One half of federal spending goes to Social Security, Medicare and Medicaid while the other half goes to other programs funded with money "borrowed from a foreign land."
Rob Woodall on Tuesday, February 1st, 2011 in a town hall meeting
Congressman offers students math lesson on federal spending
U.S. Rep. Rob Woodall, R-Lawrenceville, recently offered some high school students a lesson in Washington math.
The freshman House member held a town hall meeting with students from Duluth High School in Gwinnett County. The Republican is not fond of the way the federal government is managing its finances, particularly how much it is borrowing to pay its bills and who it is borrowing from.
"Woodall said every nickel that came in during the last two years went to pay interest on the national debt, Social Security, Medicare and Medicaid," the Gwinnett Daily Post reported on Feb. 2. "And every other nickel spent went for things like the environment, parks, homeland security and defense and was borrowed from a foreign land."
A couple of loyal PolitiFact Georgia readers wondered whether what Woodall told the kids was true. His spokeswoman, Jennifer Drogus, told us the Post accurately reported what he said and offered a detailed explanation.
"For the amount of money the federal government receives in tax revenue, at current levels, we can only fund mandatory spending projects [including Social Security, Medicare, Medicaid, etc.] and the net interest," Drogus wrote us in an e-mail. "Right now, our nation’s tax revenue can only cover mandatory spending projects. Therefore, remaining money to cover discretionary spending projects must be borrowed."
The budget deficit and national debt are big issues in Washington, with talk of a government shutdown as Democrats and Republicans debate how to best cut spending. Woodall wants to slow borrowing.
"There’s not a problem in in this nation that can be solved by borrowing more money," Woodall said, according to the Post.
We reached out to a few experts to see whether Woodall’s comments about federal spending were correct or was he sharing fuzzy math with those students.
First, let’s look at how the federal budget works.
The federal budget year begins Oct. 1 and ends Sept. 30. In fiscal year 2009, which ended Sept. 30, 2009, the U.S. government spent slightly more than $3.5 trillion, according to the Congressional Budget Office. A year later, the government spent just under $3.5 trillion. The government is projected to spend about $3.7 trillion this fiscal year.
The federal government separates its budget into two categories, mandatory spending and discretionary spending. Mandatory spending primarily goes toward entitlement programs including Social Security, Medicare and Medicaid. Uncle Sam spends about $2 trillion a year on these programs, according to CBO data.
Discretionary spending accounts for about $1.3 trillion a year. About half of that money goes to the Defense Department. The remainder is spent on homeland security, NASA, the FBI, agriculture, the Census Bureau and hundreds of other federal programs. The rest of federal spending, about $200 billion, is interest paid on the federal debt.
So where does the money come from to pay the bills in Washington? About two-thirds of it comes from you. CBO data show slightly more than $2 trillion a year comes from individual and corporate income taxes and social insurance taxes. The government borrows the rest of the money, about $1.5 trillion during each of the past three fiscal years, by selling securities in its capital markets to make up the difference. That debt is bought by buyers in the U.S. and foreign investors. We’ll talk more about those investors shortly.
Woodall told the students that about half of federal spending goes to those entitlement programs and interest on the debt. The CBO’s numbers show he’s right.
So what about this "borrowed from a foreign land" part?
The CBO says domestic investors own 53 percent (the Federal Reserve owns the largest share) of the federal debt. The remaining 47 percent is owned by investors overseas. China and Japan are neck and neck in terms of which foreign investors have the largest share of that 47 percent, according to the U.S. Treasury Department.
Jason Peuquet, a policy analyst for the Center for a Responsible Federal Budget, a Washington-based group that started in 1981, said the congressman was "roughly in line" regarding his statement that "every nickle" goes toward entitlement programs such as Medicare. The CBO’s numbers show it’s closer to 60 percent.
"That’s a simplification, but it’s fairly correct," Peuquet said.
Peuquet disagreed with the congressman about foreign spending.
"I would say [Woodall] is somewhat off the mark because not all of what we’re borrowing is abroad," Peuquet said.
Craig Jennings, federal fiscal policy director of OMB Watch, a research and advocacy group founded in 1983, agreed.
"If he is implying that all of it comes from a foreign land, that is wrong," Jennings said.
Woodall said in a telephone interview Thursday that he recognized that the majority of the federal debt is held domestically, adding that he owns some Treasury bonds himself. Woodall said his conversation with the Duluth students didn’t go into that kind of detail, just his larger point that much of the debt is owned by foreign countries.
"Don’t think that I’m trying to persuade anyone we’re not buying American bonds," Woodall said.
We conclude that the congressman was essentially correct on how federal money is spent. He said about 50 percent of federal funds are spent on mandatory programs such as Social Security. The CBO’s data show a slightly higher percentage is spent on these programs, but we figure that’s close enough.
As for the congressman’s other point, federal data and the fiscal watchdogs we talked to said Woodall’s comments could leave the wrong impression about the federal debt.
Putting it all together, we rate his statement to the students as Half True.