Tag Archive for: FederalBudget

Budget; What Budget?

Estimated Reading Time: 3 minutes

Our leaders have failed at a national balanced budget. They do not even begin to address whether we are anywhere near the possibility of a balanced budget.  Charges are flying back and forth about whether anyone wants to cut Social Security and/or Medicare as some demagogue the issue.  It is time to take a simple “helicopter” view of what is actually happening.

In 2022, our federal government spent $6.48 trillion.  The breakdown:

  1. Social Security — $1.22 trillion, comprised of three parts: Payments to seniors $1.03 trillion, $144.7 billion for disability; $48.4 billion – other.
  2. Defense – $1.03 trillion, composed of $759.8 billion for defense and $271 billion for veterans.
  3. Medicare $756.1 billion.
  4. Transfers to states – $1.21 trillion.
  5. Transfers payments – $619.3 billion. Only $36.3 billion of that is paid for by the recipients as those are payments related to unemployment insurance.
  6. Interest payments – $483.5 billion.

The government received $5.03 trillion in revenue:

  1. Payroll Taxes – $1.50 trillion comprised principally of $1.09 trillion Social Security and $344 billion for Medicare.
  2. Income taxes and other taxes — $3.50 trillion.

Clearly, there are many items to discuss.  First, you can see that Social Security already has expenditures exceeding collections.  There is no fund saved somewhere to make up the difference. If there were no massive payments for disability and “other,” the fund would be solvent. No question that there are many deserving recipients of disability benefits but there are many who are not.  The disability recipient pool expands dramatically any time there is an economic downturn, and no one polices that.

Notice the expenditures for Medicare are more than twice the revenues.  This is after significant increases in the tax base occurring in the ACA passed during the Obama Administration.  Not clear how this can possibly get close to being balanced.

Why so much money is paid out to the states instead of the states making their own tax collections remains a mystery. Over $600 billion of this is for medical care programs. That means the federal government is funding over $1 trillion for unfunded medical care.

The taxpayers of the states are unwilling to vote themselves to be taxed, but the feds are willing to simply print more money.  The feds enjoy supplying the funds because it gives them control over the state and municipal governments.  Without all these transfers the budget would have been close to balanced. 

The interest payments are already skyrocketing with the return to more normal interest rates.  Our irresponsible elected officials were willing to incur greater debt when the interest rates were much lower.  They had to know that would change and we would have a serious problem.  The massive amount of interest has already increased from over $300 billion to $783 billion annualized and it is a good bet that will go higher.

Some people keep harping on the fact that we should increase tax collections on wealthy individuals and corporations.  We have already increased tax collections as the reduced rates spurred higher collections.  The top 1% of earners pay 40% of income taxes while earning a far smaller share of that income. Does anyone really believe we can close this $1.45 trillion budget imbalance simply by collecting more from large corporations and the very financially successful ones? If we collected 100% of high-earners’ income we would still be nearly a trillion dollars short of a balanced budget.  Seems implausible to me. 

If we combine the four factors of defense, social security, medical care, and interest payments, the current amount being paid out is $4.4 trillion. That is almost the entire revenue of the federal government.  Since two of those expenses are programs people have paid into to receive benefits and defending the country is the primary aspect of what the federal government should be doing, there is little flexibility.  The problem is everything else the federal government does and for the most part badly.

Our President is spending much time criticizing Republicans about phantom proposals to cut Social Security and Medicare. On the other side, Republicans are swearing fealty to an unsustainable system.  Biden appears unwilling to negotiate on reducing any element of the budget to create a positive atmosphere to raise the debt ceiling. He is proposing even greater levels of expenditures. All of these talking points may change but currently makes little sense.

The CBO (Congressional Budget Office) has stated unless there is a change, the increase in the national debt will be $19 trillion over the next decade. The CBO likewise stated federal spending on Social Security and Medicare will explode over the next decade.

You can evaluate for yourself whether our current national finances are sustainable year after year with trillion-dollar deficits. It seems to me something has to change and change quickly.


This article was published in Flash Report and is reproduced with permission by the author.



Is the Debt Ceiling Lunacy?

