U.S. Budget Proposal Analysis Tool (spending)

I missed this when it came out Feb 1, but an alert student pointed me to it.  The NYTimes has an excellent interactive visual breakdown of the U.S. Federal Budget spending.  It very graphically shows where the money goes and how much.

Link: http://www.nytimes.com/interactive/2010/02/01/us/budget.html

A couple of notes.  First, the graphic shows only spending and transfer payments (outlays).  It doesn’t show offsetting receipts. For example, Social Security payments are one of the biggest categories shown. But Social Security doesn’t contribute to the deficit.  Social Security taxes, which aren’t shown, more than exceed payments made.  Similarly, but on much smaller scale, postage sales which help offset cost of the postal system aren’t shown.

Second, it’s tempting to think that programs eliminated would result in a equal deficit reduction. For example, it’s tempting to think that if $400 billion in programs were eliminated then the deficit would drop by $400 billion.  Not so. You have to consider the macro impact on overall GDP and employment of cutting the program.  Cutting $400 billion in programs might (or might not) actually worsen the deficit if the cuts result in net an overall reduction in aggregate demand and employment.  That’s because the resulting drop in tax collections would offset the supposed savings from cutting the spending program.