US Government Budgeting: The Elephant in the Room

Apparently, the government cannot see the elephant in the room.

There has been little discussion of US budgeting challenges lately. It used to be a lot of fun to have the two parties rant about how the other party was spending the country into ruin. But no longer. They’d rather scream about other things. Or maybe they have decided to put things off. Most recently, they decided to postpone discussions of the budget for 2020 for three weeks. Can you believe that? They postponed for three weeks. Do you really think they will be more prepared to work on the budget in three weeks? That’s rich.

So that gives us an opportunity to get back to basics about the budget. I created the table below to show you where the budget sat in 2018. These numbers are history in the first column. The 2020 column shows where they plan to go. These numbers are already legislated. They could change, of course, if they enact changes to the 2020 budget in the coming weeks.

Keep in mind that some people would look at the 2018 numbers and worry. In 2018, the federal government spent $823 billion dollars more than it collected in taxes. We call that a budget deficit and that number is large by historical standards. That’s a big discrepancy. Usually, a government will excuse a large budget deficit if the country is in a recession. But we were not in a recession recently, nor are we in one now. The unemployment rate is at historic lows.

Each year a government has a budget deficit, it must issue debt to pay the deficiency. Since we have had mostly deficits every year since the Tuna was a little fish, the national debt gets larger and larger. The table shows that the debt will grow by more than a trillion dollars each year over the two years. It will reach $23.7 trillion in 2020. Note—we must pay that debt. Since there are no plans to reduce the annual government deficit, this debt will just increase for the foreseeable future.

The rest of the table shows us how we spend our federal tax dollars. The total spending includes everything, but the individual amounts in the table do not include every category of government spending. The main ones are all there, though.

Notice first that over these two years, spending is planned to increase by $409 billion and that amounts to a 10.7% increase. I hope you get to spend that much more on your household over those years. Note that inflation is coming in lately at about 2% per year so the 10.4% increase is pretty generous. It does not look like the government is worried about spending too much and how that impacts deficits and debt.

Second, look down the 2018 column to see the biggest spending numbers. What do we spend our money on? If you add together Social Security and Medicare, you get a total of about $1.7 trillion. Those two programs gobbled up 45% of the entire government spending in 2018. Of the projected change through 2020, the increase in those two programs is expected to be $192 billion and that amounts to 47% of the total spending increase.

Even though the large defense spending figure leaves out some of the total amount of military spending, one can see that defense spending is a major part of the overall budget and at 11.6%, it is one of the fastest growing spending categories through 2020.

While the expected $390 billion of net interest (on the national debt) is not among the largest numbers, it shows that our continuing debt has consequences. We spend more on net interest than on income security, on Veterans, and it is coming close to equaling how much we spend on Medicare. A smaller debt would imply less interest paid. But no one in our government seems very concerned about that. 

Table. US Federal Deficits, Debt and Spending

Table. US Federal Deficits, Debt and Spending
Actual and Projected
	2018	2020*	Change	% Change
Deficit	(823)	(1,008)	(185)	22
Debt	21,462	23,688	2,226	10
Total Spending	3,829	4,238	409	11
Defense	627	700	73	12
Non-Defense **	579	622	43	7
Social Security	992	1,097	105	11
Medicare	728	815	87	12
Medicaid	369	418	49	13
Income Security	290	302	12	4
Veterans	93	104	11	12
Net Interest	325	390	65	20
In billions of dollars.
* 2020 figures are estimates based on current law
Source: https://www.cbo.gov/about/products/budget-economic-data
**Non-Defense Discretionary Spending includes many
different government programs not listed individually.