Estimated Reading Time: 5 minutes

The United States is bumping up against the debt ceiling once again. The Treasury department has begun taking extraordinary measures to ensure it can continue to service its debts on time. Secretary Yellen has said these measures should be sufficient until June. Some project they might work until August.

Many pundits act as if there is no good reason to have a debt ceiling. They say Congress implicitly approves an increase in debt when it passes revenue and spending bills. They think requiring Congress to explicitly raise the limit on issuing debt is unnecessary and—since it increases the odds of default—unnecessarily risky. Some go so far as to describe it as lunacy.

David Beckworth discussed the debt ceiling with Michael Strain on a recent episode of Macro Musings. Strain, who is the Director of Economic Policy Studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute, provides a clear statement of the view described above:

[…] the gap between spending and revenues is implicitly determined by Congress. It doesn’t make any sense to require Congress to explicitly authorize these periodic debt ceiling increases.

The debt ceiling puts the President and the Executive Branch in a weird position of kind of picking which laws it will break and will not break. You know, it would be illegal for the Treasury department to issue additional debt if Congress didn’t raise the debt ceiling. It is also illegal for the Treasury department not to spend the money that it is required by law to spend. So, which of those two laws is Treasury going to break?

Given Congress’s implicit consent to raise the debt ceiling, Strain argues, there is no reason to require explicit consent.

I am sympathetic to Strain’s broader argument. We are a nation of laws. Our laws should be consistent. The government should not make promises and then fail to keep them. We should keep our promises and honor our debts.

That said, I don’t buy the implicit consent argument. And I don’t think the debt ceiling is lunacy. To the contrary, I think the debt ceiling might serve as a useful constraint.

On Implicit Consent

To be honest, I have never quite understood the implicit consent argument. If passing a spending bill that exceeds the revenues authorized by Congress implies consent for raising the debt ceiling, why is raising the debt ceiling so difficult? That it is so difficult suggests that a majority in the House or Senate has not already consented to a higher debt level.

We have known that majority voting systems can produce inconsistencies since the 18th century. One should not assume Congress prefers A to B just because they have indicated they prefer B to C and C to A. They might also prefer B to A. Therefore, it is inappropriate to assume that passing a spending bill that exceeds authorized revenues necessarily means Congress is willing to raise the debt ceiling. And, if Congress is not willing to raise the debt ceiling, it is not obvious why its decisions on revenues and spending should force it to change its decision on the debt ceiling. One might just as easily argue that its decision not to raise the debt ceiling should force it to change its decision on revenues or spending.

On Constraints

A binding constraint prevents one from doing what he or she would like to do. Relaxing such constraints, therefore, generally makes us better off. But it is naive to think all constraints are bad. Sometimes constraints make us better off.

Think about dieting. In principle, anyone can lose weight: just burn more calories than you take in. And, yet, many of us struggle to do so. You might say, “Just don’t eat the chips. It’s inconsistent with your goal of losing weight.” But, for some of us, having chips in the house is a temptation we can’t resist. If we are serious about losing weight, we adopt hard rules like “Never buy chips.”

Can one lose weight while still enjoying the occasional handful of wavy Lay’s? Sure. But, if we are likely to err in the eat-too-many direction (and likely to do so frequently), going cold turkey might be a better option.

The Potential for Strategic Interaction

Richard Thaler and H. M. Shefin describe self-control problems, like the dieting decision discussed above, as a problem of two selves. My future self wants to be thinner. My current self wants to eat chips. The hard constraint aligns the decisions of my current self with the goals of my future self.

The need for hard constraints is perhaps even more clear when we are dealing with truly separate selves: different people with different objectives. With separate selves, we must think seriously about strategic interactions: individuals make decisions today based, in part, on the decisions they expect others will make in the future. If there is scope for strategic interactions, hard constraints might make us all better off.

There is certainly scope for strategic interaction in Congress. Congress is not a single acting entity: the decisions of Congress are actually the decisions of a majority of its members. Moreover, the majority specifying how much to spend might not be the same as the majority specifying how much can be raised in taxes. And the decisions individual members of Congress make with respect to how much to tax and how much to spend depend, in part, on the decisions they expect others to make in the future. By treating Congress as a single acting entity, those advancing the implicit consent argument obscure the potential for strategic interactions.

