Average US worker pays $14,460 in tax; government spends $16,897.
To begin with the revenue side, the average employed worker paid $12,748 to the Federal government in the fiscal year ending September 2009. The
company he or she works for chipped in $1,712/worker in the form of corporate income taxes. So that works out to $14,460 per employed person in Federal
government revenue. In case you are curious about total per capita, every man, woman and child in America pays just over $6,000 in taxes annually.
So, against that $14,460 per employed tax payer, how much does the government spend on their behalf? Let’s step through the most well-known programs for the 2009 fiscal year.
- Social Security: $4,180 per worker
- Medicare: $3,745 per worker
- Medicaid: $1,892 per worker
- Educational Programs: $1,436 per worker
- Defense Vendors: $2,935 per worker
- Federal Salaries: $1,341 per worker
- Unemployment Benefits: $894 per worker
- Food Stamps: $384 per worker
Source: Nicholas Colas at BNY ConvergEx
The euro may fall as much as 28 percent if France fails to repay investors, while a default by the Spanish government would trigger a 20 percent currency devaluation, Italy a 17 percent drop and Germany a 25 percent decline, according to Citigroup.
Fortunately, the very severity of the pending crisis and growing analogies to Greece set the stage for a serious response. That response needs to recognize that the range of error of long-term U.S. budget forecasts (especially of Medicare) is, in historic perspective, exceptionally wide. Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis. Our policy focus must therefore err significantly on the side of restraint.
I’ve been playing around on a simple google spreadsheet on debt sustainability. The math of an indebted country with little GDP growth and a primary (i.e. before interest payments) deficit is rough and will ultimately lead to a debt spiral. Interesting how people forget about the exponential dynamics of interests and debt.
Although markets have until now been worrying about the euro zone’s sovereign debt problems, the U.S. is arguably in a worst situation. The Organization for Economic Cooperation and Development predicts that the U.S. budget deficit will still be at 8% of GDP in 2011 after hitting 9.3% of GDP in 2009. For the euro area, the OECD sees the deficit remaining around 4.0% of GDP through 2011.
Managing that portfolio is Maria Cannata’s job, the public officer in charge of selling Italian government bonds on the market.
Possible reasons for optimism on Italian treasuries:
- A woman is in charge of selling our bonds, Maria Cannata
- Italian Treasury has €25 billion in cash deposited in a bank account
- Average maturity of debt is 7.1 years
Let’s hope for the best, June and August 2010 are the worst months in terms of redemption of Italian government bonds, with over €45 billion coming due.