2024 Budget

Here is a link the the 2024 Federal Budget:

https://www.cbo.gov/publication/61181

Note that Mandatory spending ($4.1 Trillion) plus Interest on Debt ($.881 Trillion) amounts to $4.981 Trillion. Note also that Total Revenues amount to $4.9 Trillion.

Thus, the total amount collected by the entire government ($4.9 Trillion) is spent on Mandatory spending and Interest.

The remaining governmental functions (discretionary spending), such as defense, salaries and overhead of the three branches of the government and miscellaneous, are paid with borrowed money.

Assuming we want to balance the budget, what should we do? Should we raise taxes or reduce spending?

Total collections amounted to 17.1% of GDP in 2024 (the value of all goods and services produced by the entire country). In recent years, federal revenue has hovered around 17% of GDP. Total spending amounted to 23.4% of GDP. This means that the government taxed, seized or borrowed and spent about a quarter of the value of all goods and services produced by the entire country.

In 1964, total spending amounted to 18% of GDP (about $122.5 Billion) and mandatory spending was under 30% of total spending (about $40 Billion).

Considering the above, it seems that income is about in line with the growth of GDP but expenditures are not. Therefore, maybe we should look at spending and see why it is so out of line.

It seems that the establishment and expansion of programs like Social Security (1935), Medicare (1966), and Medicaid (1965) increased government outlays as a share of GDP. These “mandatory spending” programs have grown exponentially over the past 60 years and have, in some instances, far outpaced GDP growth.

Let's take a look at these spending programs in detail. Click here.

It is obvious from the above that welfare is the culprit. Interestingly, all you hear about in the press is how Social Security and Medicare are breaking the budget when, in reality, they pretty much pay their way. Welfare (Medicaid, etc.) does not. 

While it is true that Social Security and Medicare spending has increased similarly to Medicaid but so has their related income.

Medicaid spending in the U.S. has significantly increased over time, particularly following the Affordable Care Act (ACA) and the pandemic. In 2023, Medicaid expenditures reached $894 billion, the highest in the program's history. This growth is partly due to increased enrollment and partly due to rising healthcare costs. The ACA allows every Tom, Dick and Harry who makes less than $21,597 access to Medicaid and the Feds reimburse the states 90% of the costs (50% for regular recipients). Check out this Chart.

Approximately 22% of the U.S. population is enrolled in Medicaid. This translates to roughly 72 million people or one in five Americans.

Clearly, this trajectory is unsustainable because it is driving the country into bankruptcy. The recently signed One Big Beautiful Bill Act has made an attempt to, at least, slow the growth of the program.

It is my hope that people will begin to understand the reality and stop believing the misleading information put out by the press.

And That's that!