A simple example serves to illustrate. Suppose a Senator supports higher spending and higher taxes. A spending bill comes up, which he would happily support if he knew taxes would be increased to cover the additional spending. His colleagues assure him that they will support a tax increase in the near future.

What‘s a budget-balancing Senator to do?

If he doesn’t support the spending bill today, he risks seeing that bill fail. That’s bad, in his view, because he thinks the additional spending is warranted.

If he supports the spending bill today, he faces the risk that his colleagues will renege when a tax bill comes up in the future. That’s bad, in his view, because he thinks the additional spending should be paid for with additional tax revenues.

The potential for parties to engage in ex-post negotiation makes it harder to reach an agreement ex-ante.

Enter the Debt Ceiling
The debt ceiling provides a limit on the potential for ex-post renegotiations. Our hypothetical budget-balancing Senator can vote for the spending bill today, knowing that in the future his colleagues will be forced to grapple with the imbalance. They must either raise taxes (as he’d prefer), forgo the additional spending (his second best policy outcome), or—if he’s in the minority—raise the debt ceiling.

Obviously, this is a simple example. But it illustrates an important point: sometimes constraints make us better off.


It’s tempting to think that all constraints are bad. In fact, we often impose constraints on ourselves and our counterparties to achieve better outcomes than would be possible in the absence of constraints.

Left unconstrained, many individuals will eat more calories than they should. That’s why they impose constraints on themselves! Likewise, unconstrained politicians are likely to authorize more borrowing than they should. The debt ceiling might provide a useful—if somewhat limited—constraint against excessive borrowing.

This article was published by AIER, American Institute for Economic Research and is reproduced with permission.

Getting Serious About Responsible Defense Spending

Estimated Reading Time: 5 minutes

Another Congress, another debt limit showdown. It might seem there is nothing new under the sun.

But something is different this time: In my conversations with members of Congress in recent weeks, conservatives repeatedly mentioned their willingness to tackle the thorny challenge of military spending reforms, in addition to the out-of-control non-defense spending conservatives typically confront. This boldness is a refreshing change from the Washington status quo.

For too long, Republicans considered it a victory to increase defense and non-defense spending by equal dollar amounts, without cutting a dime from the deficit. Congress accepted the D.C. canard that a bigger budget alone equals a stronger military. But now, facing down a record debt to the tune of $242,000 per household, conservatives are ready to tackle an entrenched problem and confront the political establishment, unaccountable federal bureaucrats, and well-connected defense contractors all at once in order to keep the nation both solvent and secure.

Our national debt stands at over 120 percent of GDP, the largest sum since World War II. Most of this debt is the result of a bloated federal bureaucracy, of domestic programs that Congress allows to run at a deficit, and of bipartisan spending sprees like the “emergency” Covid-19 packages. Republicans owe it to their constituents to use the debt limit as an opportunity to reduce spending and shrink the administrative state.

Most Republicans generally give lip service to the idea of cutting spending, but blink when it comes down to the wire. In the end, Democrats hold defense spending hostage from Republican hawks and Washington plays along, with bigger defense and discretionary spending as the deficit balloons. As lawmakers face an impending debt limit deadline yet again, they can’t behave as they’ve done in the past. Defense and non-defense spending must both be on the table.

Today’s Pentagon is approaching a 13-figure annual budget. Congress needs to put away its kid gloves and put the Department of Defense and other agencies alike under the knife to excise wasteful spending. It is a top priority to save our nation, particularly the next generation, from the yoke of debt and an unaccountable, over-funded federal bureaucracy.

Of course, paramount to the goal of fiscal sanity is the goal of a strong national defense. A robust military deters any would-be attackers and protects American interests around the globe. On our military readiness, however, the sirens are blaring: Heritage’s 2023 Index of U.S. Military Strength rated the state of our nation’s military as “weak” for the first time. Our military is too outdated to fully protect American interests at home and abroad. We need a stronger military overall, and especially a force able to deter the rising threat of communist China and 21st-century threats.

