Tuesday, August 1, 2017

1969 Was a Good Year

I wanted to compare some data and found a nice series for government spending going back to 1969. Not sure why they started the data in 1969, but they did. So I started thinking about what things were like about 50 years ago.

I started with my favorite subject, me. I finished my BS in Industrial Management at Georgia Tech in June of 1968 and to escape the draft, I started an MS program there. Strangely enough, the draft was not impressed by my love of Industrial Management, so they sent me a draft notice in late 1968. They let me finish two quarters of my new program and asked me to report for basic training in March of 1969. So in 1969 I was about 23 years old and was spending time training in Texas and Colorado. I finally settled into an Air Force base in Tucson, Arizona. I was an Airman First Class. I had one stripe. I think I made less than $100 per month.

On that salary I was lucky that a stamp cost 6 cents and a gallon of gas was about 35 cents, which made it economical to drive down to Nogales, Mexico to buy rum. A dozen eggs was 62 cents. For real people who could think about such things because they had a median income of about $8,300, a car cost about $2,000 and a decent house ran $30,000.

I was fully employed in the USAF in 1969. The national unemployment rate was 3.5%. A recession started in December 1969 so the unemployment rate started rising in 1970. The inflation rate was 4.5% in 1969. I could remind you of more – but that’s probably enough for the purposes today.

My main purpose is to look at how we spend the government’s money today compared to 1969. The table below shows 1969 spending in billions of dollars and as a percent of total government spending. 
                                          BIL$      %ofTotal
       Total Government      183.6          100
       Total Mandatory          53.6            29
       Social Security            26.7            15
       Medicare                       6.3              3
       Medicaid                       2.3              1

Our beginning situation finds government spending of about $184 billion in 1969. What we refer to as Mandatory Spending comprised a little more than a quarter of that total spending. Social Security spending was responsible for most of that – and amounted to 15% of total government spending. Medicare and Medicaid were toddlers in monetary terms – accounting for about 4% of all government spending in 1969.

A lot of water has passed under the bridge since then. For example, my forehead has grown several thousand percent since I was 23, and my time in a 10K race might have tripled. In basic training we had to run a mile in less than 6 minutes with combat boots on. I am not kidding. Anyway, let’s look at our government in 2016.

                                          BIL$     %ofTotal
      Total Government       3,853          100
      Total Mandatory         2,428            63
      Social Security              910            24
      Medicare                       693            18
      Medicaid                       368            10

As you might expect, if all the things we buy went up in price then government spending would do the same, and it did. Government spending went from $184 billion to $3,853 billion. That’s an increase of 21 times. Notice that if median income had gone up 21 times, it would now be about $174,000. So let’s give a big cheer for government growth. Way to go, government.

The above table shows that total Mandatory Spending went from being 29% of total government spending to 63% in 2016. That means – tada – that Mandatory Spending went up a lot faster than overall government. Mandatory Spending went up 45 times in 47 years! If median income had gone up that much, the median person today would be making $374,000 per year. You guys all make that amount, right?

You smarty-pants are starting to get my drift. Now let’s look at Social Security, Medicare, and Medicaid. To cut to the chase, Social Security went up 34 times; Medicare by 110 times; Medicaid by 160 times. These three programs have gone from being 19% of all government spending to 52% of it. Or put another way, all the other things the government spends on went from being 81% of the budget to 48%.

I know I harp on this point a lot. But the baby boom generation is just getting started. We were born from 1946 to 1964. Those born in 1964 are mere babies in their fifties. If we don’t focus more on how we spend money on the old folks, then the rest of you are going to have to live on a lot less. Maybe you should think about it a little more. In case you are interested, if median income had gone up by the same number of times as Medicaid (160 times) we'd each be making about $1.3 million a year. Sweet. 


  1. HMMM! So what to do? I missed the draft all together because the Draft Board accepted VISTA teaching deferments and my first job paid $9,500. That supported rent, car, clothes ( lots of suits) rugby and I had 25% left over for savings because my employer paid for my healthcare at $50 per month.

    Now my employee's share of the healthcare is equal to at they can afford. I am on Medicare and it cost me $120 for Part B. I have been lucky to not get anything serious and usually hove most of my our of pocket reserve left at the end of the year. Prior to this I was paying Blue Cross $700 via my wife's teacher plan and she was paying $25.Yes I was subsidizing her. What to do? Again a perplexing issue. Let people die in the streets? Make people be healthy...there are a lot of things that happen to even the most healthy. Look at the main culprits being insurance companies since we we graduated from college in 1968....they need to make a certain but high rate of return so they are either dropping out of the plan or reducing services provided to do so and doctors fees have gone up almost as much as healthcare cost? HMM!

    1. Thanks Hoot. What to do? Entitlements are growing like wild fires. They are crowding every dollar of spending out of the government budget. Obama care was supposed to solve many problems and yet here we are. Smart people could design remedies but they are too political to use common sense.

  2. The whole US job structure is in transition. The loss of good manufacturing paying jobs with healthcare replaced by less jobs with lesser or no healthcare and flat incomes which do not keep up with the cost of healthcare. Is healthcare a free market thing or should the free market accept it as a necessary thing that there needs to be a tax for like roads, bridges...infrastructure and stiff rules for abuse.?

    1. I guess it all depends on who you ask. If you are asking me I don't think healthcare is a right. Sorry. I'm not on that team. I still believe strongly that if those idiots we call politicians had some real moral courage they could come up with fixes with our system that realize that healthcare, like many things, is a private/public good. It always has been and always will be. There are fixes but they'd rather pose for TV cameras than fix the system. Single payer is one extreme fix that I wouldn't like. But at least let them come up with something.

  3. Dear LSD. In ’69 I was in my last classes and bartending in Tallyhicky. Yep, a good year to finish gitt’n edukated and gitt’n my first real-paying yob—yepper, a very good year.

    Your stats—as always—provide good info that usually doesn’t always present a pretty pic. Jim’s query, “What to do? obviously has no answer, and your comment to focus more on how we spend money on us old fogies poses equally insoluble potential “corrective” actions—no matter how much more thinking is directed to it. Us old fogies—most of us anyway—set up retirement based on rules/regs/policies given us by D.C. It’s too late in the game to pull the rug out from under us ‘cause of unintended consequences that likely would result in increased social costs/unrest that younger folks would be forced to accommodate. Given the trajectory of national debt and pols’ inability to control spending—discretionary and entitlements—the youngsters will likely live on a lot less, as you say—regardless of any reduction in public payments to us old fogies.

    I watched John Kasich—my fav R candidate before the debates—two nights ago espouse again the same description of his record in Congress and as OH gov—essentially that of compromise to “get things done.” As I’ve said in your blog many times, it has been “compromise” that got us to where we are today—the Rs as blameworthy as Ds, but more so because their mantra of smaller, less govomit and “responsible spending” now echoes hollow endlessly.

    While a focus on reducing govomit waste and fraud to mitigate the increases in entitlements would be a mere drop in the entitlement bucket—it would be a more palatable effort than focusing on how we spend money on us old fogies: Neither has a snowball’s chance in hell of occurring. Long live the youngsters—git’m to vote R—maybe a miracle will happen and the Rs will git right with their mantra.

    1. Thanks Tuna. I can't argue with you today. I think the real problem is the kick the can mentality and how it led to a spot right between a rock and a hard place. The solutions get harder and harder the longer we wait. I think that is what the politicians understand. They don't want to face up to policies that will negatively impact people. They have waited so long that the impacts will kill their chances of reelection. So they kick the can again. At some point we will have to pay for letting the politicians do this. I am guessing you and I will be holding up daisies at that point.