The federal deficit is big … and getting bigger.
The omnibus spending bill President Trump recently signed will generate a deficit of nearly $900 billion this year … and nearly $1 trillion next year.
By the end of FY 2018 – September 30th of this year – the gross U.S. federal government debt is estimated to be $21.48 trillion…
And this doesn’t include the unfunded liabilities of Social Security and Medicare … which are 4 times the current public debt.
How did the federal government’s finances degenerate to this level of fiscal irresponsibility?
It didn’t happen overnight … or during the Obama administration.
Here are 7 surprising facts you may not know about Congress and the federal deficit:
- High tax rates and a growing economy over the past 7 decades have produced record revenue … but not enough to keep pace with the voracious out-of-control spending habits of Congress.
Since the end of World War II, federal tax revenue has grown 15% faster than national income … but federal spending has grown 50% faster.
Since 1946, the federal government has ended its fiscal year with a surplus 12 times … and with a deficit 60 times.
The $8.4 trillion in federal deficits accumulated during the 8 years of the Obama administration is over $3 trillion more than the total of all the deficits from 1946 to 2008.
- All of the increase in federal spending relative to Gross Domestic Product (GDP) over the past 7 decades has been due to increases in entitlement spending.
Entitlement spending includes the following:
- Social Security
- Disability Insurance
- Food Stamp program
- Other welfare and government assistance programs
Entitlement spending as a percent of GDP has risen from less than 4% in the late 1940s to an irresponsible and unsustainable 14% this year.
National defense and nondefense discretionary spending as a percent of GDP is no higher today than it was at the end of World War II.
- The federal government’s priorities have shifted from providing for the nation’s defense to income redistribution.
The Vietnam War … the Iraq and Afghanistan wars … the war against terrorism and ISIS … the defense buildups under President Reagan and now President Trump … have all been costly … But all of these combined pale in comparison with the astonishing increases in entitlement spending.
- Since the early 1970s, entitlements have been the largest category of spending in the federal budget.
Entitlement spending today accounts for almost two-thirds of all federal spending…
Defense spending is still only about one-sixth – 16% — of total federal spending … even with the President Trump’s requested increase.
Even if defense spending were doubled from the current level … it would still only amount to half what is spent on entitlements.
- Significant reduction in the federal deficit can only be achieved by reducing the growth of entitlement spending.
History shows that restraining the growth of entitlement spending requires presidential leadership.
So far, President Trump has failed to step up…
The budget he submitted last year proposed to shave only 1% from entitlement spending that’s growing by 6% every year.
Social Security and Medicare spending – the 2 largest entitlement programs – will exceed payroll taxes and premium payments this year by $420 billion.
- Congress has proven that it has no desire or willingness to restrain entitlement spending.
Our elected Congressional representatives have:
- Eliminated the requirement to vote on a debt ceiling increase this year
- Ruled out the reconciliation process for any federal budget legislation
No wonder President Trump has asked for a line item veto authorization … Congress is refusing to do its job.
- Social Security and Medicare expenditures are accelerating due to the retirement of the baby boomer generation.
Between now and 2030, it’s estimated that 10,000 additional baby boomers will be retiring and claiming Social Security and Medicare every day – about 300,000 per month.
Financing this level of expenditure will require either record levels of taxation … or an even greater level of debt than what we have now.
Economics teaches us that high tax rates reduce economic growth and standard of living…
History teaches us that high public debt exacerbates economic volatility and makes a country’s financial system more prone to a major crisis.
Congress must begin to act responsibly very soon … before it’s too late.
Its current level of deficit spending is unsustainable…
Its excessive borrowing – and the excessive fiat money creation by the Federal Reserve – will lead to economic problems and a stock market decline at best…
…and hyper-inflation – even economic collapse – at worst.
Note: Who you vote for in the upcoming election is key to turning this around. Our voter guide is almost ready. Be sure to vote for economic sanity.
What do you think? Write me at [email protected]