations and other facilities at the agency’s public recreation sites. And what’s the justification for all this disruption? There’s no valid reason whatever; it’s simply all charade.

I must now offer an apology. Despite describing examples of financial and political nonsense, we really haven’t tackled the fundamental significance of this article’s title – How Uncle Sam Spends our Money. It’s time to get down to bedrock. The U.S. federal budget consists of mandatory expenditures enacted by law (these include Social Security, Medicare, and Medicaid)), discretionary spending implemented through appropriation bills (such as for defense, cabinet departments and agencies), and interest payments on debt. During fiscal year 2018 the federal government spent $4.11 trillion, of which approximately 62 percent was mandatory spending and 12 percent interest – mostly pre-obligated. It’s the remaining 26%, or about $1.15 trillion in discretionary spending, that characterizes whether the political establishment is giving our citizens their money’s worth. I’ll now acknowledge a comprehensive analysis of this would take millions of pages, which I can’t possibly write and you wouldn’t care to read. Instead, I’ve selected – arbitrarily, I admit – a single easily recognizable agency to see how they measure up; I’ve chosen the National Aeronautics and Space Administration (NASA). What will be your guess as to the value the American public is receiving from the expenditures this organization expends on our behalf?

Just so you’ll know, NASA is scheduled to receive $21.546 billion in 2019 – a significant increase over its 2018 funding, and “… setting the agency on the trajectory to rise above and beyond its glory days of Apollo,” according to Rep. John Culberson (R-Texas), former Chairman of the Commerce, Justice and Science Appropriations Subcommittee.

Word from NASA in mid-April, 2017, suggested one of Saturn’s moons, Enceladus, may possess an ocean below its surface, with hydrogen gas pouring into it from hydrothermal activity on the sea floor. It’s also possible the gas provides a chemical energy source for life, so suggests researchers on the project.

So the quest for life goes on, with no bit of trivia too insignificant not to be cited as a basis for renewed endeavor. There’s a problem, of course: In addition to water, life also requires sources of energy to survive. With Saturn and its satellites some 887 million miles from the sun, with an average surface temperature –288 degrees Fahrenheit (–178 degrees Celsius), thus ruling out sunlight as the source of energy, we must relegate any carbon-based life forms to the subsurface. Whatever forms of life may be encountered will not resemble the creatures from Orson Welles’ War of the Worlds. Instead, they’ll be primitive and lackluster. What’s the purpose of this continual pursuit into the cosmos? During the Cold War era justification existed for the space race. We were in competition with a hostile Soviet Union and the technological expertise we might develop could be a factor in guaranteeing our national survival. Here in the 21st Century this is no longer the case. 

Apparently no insignificant bit of substance floating in the cosmos is too small not to engage a spark of interest, as NASA’s New Horizons probe relayed images of a faraway frozen body known as Ultima Thule this past New Year’s Eve. Located roughly 4 billion miles from Earth, this approximately 20-mile long chunk of dust and gas, in deep freeze for the past 4.5 billion years, is believed to be a pristine example of the solar system’s original disk.

You may remember New Horizons as the spacecraft that blasted off from Earth in January 2006, and which gave humanity its first close-up view of the dwarf planet Pluto in 2015. The monitoring team has given their space craft various tasks to complete as it passes by Ultima Thule, chief among them the search for evidence this small cold speck of nothingness is not completely dormant. In its quest for evidence of some form of life, there seems to be no limit to the effort expended or the costs incurred. In short, NASA is simply going through motions; no payback is required.

A final thought: Except for the individuals who profit directly from each make-work project a government agency engages in, I’m convinced there’s little of value to the general public from most discretionary spending. I doubt this is unique to our nation or to this current era; it’s likely the Pharaoh’s Egypt operated much the same way.

Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. You may view them on http://www.roadwaytoprosperity.com

al@beachcomber.news

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