The task at hand today is to achieve both goals: restore fiscal sanity and ensure our military protects our citizens from today’s threats. Republicans must defund unnecessary programs and unneeded bureaucrats, while also ensuring our military is ready to confront the nation’s threats. It will not be easy, but with enough political will, it can be done.

To get into the right mindset, Congress should refamiliarize itself with Oakland A’s general manager Billy Beane, who was handed a team in 2002 with the third-lowest payroll in the MLB, one-third as much as the Yankees. By defying the prevailing practices of MLB old-timers, who valued the looks of their players ahead of on-base percentage, Beane took a more efficient, data-driven approach and squeezed the most out of every dollar. He took his band of misfits to a 103-59 season and a postseason berth—the same number of wins as the well-funded Yankees.

Congress needs to take a Moneyball approach to our national defense, a much larger contest with life and death consequences if we get it wrong. Instead of engaging in a debate over topline spending numbers and throwing money at old programs and systems, Congress should insist that every dollar is used to advance military lethality and readiness while saving taxpayers as much as possible.

My colleagues at the Heritage Foundation are committed to helping our lawmakers find more savings. In February, we’ll convene top experts in national security and defense to scrutinize the Pentagon’s budget, line by line. Already, we’ve identified some top ways in which Congress can help our military give the taxpayer a square deal. Here’s a sample:

First, Congress and the Pentagon should ruthlessly target wokeness and waste. In the middle of a recruiting crisis, Secretary Lloyd Austin and the Pentagon prioritized onerous vaccine requirements and anti-American “diversity, equity, and inclusion” programs. And at a time when the military is increasingly weak, appropriators have jammed about $1.4 billion in non-defense research into the defense budget. Appropriators should immediately slash any program that doesn’t contribute to improved warfighting capabilities.

Second, Congress should go after inefficient and outdated weapons systems and other programs. Individual members of Congress have often insisted on funding programs that serve the wants of their home districts or of defense contractors, putting special interests ahead of overall readiness. For instance, the Army asked to terminate the CH-47 Chinook helicopter for three years running, but Congress keeps adding money back in.

The Pentagon has been telling Congress it has too many bases and facilities for years now. In 2016 the Pentagon estimated they were carrying 22 percent excess infrastructure: unnecessary bases, buildings, and facilities. But since 2005, Congress has been unwilling to consider closing any infrastructure, despite estimated savings of over $2 billion a year. A frustrated Pentagon has now given up on asking for authorization to consider a closure process. It is time for Congress to authorize a new round of Base Realignment and Closure (BRAC), which overcomes parochial interests to close down unneeded bases in a fair and strategic manner, and to apply the same philosophy to the rest of the budget, regardless of how much defense contractors protest.

Third, the United States must insist that its allies do their part, particularly in Europe. Our friends across the Atlantic have for decades enjoyed the protection of the American military and were content to spend less than the NATO goal of 2 percent of their GDP on defense while Uncle Sam protected their backyard, even while countries such as Germany enjoyed budget surpluses. It is time for them to end their free riding, pick up the tab, and meet their NATO obligations. We should use our considerable leverage to insist on it. This doesn’t mean abandoning Europe—far from it. But pushing our allies to take a greater role in defending their own continent will allow the United States to repurpose funds, troops, and programs to counter the larger global threat of communist China.

There are far more programs and ways for Congress to right-size the Pentagon budget, but the first step is to stop running the same old Swamp playbook and start playing Moneyball. Congress has the chance to show it can walk and chew gum at the same time, keeping our homeland safe while prioritizing Americans first, if it is willing to make the hard decisions necessary to do so.

Conservatives on the Hill must step up and face the challenge head-on, or face the righteous fury of the American people if they vote for business as usual. I am optimistic they’ll make the right choice.

This article was published by The American Conservative and is reproduced with permission.

Our National Debt Crisis – Let’s Begin by Throwing Big Bird Off The Cliff

Estimated Reading Time: 3 minutes

The initial sparring and positioning over the debt limit have begun and not surprisingly, the Democrats are pulling out their past winning arguments that have kept any of the huge entitlement programs off limit to any kind of reform. The past arguments can be summarized as “pushing Granny off the cliff”, a theme derived from the famous TV commercial where a Paul Ryan lookalike kills his grandmother. It was one of the most deceptive, yet effective political TV ads ever.

