Got brains? Check your federal deficit IQ

By Dian Vujovich

We all know Uncle Sam needs a financial makeover. One way to remedy that is to make changes in the federal budget. Raising taxes is another, but that idea seems to make lawmakers quake. When it comes to the deficit, what you don’t know might be surprising.

From Kiplinger’s recent “How Well Do You Know the Federal Deficit?” 10-question quiz, test your deficit smarts by answering the following:

Q: Which of the following categories ate up the biggest chunk of the $3.6 trillion federal budget in fiscal year 2010? (Hint: It’s not defense spending.)

A. Health Care

B. Defense

C. Domestic spending (other than health and defense)

D. Interest on the debt

A: Health Care is correct. Health care by far, clocking in at 24%. That includes 13% for Medicare, 8% for Medicaid and 3% to care for veterans. Defense was second at 20%. Other discretionary domestic spending accounted for 16%. Interest on the debt? It’s only 6% (we’ll explain later in the quiz).

Q: Ending foreign aid and keeping taxpayer dollars home would save about how much of the federal budget?

A. 0.5%

B. 2%

C. 5%

A: The right answer is A. 0.5%. Foreign aid is a political hot button. But less than $28 billion goes to overseas spending programs, including humanitarian assistance in crises, such as the earthquake in Haiti. That’s less than 1% of federal spending.

Q: How much will it cost to extend the Bush tax cuts over the next 10 years for all taxpayers, as Republicans want, rather than just for those individuals earning less than $200,000 a year ($250,000 for couples), as most Democrats want? (Hint: It’s a huge amount of money.)

A. $1 trillion

B. $1 billion

C. $300 billion

D. $700 billion

A: D. $700 billion is correct. The $700 billion is in addition to the estimated $3 trillion (in revenue and interest on the debt) for extending the cuts for those making less than $200,000. A compromise proposal — to extend the cuts for everyone making less than $1 million — would cut the $700 billion figure to about $300 billion

Q: The government ran a surplus during the last four years of the Clinton administration. Prior to that, which president managed to balance the budget?

A. Jimmy Carter

B. Ronald Reagan

C. Lyndon B. Johnson

D. George W. Bush

A: The right answer is C. Lyndon B. Johnson. President Johnson submitted a balanced budget his last year in office, and when fiscal year 1969 ended under President Nixon, there was a small surplus. That was followed by almost 20 years of deficits, and then large surpluses throughout Clinton’s second term. While economists and politicians disagree on the causes, contributing factors include the 1993 income tax increase, austerity measures (including budget caps and welfare reform) and the economic boom that led to higher profits and earnings, thereby boosting tax revenue.

BTW, time definitely is money. Every seven seconds our national debt grows by about a quarter of a million dollars.

Take the entire test at:
http://portal.kiplinger.com/quiz/federal_deficit/index.html?qid=83