The federal budget deficit rose to $1.83 trillion for the fiscal year that ended last month, a growth of 13% from the year before despite the fact that the economy is growing, there is no pandemic causing a government lockdown, and, as mentioned before, the military is not engaged in a large-scale conflict.
Usually, when the economy grows during peacetime, the deficit shrinks. But not under President Joe Biden. Thanks to Biden’s previous spending binges, plus a record-high growth in federal education spending caused by Biden’s unilateral college tuition bailout, overall spending rose to $6.75 trillion last year, an 11% increase from the year before.
While the cost of Biden’s bailout will fade in future years, the other drivers of federal spending growth will not. Social Security and Medicare spending continue to grow faster than the overall economy, with Medicare spending, $869 billion, now eclipsing defense spending, $826 billion, for the first time in the nation’s history.
More alarming is the growth in interest payments on existing federal debt. Rising from $710 billion the year before to $950 billion this last fiscal year, interest payments on the debt are now also larger than total military spending, another historical first.
This growth in federal spending is simply unsustainable, and higher taxes cannot solve the problem. Already under existing tax rates, revenues are at an all-time high of $4.9 trillion. Individual income tax receipts rose 11% to $2.4 trillion, while corporate tax receipts rose 12% to $529 billion. All together, federal revenues have averaged 17.3% of the economy since 1974, and they are set to rise to 17.9% by 2034.
The problem is that federal spending as a percentage of the economy is already at 22.7% and is set to rise to 24.1% a decade from now. The highest federal tax revenues as a percentage of the economy have ever been was 19.8% at the height of World War II. There is simply no historical precedent for our economy sustaining federal revenues above 20% of the total economy. We must get spending down.
Unfortunately, neither candidate in this year’s presidential race has voiced any concern about growing federal deficits or the runaway spending that is causing them. Instead, both candidates seem to be competing on who could raise deficits the fastest. In addition to both candidates promising not to touch Social Security or Medicare, Vice President Kamala Harris has promised a brand-new, long-term home healthcare entitlement, a spending program so fiscally irresponsible that the Obama administration was forced to abandon it just two years after it was passed as part of Obamacare.
Not to be outdone, former President Donald Trump has promised reckless new tax cuts on tips, overtime, state and local taxes, and a new tax deduction for interest on car loans. Every single one of these proposals is a transparent bribe to a favored constituency, and all of them would weaken the tax code by shrinking the base and making it less transparent. Consumers already have far too much car loan debt, so the last thing we need is for the federal government to subsidize more of it.
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For all his other faults, Biden is correct when he says, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” The first priority of the federal government is to provide for the common defense. For most of history, we could see this prioritization of values in our budget, with defense spending on top as the biggest item. But now, military spending isn’t first, second, or even third. It’s fourth, behind Social Security, Medicare, and debt payments.
With China constantly growing its naval fleet while investing heavily in aerial and cyber capabilities, and with Iran funding proxies to attack American interests across the globe, we should be looking to grow our defense budget, not let it shrink. Our runaway federal spending problem is fast becoming a national security problem. It is time we started doing something about it.
This article was originally published at www.washingtonexaminer.com
