Running the government on 8¢

chart_tax_revenue.top.jpg By Jeanne Sahadi, senior writer


NEW YORK (CNNMoney) -- Those who clamor for more "limited government" rarely define what they mean. But assuming nothing changes over the next decade, Americans could be left with a de facto limited government -- limited in what it will be able to do.

Today, the United States spends roughly 76 cents of every federal tax dollar on just four things: Medicare, Medicaid, Social Security and interest on the $14 trillion debt. That leaves 24 cents of revenue to pay for everything else the federal government does.

That's not a lot. But it's a mint compared to what could be left over by 2020, according to a simulation made by the Government Accountability Office.

Barring serious efforts to curb the growth in the country's debt, by 2020 Washington could be spending 92 cents of every tax dollar on Medicare, Medicaid, Social Security and interest alone. That would leave just 8 cents to pay for everything else.

How much of "everything else" can 8 cents buy? Not a lot, especially relative to what Americans are accustomed to their government providing.

Things like the national parks, the FBI, student loans, air traffic controllers, defense, the interstate highway system and food safety. The list goes on and on.

To give a better sense of just how much government would have to cut back, consider this: In 2010, Uncle Sam took in $2.162 trillion in federal revenue -- and 8% of that is $173 billion.

Here's a sampling of what that $173 billion could have paid for last year:

  • The Department of Labor ($173 billion) OR ...
  • One-fourth of defense spending ($667 billion) OR ...
  • The wars in Iraq and Afghanistan (roughly $170 billion) OR ...
  • Most but not all of the interest owed on the country's debt ($228 billion) OR ...
  • The Departments of Transportation ($78 billion), Justice ($30 billion) and Housing and Urban Development ($60 billion); plus the National Oceanic and Atmospheric Administration ($5 billion) OR ...
  • The Departments of Agriculture ($129 billion), Energy ($31 billion) and Commerce ($13 billion) OR ...
  • The Departments of Education ($93 billion) and Homeland Security ($44 billion), plus NASA ($19 billion), the EPA ($11 billion) and the parks, fish and wild life services ($6 billion).

Beyond 2020, the 8 cents to pay for "everything else" would get whittled down to zero. By 2040, there would only be enough in federal tax revenue to pay for interest on the debt and Social Security, according to Susan Irving, GAO's director of federal budget analysis.

Sure, the country could try to borrow to pay for what revenue can't cover. But given the magnitude of what would have to be borrowed, the interest costs alone would be prohibitive. Another alternative: the government could abruptly raise taxes sky high and cut spending to the bone.

This is just one reason why the country's fiscal course is often described as "unsustainable."

And that's why Irving and others say lawmakers and the public need to ask some tough questions about their priorities and their means.

"What is it that the government should do? What would that cost? Are you willing to spend that?" Or, Irving suggested, "What do you want to pay for government and what will that cover? Can that fund your priorities?"

In the abstract, she noted, "Everybody wants a small government. Everybody would like low taxes. And they'd like government to do everything that they think government should do. But the arithmetic can be a problem." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,982.59 22.02 0.13%
Nasdaq 4,444.91 -4.65 -0.10%
S&P 500 1,978.91 0.57 0.03%
Treasuries 2.49 0.02 0.89%
Data as of 8:36pm ET
Company Price Change % Change
Apple Inc 99.02 1.35 1.38%
Facebook Inc 74.92 -0.27 -0.36%
Bank of America Corp... 15.50 -0.09 -0.58%
Dollar Tree Inc 54.87 -0.08 -0.15%
Family Dollar Stores... 75.74 15.08 24.86%
Data as of 4:03pm ET

Sections

Herbalife shares tumble after the maker of nutritional supplements reports earnings that fall short of analysts' estimates. More

New annual report from U.S. government shows the long-term prognosis for Medicare has improved thanks to slower health spending, while the outlook for Social Security remains unchanged. More

Online dating site OkCupid found its users were more likely to have conversations when it told them they were more compatible than in reality. More

Actor-founded This Bar Saves Lives had Hollywood connections, but learned Start-Up 101 the hard way. More

Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.