Finished taxes: six grand winging its out of my bank account today to pay Uncle Sam plus the Governator. That’s only how much I underpaid my taxes, nowhere close to what I paid for 2007 overall.

It’s book review time. I’m most of the way through a book entitled Where Does the Money Go?: Your Guided Tour to the Federal Budget Crisis, by Scott Bittle and Jean Johnson. The New York Times business section mentioned it a couple of weeks ago. Despite the goofy Schoolhouse Rock cover, it is absolutely a must read. And very relevant right now: not just because it’s tax season, but because it’s an election year. Wondering where most of your federal tax dollars go? Hint: it’s not (yet) defense, and it’s definitely not pork-barrel, or even earmarked spending. For the most part, I avoid discussing politics on this blog because as a nonvoter for both where I live and where I’m from, I really don’t have a say in the matter. However, as a fiscally responsible (and dare I say, conservative) person watching the economy slide into recession due to fiscal irresponsibleness, I’m still keenly interested in what the presidential candidates have to say about money matters. Yes: it’s about the economy, stupid, no matter which party you vote for. How else are we going to fund universal health care? Or if that’s a non-starter for you, fair enough: replace those last three words with “national security”, and it still starts with the budget.

One of the messages I’m getting out of Where Does the Money Go? so far is this: the federal government (and by extension, Americans as a whole) is in deep, deep trouble unless we address Medicare and Social Security spending, and balance the budget. That trouble might be a couple of decades away in the case of Social Security, or looming on the horizon immediately (Medicare). Balancing the budget means reducing the deficit to zero - and not just reducing the deficit by a few billion dollars - because only then will we start making some headway on the debt (which is not the deficit, as Bittle and Johnson make clear). The authors, in a mostly non-partisan style, go into clear and precise detail about worst case scenarios; and better yet, propose common sense, realistic (yet painful) fixes to the budget crisis. Yes, raising taxes is one of them. After reading this book, it’s worthwhile seeing exactly what the current presidential candidates have to say with regard to these issues. As a single example that affects my financial situation: Social Security taxes now cap at about a hundred grand. Removing the cap means more money into Social Security, which may delay the looming SS crisis for a few years. An important point the authors make clear: the government needs much of those SS tax dollars you’re paying now, simply to pay out this year’s benefits to other people: you’re not just funding your own retirement. (This is why simply switching to a privatized, self-directed Social Security is not an answer in itself: you’re not funding the current generation of benefit receivers.) Personally, I think people who make more than the cap (self included) can well afford to continue to pay SS tax on the remainder: seeing as how they were able to live for some first portion of the year where it was automatically deducted from their paychecks. Barack Obama is in favor of removing the cap, while Hilary Clinton is uncommitted (and in fact, she’s been extremely vague on Social Security in general).

It’s only one issue, but when you realise the candidates aren’t very clear about the basic issues as presented in the book, you start realising they’re aren’t very clear about how they’re going to fund other issues they’re campaigning on. And why am I harping on Social Security? Because it’s the biggest chunk of where your federal tax dollars go. Not defense. Not earmarks. Medicare is #3 (defense is #2), but unlike defense it’s mandatory spending, and its costs are skyrocketing.

After you finish your taxes, go buy the book and read it before you vote. There’s a lot more to it than what I covered here.