US Government Overspending 9-8-25

The U.S. federal government ran deficits each year from 2021-2024, meaning spending exceeded revenue, with the FY 2024 deficit reaching $1.83 trillion. Factors contributing to increased spending included rising net interest costs on the national debt, Social Security and Medicare expansions, increased food stamp benefits, and aid to Ukraine. This trend reflects continued borrowing to finance a large gap between spending and revenue, leading to a growing national debt.  

Government Spending vs. Revenue: The Deficit

·       A budget deficit occurs when the government spends more money than it collects in revenue. 

·       Since FY 2002, the federal government has consistently run deficits every year, adding to the national debt

Key Drivers of Increased Spending (2021-2024)

Interest Costs: Net interest payments on the national debt have nearly tripled since 2020, becoming one of the largest areas of federal spending. 

Mandatory Spending: Increases in mandatory programs like Social Security and Medicare, which are required by law, contribute significantly to higher overall spending. 

Other Factors: Additional spending increases were linked to:

·       Increased Food Stamp (SNAP) benefits. 

·       Student loan debt transfers. 

·       Aid to Ukraine. 

·       Bank bailouts. 

The Fiscal Context

·       In FY 2024, the federal deficit was $1.83 trillion, an increase from previous years, and represented 6.4% of the nation's Gross Domestic Product (GDP). 

·       Federal spending has grown substantially, with some analyses indicating spending increased by approximately $4.7 trillion above pre-Biden-Harris administration projections from FY 2021 to 2024. 

·       While the U.S. has experienced budget surpluses, the last one was in 2001. 

Between fiscal years (FY) 2021 and 2024, the U.S. federal government ran annual budget deficits ranging from $1.4 trillion to nearly $2.8 trillion, according to data from the Congressional Budget Office (CBO). While a budget deficit simply means that spending exceeded revenue, several significant factors contributed to the government's substantial spending during this period. 

Budget deficits from FY 2021–2024

The Committee for a Responsible Federal Budget (CRFB) and the CBO reported the following deficits for each fiscal year: 

·       FY 2021: $2.8 trillion, primarily due to spending on COVID-19 relief measures.

·       FY 2022: $1.4 trillion, a 50% decrease from the previous year, mainly because pandemic-related spending expired.

·       FY 2023: $1.7 trillion, an increase from the previous year. This figure was artificially lowered by an accounting adjustment related to the Supreme Court striking down a student loan forgiveness plan. Without this reversal, the underlying deficit would have been closer to $2 trillion.

·       FY 2024: $1.8 trillion, an increase over the previous year driven by higher interest payments on the debt and increased costs for mandatory spending programs like Social Security and Medicare. 

Key drivers of spending during this period

Several factors explain the federal government's significant spending between 2021 and 2024.

1. COVID-19 pandemic response

·       FY 2021: A large portion of the $6.8 trillion in spending was from COVID-19 relief legislation, such as the American Rescue Plan. This included unemployment benefits, refundable tax credits, and financial assistance to small businesses.

·       Expiration of relief: The decrease in the deficit in FY 2022 mainly resulted from the expiration of these pandemic-era programs. 

2. Increased interest rates

·       Rising interest costs: As the Federal Reserve raised interest rates to combat inflation starting in 2022, the government's cost to service its debt increased significantly.

·       Budget impact: Interest payments on the public debt rose by 35% in FY 2022 and by another 34% in FY 2024, becoming a major contributor to the growing deficit. 

3. Growth of mandatory spending

·       Social Security and Medicare: The cost of major entitlement programs saw steady growth. This was driven by cost-of-living adjustments for Social Security and increased enrollment and higher payment rates for Medicare and Medicaid.

·       Education spending: Outlays by the Department of Education also contributed to higher deficits. For example, spending rose by 145% in FY 2022, largely due to a now-invalidated student loan forgiveness plan. 

4. Reduced tax revenues

·       Weakened revenue collection: Although overall economic growth occurred, federal revenues decreased in FY 2023. This was largely due to lower individual income tax collections from lower capital gains realizations and a drop in remittances from the Federal Reserve.

·       Offsetting increases: For FY 2024, revenues increased by 11% but were outpaced by a 10% increase in government outlays. 

A long-term fiscal challenge

The large deficits during this period, particularly those not directly related to pandemic relief, highlight a growing long-term fiscal challenge for the United States.

·       Rising debt-to-GDP ratio: The national debt continued to grow, and the debt-to-GDP ratio increased, rising from 96% in 2023 to 98% in 2024.

·       Unsustainable path: Organizations like the U.S. Government Accountability Office (GAO) and the CRFB have repeatedly warned that the government is on an unsustainable fiscal path, with debt projected to reach record levels relative to the economy in the coming decades. 

https://www.google.com/search?q=us+federal+government+overspending+2021-2024

Comments

The Biden Administration took Federal Spending from $5 trillion to $7 trillion by overfunding bad policies. The current Trump Administration will need to keep spending $7 trillion to undo the harm done by the Biden Administration.

In the Midterm Election in 2026, if Republicans can increase their numbers in the Senate to 60 seats and increase their numbers in the House to 240, the “Economic Recovery” will accelerate.

Norb Leahy, Dunwoody GA Tea Party Leader