Voters will be told that any kind of proposed cut is equivalent to ruining Social Security and Medicare. This effectively ties the attempt to cut spending to cutting off the elderly who have been given government promises, around which they have planned their retirement.

The counterargument would be to tie cuts in spending to egregious programs which only help rich liberals.

At one time, Republicans had a slogan of “defund the Left.” It basically was designed to cut programs where progressives have mobilized tax dollars to use on their side of the political fight. This can range from NPR and PBS, and government agencies funding nonprofits for “voter registration”, to funding UNESCO and other UN left-wing initiatives. How about cutting funding for research so Chinese scientists cannot make new plagues to harm mankind? Is there not a dollar of waste in the defense budget? How about cutting all funds for Critical Race Theory in the Pentagon? I mean, talk about a target-rich environment!

It is also possible to roll back any program not associated with Social Security and Medicare, such as ObamaCare and Medicaid expansion. That could include a modest cut in so-called discretionary spending (spending other than entitlements, defense, and interest payments.)

In truth though, the long-term deficit problem cannot be addressed without eventually getting around to these two demographically flawed programs as they are growing at such speed and consume so much of the budget already that they are becoming the blob that will eat the entire budget.

Most of the Budget Goes Toward Defense, Social Security, and Major Health Programs


Looking at the chart above, it really is amazing how little is spent on law enforcement, for example, a primary function of government, and how much is spent on income transfer programs.  Today, the government has largely become a mechanism not to protect safety and liberty but to move money from one taxpayer to another and move money from one generation to another.

But for the time being, baby steps are necessary.

America has not exercised its budget-cutting muscles in a long time. They are so completely atrophied, that success should first be realized with more modest steps. We need to show the political parties, the populace, and the markets; that actual cuts, however modest they may be, can be accomplished. Right now cynicism dominates because previous attempts have led to political disaster for those daring to cut any kind of government spending.

We suspect Republicans will learn from past mistakes and will use the debt ceiling to effectively cut wasteful, politically motivated spending. If we are reading the political tea leaves correctly, it appears that McConnell understands the newly elected House has the power in the negotiations to be had and that in turn, a hard core of conservatives holds excessive power because of the very narrow victory. Let’s hope they use that power wisely and in a politically savvy way.

What could be the argument to maintain NPR and PBS? Not only is its biased coverage lavishly funded by tax-free foundations and the public donations, but its fundamental purpose was also designed in the era of three dominant TV networks. But today, there are so many channels, podcasts, streaming services, and networks that have educational and nature-inspired programming, news programming, and cultural programming, it is redundant and outmoded.

Before we even attempt to reform Social Security, let’s throw Big Bird off the cliff first.


Federal Fiscal Shortfall Nears $1 Million Per Household

Estimated Reading Time: 6 minutes

The U.S. Treasury has published a major report revealing that the federal government has amassed $124.1 trillion in debts, liabilities, and unfunded obligations. To place this shortfall in perspective, it equates to:

  • $955,407 for every household in the U.S.
  • 29 times annual federal revenues.
  • 86% of the combined net worth of all U.S. households and nonprofit organizations, including all assets in savings, real estate, corporate stocks, private businesses, and durable consumer goods like automobiles and furniture.

The new data reflect the government’s finances at the close of its 2021 fiscal year on September 30, 2021. Unlike other estimates of the federal government’s red ink which extend into the infinite future, the figure of $124.1 trillion only includes Americans who are alive right now. Thus, it measures the financial burden that today’s Americans are placing on future generations.

Officially called the “Financial Report of the United States Government,” this 258-page publication is mandated by a federal law which requires the Treasury and White House to produce a full accounting of the government’s “overall financial position” each year. Beyond the national debt, this also includes the government’s explicit and implicit commitments. This methodology approximates the accounting standards that the federal government imposes on publicly traded corporations.

Although the report discloses information of crucial import to the citizens of the United States, Google News indicates that no major media outlet has informed anyone about it since it was released on February 17, 2022.

A Comprehensive Accounting

As explained in the report, the federal government’s budget is “prepared primarily on a ‘cash basis’.” This is an incomplete measure of its finances because cash accounting is the simplistic process of counting money as it flows in or out. For example, cash accounting ignores the pension benefits promised to federal workers until these benefits are actually paid, which is often years or decades after they are promised.

In contrast to cash accounting, this Treasury report uses accrual accounting, which measures financial commitments as they are made. The U.S. Government Accountability Office, the official watchdog of Congress, explains that the report uses accrual accounting “to provide a complete picture of the federal government’s financial operations and financial position.”

The federal government requires large corporations to use accrual accounting for their pension plans because this is the “most relevant and reliable” way to measure their financial health. The same applies to other retirement benefits like healthcare. The official statement of this rule explains that “a failure to accrue” implies “that no obligation exists prior to the payment of benefits.” Since an obligation does exist, failing to account for it “impairs the usefulness and integrity” of financial statements.

Nevertheless, the media and politicians routinely cite the federal budget and national debt, while ignoring the far more comprehensive and bleaker data from this Treasury report.

Federal Employee Retirement Benefits

The differences between the federal budget and the broader Treasury data have major consequences for future taxpayers, partly because pension and other retirement benefits are a large part of the compensation packages for government employees. When these benefits are included, civilian non-postal federal employees receive an average of 17% more total compensation than private-sector workers with comparable education and work experience. Postal workers receive even greater premiums ranging from 25% to 43%.

In 2020, federal, state, and local governments spent $2.13 trillion on employee compensation, which amounts to an average cost of $16,556 for every household in the United States.

The Treasury report shows that the federal government currently owes $10.2 trillion in pensions and other benefits to federal employees and veterans. To pay the present value of these benefits will require an average of $78,372 from every household in the United States.

Social Security & Medicare

A similar situation exists with social insurance programs like Social Security and Medicare because, contrary to popular belief, these programs don’t save workers’ tax payments for their retirements. Instead, they immediately spend the vast majority of those taxes to pay benefits to current recipients. Thus, they are called “pay-as-you-go” programs.

In stark contrast, the U.S. Bureau of Economic Analysis states that “federal law requires that private pension plans operate as funded plans, not as pay-as-you-go plans.” The reasons for this, as explained by the American Academy of Actuaries, are to increase “benefit security” and ensure “intergenerational equity.” Social Security and Medicare, on the other hand, have levied increasing tax burdens on succeeding generations of Americans and have accumulated trillions of dollars in unfunded obligations.

Federal actuaries measure the unfunded obligations of Social Security and Medicare in several different ways, but only one of them approximates accrual accounting. This is called the “closed-group” unfunded obligation, which is the money needed to cover the shortfalls for all current taxpayers and beneficiaries in these programs.

In the words of Harvard Law School professor and federal budget specialist Howell E. Jackson, the closed-group measure “reflects the financial burden or liability being passed on to future generations.” These burdens are $43.2 trillion for Social Security and $47.8 trillion for Medicare. To place these figures in context:

  • Social Security’s unfunded obligations amount to an additional $247,327 from every person who currently pays Social Security payroll taxes.
  • Medicare’s unfunded obligations amount to an additional $183,614 from every U.S. resident aged 16 or older.

Those shortfalls are what remain after the federal government has paid back with interest all of the money it has borrowed from Social Security and Medicare. This debunks the common myth that Social Security’s financial problems are caused by the federal government looting it to pay for other programs. Just the opposite, the federal government has repeatedly boosted Social Security by raising its payroll tax rate, increasing its inflation-adjusted taxable maximum, and injecting other taxes to its income stream.

Yet, the program is still facing insolvency, mainly because the ratio of workers paying taxes to people receiving benefits has fallen by 47% since 1960 and is projected to fall further.

Social Security and Medicare differ from true pensions because taxpayers don’t have a contractual right to receive these benefits. Nevertheless, paying these benefits is an implied commitment of the federal government, and federal law requires that these programs be included in the Treasury report.

