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About this series
TODAY: Where the money goes
MONDAY: A $200,000 dry-cleaning bill
TUESDAY: The big business of government
WEDNESDAY: Fort Wayne refrigerators for Eskimos
THURSDAY: Maybe we're not so dumb, after all
FRIDAY: Putting $600 million in the gas tank
NEXT WEEK: War has been good for northeast Indiana
Graphic by Gregg Bender/The Journal Gazette

Follow the MONEY

How the feds spend billions right here

One presidential campaign claims it can pay for every penny of the many programs and tax cuts proposed in its platform.

The other says only that its candidate can tame out-of-control spending.

Believe this much, at least: Federal spending is bigger, more widespread and closer to home than you ever imagined, to the tune of $5.6 billion spent in northeast Indiana in the past five years.

Yes, $5.6 billion.

And that was just to buy stuff Hoosiers were selling. Billions more came to northeast Indiana in grants, federal salaries and checks to people for things like Social Security.

How much money are we talking about?

In 2005 alone, the federal government dropped $4,434,221,707 in northeast Indiana's 11 counties. Take $100 bills and you would have to stack them up the side of One Summit Square almost 40 times before you equal the amount Uncle Sam spent in your backyard on everything from building roads to your mailman's salary to Uncle Butch's disability check.

That's in just one year.

It's no wonder Hoosiers paid the equivalent of more than $5,000 in federal taxes for every man, woman and child.

“(People) think government spends too much, they think taxes are too high, but when you ask them about specific services, they think the spending is about right or too low, with two exceptions: Foreign aid and welfare,” said Henry J. Aaron, a senior economics fellow at The Brookings Institution, a Washington think tank. “So there's this paradox - we are in the abstract for less government, but in the specific for more.”

In short, no one likes paying taxes. But they also need bridges, want to be defended from foreign enemies and want unemployment checks when they lose their job.

And no matter what politicians promise, billions of dollars of your taxes spent nationwide cannot be controlled, no matter who takes over America's checkbook.

“In the short term, the choice of president, whether it's Democrat or Republican, is a difference between the federal government representing 19 percent of gross domestic product versus 21 percent of gross domestic product,” said Brian Riedl, an analyst at The Heritage Foundation, a Washington think tank. “Most of government is not going away because of who gets elected president.”

In other words, while policies and priorities might change, the fact that $1 out of every $5 in the economy involves federal spending likely will not change, at least not significantly.

Although both campaigns say they want to trim spending, Riedl said the election will not do away with the Veterans Administration, the Interior Department or any of the other thousands of government agencies that spend taxpayers' billions every year.

“The president doesn't even control the budget,” he said. “First, he has to deal with Congress, and second, two-thirds of the budget is on autopilot anyway through entitlements. The effect of who the president is on the budget is very small.”

Still, even a small effect is a lot of money: Cutting the 2006 budget by 1 percent would have saved taxpayers $28.7 billion.

Over the next two weeks, The Journal Gazette will follow the money as it flows back from federal coffers into northeast Indiana. Using a federal procurement database of every purchase contract the government signs, The Journal Gazette was able to trace back $5,618,386,731.89 spent on goods and services in the 11 counties between Jan. 1, 2003, and Aug. 14 of this year - more than 25,000 separate purchases.

Additional analysis was done related to the money coming back in payments to individuals, such as Social Security, disability, government retirement plans and flood insurance payouts. The data was compiled by the Census Bureau from every federal agency.

Spending on grants to local governments and agencies, and salaries for federal workers, was also reviewed.

The list goes on and on, and the numbers can seem astounding.

But the most detailed analysis in this series will be on federal procurement: The goods and services Uncle Sam bought in northeast Indiana, because it has such a direct - but largely unseen - effect on our economy, keeping Hoosiers in business doing everything from making high-tech gear for NASA to providing hand soap for government bathrooms.

The money federal agencies spent in the area just to buy goods and services in the past five years would be enough to cover the floor of the entire Grand Wayne Center with $1 bills in a layer 11 inches deep. That includes the upstairs and lobby areas, but the spending does not include federal salaries, grants, Social Security payments or food stamps.

“As far as expenditures are concerned, (federal spending) is about a fifth of the (national) economy,” said Brooking's Aaron. “But it's bigger than that for a host of reasons, including tax provisions, that influence what people do and don't do. Getting a percentage on that is hard to say.”

For example, federal taxes on gasoline at the pump add 18.4 cents to the price of every gallon and might influence you to drive less. Meanwhile, the production of ethanol is subsidized, making E-85 cost less than regular gas and encouraging its purchase.

“Sin taxes” discourage smoking and drinking, while tax credits encourage college. Federal rules govern workplace safety, how much you're paid and regulate your retirement. Laws say what medicines your doctor can and cannot prescribe. At every turn, it seems, the government is there in one way or another.

It might be impossible to measure influence, but you can measure spending. For the amount the federal government spends, you need a very big ruler.

“When you start talking about billions and trillions, people's eyes glaze over,” said Heritage's Riedl. “So look at it this way: The federal government will spend $25,321 per household this year. That household will have federal taxes of $21,825.”

Riedl said one reason we need so much government is because taxes have made us dependent.

“Many would argue that Washington is a much less efficient user of money than the average person,” Riedl said. “If you let me spend that $25,000, I wouldn't need so much in government services.”

dstockman@jg.net

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