The Congressional Budget Office’s latest report paints a dire picture of the US federal budget, even as the country enjoys a growing economy and no major wars. The budget deficit has surged to $1.83 trillion for the fiscal year that ended last month, a 13% increase from the previous year.
The rising deficit is largely due to President Joe Biden’s increased spending, including a record-high growth in federal education spending. This spending binge has pushed overall spending to $6.75 trillion, an 11% increase from the previous year. While the costs of Biden’s education bailout will eventually decline, other drivers of federal spending growth, such as Social Security and Medicare, will continue to rise.
Medicare spending, which reached $869 billion, has surpassed defense spending, $826 billion, for the first time in US history. Furthermore, interest payments on existing federal debt have risen from $710 billion to $950 billion, exceeding total military spending and marking a new historical milestone.
The growth in federal spending is unsustainable, and higher taxes are unlikely to solve the problem. Tax revenues are at an all-time high of $4.9 trillion, with individual income tax receipts rising 11% to $2.4 trillion and corporate tax receipts increasing 12% to $529 billion. However, federal spending as a percentage of the economy is already at 22.7% and is projected to rise to 24.1% in a decade.
In contrast, the highest federal tax revenues as a percentage of the economy were 19.8% during World War II. There is no historical precedent for the economy sustaining federal revenues above 20% of the total economy. The federal government must reduce spending to avoid a financial crisis.
Neither candidate in this year’s presidential election has addressed the growing federal deficits or the unsustainable spending that is causing them. Instead, they are competing on who can raise deficits the fastest. Vice President Kamala Harris has promised a new long-term home healthcare entitlement, while former President Donald Trump has proposed reckless tax cuts on tips, overtime, state and local taxes, and a new tax deduction for interest on car loans.
These proposals would weaken the tax code and exacerbate the financial crisis. The federal government’s priority should be to provide for the common defense, but with military spending now ranking fourth, behind Social Security, Medicare, and debt payments, this priority is being neglected. With China and Iran investing heavily in their military capabilities, the US should be increasing its defense budget, not letting it shrink. The federal government’s runaway spending problem is becoming a national security problem, and it’s time to take action.
