Historical Fiscal Analysis of U.S. Federal Revenue and Spending (1790‑2010)

Conclusions: 100-Year Review of USA Inc. Income Statement * America’s government has grown dramatically - USA Inc.’s revenue as percent of GDP has risen from 2% to 15%. Individual / social insurance (Social Security + Medicare) taxes have risen dramatically while customs / excise / estate taxes have declined in relative importance. In addition, USA Inc.’s spending as percent of GDP has risen to 24% in 2010, up from 3% average between 1790 and 1930. ¢ USA Inc.’s average operating income was at or near breakeven for most of the periods from 1910 to 1970. In the 1970s, as healthcare expenses (related to Medicare and Medicaid) began to surge, USA Inc. reported more frequent — and bigger — losses. Since 1970, USA Inc. showed a profit just 4 times (F1998-F2001, when economic growth was especially robust and defense spending was relatively low). ¢ General expense trends since 1970: non-defense discretionary spending has been flattish (except in recessions with material one-time charges), healthcare spending (largely Medicare + Medicaid) has risen materially, Social Security spending has been flattish, defense spending has been down to flattish, and interest payments varied with interest rates. KP i USA Inc. | Income Statement Drilldown 61 Operations of USA Inc. Are Solid, Excluding Medicare / Medicaid and One-Time Charges Revenues of USA Inc. (largely from individual and corporate income and payroll taxes) can fund most expenses (largely spending on defense, Social Security, unemployment insurance, education, law enforcement, transportation, energy, infrastructure, federal employee & veteran benefits, and interest payments). In fact, for USA Inc.'s operations besides Medicare / Medicaid and one-time expenses, there’s ample scope to increase spending for defense, education, law enforcement, transportation, infrastructure and energy by ~4%* in aggregate and still remain break-even. Note: *Excluding Medicare / Medicaid revenue & expenses, USA Inc.’s expenses are, on average, 4% below revenue levels P from F1996 to F2010 based on our calculation of White House OMB data. (@E) www.kpcb.com USA Inc. | Income Statement Drilldown 62 HOUSE_OVERSIGHT_020872