Last night, Obama quoted JFK in his “jobs”speech: “Our problems are man-made, therefore they may be solved by man. ” I tweeted out: “Our problems are Obama-made.” One of my liberal friends asked how I can say that!? What proof do I have? Read on…

First, let’s look at Federal receipts (income through taxes), outlays (what they spend) and deficits (what they couldn’t pay for). All of these numbers are taken from the White House’s own OMB office:

(First, notice the spike in tax receipts after the Bush tax cuts in 2003 proving once again that Reaganomics works!)

Now, examine the steep spike in outlays (spending) since 2008.  Notice that it coincides with a decrease in receipts to the federal government. From a high level perspective Obama spent more than he took in.  Or, to take it even further: Obama spent a LOT more and we were taking in a LOT less.  How much less? About $400 billion.

In a heated debate between Byron York and Conn Carroll, Byron asserted that over half of the deficits racked up by Obama could be attributed to the economic downturn.  Byron based this on a few items 1) An increase in “Income Security” outlays 2) Increased federal Medicaid spending and 3) Fewer dollars coming in.  All of these items could indeed be attributed to the downturn.

But I think Byron misses the real culprit – a “sub-function” of Income Security: Unemployment Compensation

Let’s look at outlays by major spending category (the OMB calls them “functions”):

Social Security is the highest outlay every year since the early nineties (note: we need to fix that).  Defense is the next biggest expense (notice the spike in spending since 2001 – duh – I’ll keep this line item growing thank you).

Other notable outlay jumps include: 550 Health, 370 Commerce and Housing Credit (think TARP, Freddie, Fannie), and 600 Income Security.

Income Security includes all federal assistance that isn’t social security.  The OMB categorizes this into a handy numbering system:

• 601 General retirement and disability insurance (excluding social security)
• 602 Federal employee retirement and disability
• 603 Unemployment compensation
• 604 Housing assistance
• 605 Food and nutrition assistance
• 609 Other income security

To recap, huge uptick in “Income Security”, decent uptick in “Health”, a one-time uptick in commerce help, and sundry upticks in Education and other items.

Got it? Good.  OK… let’s zoom in Income Security:

Let’s pause for a moment so I can rant out loud: what kind of crazy government do we have that requires 4 charts to understand where all our money is going!? Anyway, I digress.

There are two big outlay jumps here since 2008: 603 Unemployment Compensation and 609 Other Income Security.

The jump in 603 outlays has to do with the unprecedented unemployment benefits extensions offered by the Obama administration.  Since 2008, outlays went from $45.3 Billion to $160.1 Billion!  That is one massive jump and account for over 5% of the total deficit between 2008 and 2010.

609 includes numerous items (taken from ourdime.us):

• TANF is the Temporary Assistance for Needy Family program.  Before 1996 this was known as “AFDC”.  It’s probably the program that most people think of when they think of “Welfare”.  It gives money directly to people to spend.
• SSI Disability is the collection of all SSI accounts.  It is disability insurance paid to people who cannot work and have no other income
• Foster Care covers both Foster Care and Adoption services
• Child Care Enforcement is only the cost of enforcing Child Support minus the Federal Share of Child Support Collections
• The biggest expense is Tax Rebates.  There are a number of tax credits mostly targeting the poor.
• Other Non-Direct Welfare are programs that help the poor, but unlike TANF they do not give money directly to its recipients.

The confusing part here is Medicaid. Byron puts Medicaid spending as a huge part of Obama’s deficits.  But Medicaid is a state “program” which is given Federal matching funds. The breakdown above is by “function.” Confused? So am I.

Since it’s a program managed at the state level the Federal matching funds are spanned across several of these items.  But looking deeper into a PDF from OMB I can confirm Byron’s numbers that Medicaid went from $190 Billion in 2007 to $272 Billion in 2010 but that increase about half of $160 Billion we noted above via the Unemployment Compensation.

By slicing the budget apple by category (rather than by program) we can see that the deficit pie slices into interesting bits.

From 2009 – 2010 (the years Obama was actually in office) he ran up $2.7 trillion in deficits.  About $400 Billion of that was from decreased revenues (fewer taxpayers, fewer tax dollars). Now look at the breakdown of categories showing increases in spending in 2010 compared to 2008:

Boil it all down and what do you get:

• Byron is correct in asserting that a good portion of the Obama deficits came from the impact of an economic downturn.
• Conn Carroll is right that entitlement spending is impacting the deficit today (25% of the increased spending came from Medicare and Social Security).
• I’m right (patting myself on the back) that Income Security, and in particular, Unemployment Compensation is the single biggest culprit in spending increases.

Bottom line: Obama inherited a terrible recession (along with the deficits that come along with a recession) and made things worse by increasing spending in a massive way.

Here are the categories with increases (in billions of dollars) and the % increase from 2008: