While it appears that every day Americans may be DOGE-ing
more waste, fraud, and abuse in the federal Governments, unfortunately America
is on an unsustainable financial path and the numbers don't lie. The national
debt has surged past $36.5 trillion, with no signs of slowing down. Both
parties are complicit, but it is the left's relentless push for government
expansion, social programs, and reckless spending that has put us on the
trajectory toward an inevitable $40 trillion in debt.
The Fiscal Budget Line Items Nobody Mentions
When you closely examine what's happening with the fiscal
budget, there are only four-line items that are substantive to the overall
expenditures in the United States.
Here they are:
- Healthcare
Programs (Medicare and Medicaid): These programs collectively account
for approximately $1.67 trillion a year of spending, representing 24% of
the federal budget. Medicare provides health coverage to seniors, while
Medicaid assists low-income individuals. The aging population and rising
healthcare costs make it challenging to curtail spending in this area.
- Social
Security: With an annual expenditure of about $1.5 trillion, Social
Security constitutes 21% of the budget. It offers retirement and
disability benefits to eligible citizens. Given its role as a primary
income source for many retirees, any attempts to reduce benefits face
significant political resistance.
- Net
Interest on the Debt: Here lies the part of the problem on why $40
trillion in debt is inevitable. Interest payments on the national debt are
at a staggering $1.1 trillion dollars a year, comprising 15.6% of the
budget. As the debt grows and interest rates rise, these debt payments are
akin to a household that has runaway credit card debt on a one-way
dead-end path to bankruptcy.
- Defense
Spending: The defense budget stands at approximately $884 billion,
accounting for 12.5% of federal spending. This includes funding for
military operations, personnel, equipment, and research. National security
concerns and geopolitical dynamics make defense cuts politically
sensitive.
When you add up all four of these line items it's almost 73%
of the overall fiscal budget. For certain, it makes sense to shake
the federal government upside down like you were looking for coins in a couch
because that is a start to reduce the overall government spending.
However, it won't make up for the money we still need to run these three major
programs and as interest rates stay high, our own debt sinks us deeper and
deeper into a hole.
Reducing spending in these areas is fraught with challenges.
Healthcare and Social Security are vital to millions, and any cuts could have
widespread social implications. Defense spending is closely tied to national
security, making reductions politically contentious. Interest payments are
obligatory; as the debt escalates, so do these payments, creating a vicious
cycle.
What About Generating More Revenue?
Federal revenue is currently pacing to be a little bit more
than $5 trillion dollars and despite the buzz about tariffs and other taxes, we
really get revenue from three sources:
- Individual
Income Taxes: These taxes contribute approximately 51.6% of total
federal revenue. When you hear the rally cry of "tax the rich",
considering that almost 50% of Americans do pay any federal income tax at
all it's a stark reality that the main way you grow revenue is to get the
people who are making lots of money to pay more. Increasing income tax
rates is politically challenging and could discourage economic growth
since the highest levels of income are earned by those who start the
businesses and create the jobs for Americans.
- Payroll
Taxes: Accounting for about 33% of federal revenue, payroll taxes fund
social insurance programs like Social Security and Medicare.
Remember, this largely includes the 6.2% you pay for Social Security,
1.45% for Medicare, and unemployment taxes. Multiple proposals
have been discussed over the past twenty-five years about how to overhaul
income from these sources including an infinite tax on your income for
Social Security, increasing the Social Security tax over the next ten
years to 7.2%, and extending the normal retirement age for those born 1980
and after to the age of 70.
- Corporate
Income Taxes: Sadly, people complain that if Trump lowers taxes on
Corporation, it could badly damage the economy. The reality is the
taxes provided by corporations only equality a paltry 9% of federal
revenue. Even if tax rates on corporations went back to 35%,
the tax revenue earned from this change could pail in comparison to making
the United States competitive for companies to locate in our country.
Expanding revenue from all these sources is problematic.
Higher individual taxes can dampen consumer spending and savings. Elevated
payroll taxes place a burden on both employees and employers, potentially
affecting employment rates. Augmenting corporate taxes may drive businesses to
relocate operations abroad, diminishing the domestic tax base.
The Political Reality: DOGE is a start, but both sides must give in to fix this problem….
So far, DOGE estimates over $100 billion in savings.
This is a combination of asset sales, contract/lease cancellations and
renegotiations, fraud and improper payment deletion, grant cancellations,
interest savings, programmatic changes, regulatory savings, and workforce
deduction. Let's not make light of the fact that $100 billion dollars in
meaningful, but it's a far cry from closing the gap on the $2 trillion-dollar
fiscal deficit we are running now with half of that deficit being the net
interest on the debt.
What Americans hate most is hearing bad news or difficult
news which is why we elect new Presidents who have great approval ratings until
they start making the hard changes. Nobody likes the hard
changes. Approval ratings go down and politicians adjust to become
more favorable to the American Public.
While Republicans talk about fiscal responsibility, they
have largely abandoned the fight for balanced budgets. We need one now in the
worst way possible. The national debt surged under both Bush and Trump, proving
that even so-called conservatives are willing to spend freely when it suits
their agenda. Meanwhile, Democrats openly embrace massive government expansion,
arguing that "deficits don't matter" and that the rich can simply be taxed more
to cover the cost. It's always the Democratic answer, play Robin
Hood. Take from the rich and give to those who deserve it more (even
after you busted your tail to earn it).
The truth is, taxing the wealthy will never be enough. Even
if the government confiscated all the wealth of America's billionaires, it
would barely make a dent in the national debt. The only real solution is both
cut spending and increase taxes at the same time, but there is no political
will on either side to do so. Any attempt at fiscal restraint is met with
fierce opposition from special interest groups, politicians, media outrage, and
accusations of cruelty on one side of other.
The Path Forward: We Are Stuck, And It's Why We Will Hit 40 Trillion
The U.S. is racing toward $40 trillion in debt, and the
consequences will be severe. Inflation, economic stagnation, and a declining
global standing are just a few of the risks we face if we don't get our fiscal
house in order.
When your kid cries in the candy store, do you always give
in and buy them a piece of candy? The answer is no. The answer is
not what Americans want to hear. The answer is it's time to avoid a
full-blown economic crisis is through serious spending cuts, entitlement
reform, and a return to sound fiscal policy. This won't be easy, and it won't
be popular, but the alternative—a bankrupt America—is far worse.
Unless we do something soon, Washington's addiction to
spending and a political class unwilling to make tough choices, hitting $40
trillion in debt isn't just possible—it's inevitable.
Sources:
https://www.usbank.com/investing/financial-perspectives/market-news/national-debt.html
https://www.cbo.gov/publication/59710
https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
