Federal Expense Mix Shows Entitlement Spending at 51% of Total in 2005

Expense Drivers as Percent of Total Expenses: Entitlement + One-Time Items Are Crowding Out Other Federal Spending 1965 — 2005 USA Real Federal Expenses Mix by Category Share of Total Expenses 40-yr ‘05 vs. 40-yr 1965 2005 Average Variance Entitlement Expenses 21% 51% 42% 9% Defense 43 20 24 -4 Non-Defense Discretionary* 29 22 23 -1 Net Interest Payments 7 7 11 4 Total Federal Expenses 100% 100% 100% 0% Normal Note: All data are inflation adjusted using GDP price index from BEA; ’05 vs. 40-yr variance is rounded. *Non-defense discretionary KP spending includes education, infrastructure, agriculture, housing, etc. Data source: White House Office of Management & Budget. (@)E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 231 Category Expenses as Percent of Expenses: Observations from Previous Slide Entitlement spending has risen to 51% of total spending, higher than 40- year average of 42% (and much higher than the 21% in 1965), defense spending has fallen to 20% from 24% average, non-defense discretionary spending (including education, infrastructure, energy, law enforcement and veteran services) has fallen to 22% from 23%, and net interest payments have fallen to 7% from 11%, despite higher debt (largely because of declining interest rates). These trends have become more pronounced in recent years. Questions: 1) Should entitlement spending account for 51% (and rising) share of total USA Inc.’s spending, while other key areas (such as education, infrastructure, energy, law enforcement...) account for only 22% (and falling) of spending? Note: All data are inflation adjusted using GDP price index from BEA; ’05 vs. 40-yr variance is rounded. KP Data source: White House Office of Management & Budget. (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 232 HOUSE_OVERSIGHT_020957