Other Obligations

Beyond the national debt, federal employee retirement benefits, and Social Security and Medicare shortfalls—the Treasury details other obligations of the federal government. These, include, for example:

  • $123 billion in accounts payable.
  • $613 billion in environmental and disposal liabilities.
  • $231 billion in loan guarantee program liabilities.

Federal Assets

The Treasury report also measures the federal government’s commercial assets, such as:

  • $475 billion in cash and other monetary assets.
  • $1.2 trillion in property, plants, and equipment.
  • $1.7 trillion in receivable loans, mainly comprised of student loans.

The report, however, doesn’t account for federal stewardship of land and heritage assets, such as national parks and the original copy of the Declaration of Independence. While these items have tangible value, the report explains that they “are intended to be preserved as national treasures,” not sold to the highest bidder to cover debts.

In total, the government owned $4.9 trillion in commercial assets at the close of its 2021 fiscal year.

The Grand Total

Adding up the federal government’s debts, liabilities, and unfunded obligations and then subtracting the value of its commercial assets yields a fiscal shortfall of $124.1 trillion.

Moreover, the actual figure may be significantly worse because the Treasury’s data is based on federal agency assumptions that are optimistic in these respects:

  • A 2012 paper in the journal Demography found that the Social Security Administration is using an antiquated method to project life expectancies, and as a result, the program “may be in a considerably more precarious position than officially thought.”
  • When the federal government makes student loans, it projects that it will eventually reap a 9% average profit from interest on the loans. However, the Congressional Budget Office (CBO) has determined that if the federal government accounted for the market risk of these loans, it would show an average loss of 12% on every dollar it lends. If President Biden forgives more student loans, as he is saying he may do, this would further increase the fiscal burden on future generations.
  • The Board of Medicare Trustees has stated that the program’s long-term costs may be “substantially higher” than projected under current law. This is because the price controls in Obamacare will cut Medicare prices for many medical services over the next three generations to “less than half of their level under the prior law.” The actuaries have been clear that this will likely cause “withdrawal of providers from the Medicare market” and “severe problems with beneficiary access to care.”

The Future is Here

In 2013, CBO ran a long-term projection of the publicly held debt, a partial measure of the national debt often cited by federal agencies and media outlets. This projection was unique in that it estimated what would occur under current federal policies and their economic effects, as opposed to other CBO projections that use unrealistic assumptions and budget gimmicks.

CBO’s 2013 projection estimated that the debt would grow over the next two decades to unprecedented levels unless the government changed course. Nine years later, the actual outcomes have been far worse, mainly due to more than $5 trillion in spending on “Covid relief” laws:


Contrary to the media narrative that tax cuts and military spending are to blame for the runaway national debt, the primary cause is greater spending on social programs which provide healthcare, income security, education, nutrition, housing, and cultural services. These programs have grown from 21% of all federal spending in 1960 to 73% in 2020:

Under current laws and policies, CBO projects that almost all future growth in spending will be due to social programs and interest on the national debt.

Harmful Effects

broad range of academic publications explain that excessive government debt can cause far-reaching negative outcomes, such as lower wages, increased inflation, weak economic growth, higher taxes, reduced government benefits, or combinations of such results.

Likewise, the U.S. Government Accountability Office warns that “the costs of federal borrowing will be borne by tomorrow’s workers and taxpayers,” which “may reduce or slow the growth of the living standards of future generations.”

Such effects may have already begun. Although association does not prove causation, the national debt has risen dramatically over past decades, and with this, the U.S. has experienced episodes of historically poor growth in gross domestic productproductivity, and household income. Along with this, rapid inflation has set in, another common consequence of excessive government debt.

While some believe the U.S. government can spend and borrow with abandon because it can print money, one of the most established laws of economics is that there is no such thing as a free lunch. The prolific economist William A. McEachern explains why this is so:

There is no free lunch because all goods and services involve a cost to someone. The lunch may seem free to you, but it draws scarce resources away from the production of other goods and services, and whoever provides a free lunch often expects something in return. A Russian proverb makes a similar point but with a bit more bite: “The only place you find free cheese is in a mousetrap.”


This article was published by Just Facts and is reproduced with permission.