What does President Obama’s new budget proposal mean to the typical American household?

The following chart illustrates the amount of spending per U.S. household that President Obama is proposing to do in the federal government’s 2016 fiscal year as a percentage share of the median income earned by U.S. households. And, as a bonus, it puts this percentage into historical context by showing how that share has evolved since Ronald Reagan’s days in office.

Although the $74 billion that President Obama wishes to increase federal spending in 2016 would appear to be small with respect to that years’ proposed budget of $4 trillion, when broken down by spending per U.S. household, that spending increase is the equivalent of more than 1 percent of the typical U.S. households annual income.

That’s the main reason why President Obama has begun floating proposals to tax the savings of middle class households. While the White House has recently backed down from President Obama’s stated desire to tax earnings from the 529 college savings plans used by many middle class households to save for their children’s higher education, so long as the President seeks to sustain federal government spending at such elevated levels, middle class households should consider themselves at an elevated risk of having these or other tax increases imposed upon them.

Speaking of which, we also see that spending during President Obama’s tenure in office consumes roughly 15 percent to 20 percent more of the typical U.S. household’s income than was typical during the tenures of his four predecessors in the Oval Office.

Data Sources

The historic portion of the data originates from the following sources:

U.S. Census Bureau. Historical Income Tables: Households. Table H-5. Race and Hispanic Origin of Householder – Households by Median and Mean Income. [Excel Spreadsheet]. Accessed 31 January 2015.

Sentier Research. Household Income Trends: January 2000 to December 2014. [PDF Document]. Accessed 31 January 2015.

White House Office of Management and Budget. The Budget of the United States Government. Fiscal Year 2015. Historical Tables. Table 1.1 – Summary of Receipts, Outlays, and surpluses or deficitis (-): 1789-2019. [Excel Spreadsheet]. Accessed 31 January 2015.

Projections

Portions of the data from 2014 onward are based upon the following projections for the number of households in the U.S. and their median incomes:

• 2014: Households = 124,312,000. Median Income = $53,601
• 2015: Households = 125,312,000. Median Income = $55,263
• 2016: Households = 126,492,000. Median Income = $56,925

We assume that the rate of increase in the number of U.S. households is equal to the average annual change recorded from 2000 through 2013.

Meanwhile, the median household income data for 2014 is based on the average of the values reported each month from January 2014 through December 2014 by Sentier Research, which is based on data collected through the U.S. Census’ monthly Current Population Surveys.

The median household income figures for 2015 and 2016 were then projected by adding the amount of the annual increase from 2013 to 2014 for each year. Given the recent trend for median household income in the U.S., these figures may be highly optimistic, with the effect being that the calculated percentage share of federal spending with respect to median household income could be considerably higher than we’ve shown above for the years of 2015 and 2016.

Featured Image: U.S. Government Printing Office