Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

It’s Tax Day—Here’s How Washington Spent Your Money

by April 15, 2025
April 15, 2025
It’s Tax Day—Here’s How Washington Spent Your Money

Dominik Lett

It’s officially Tax Day. Time to take stock.

The federal government spent $7.1 trillion in 2024. Tax dollars paid for $5.3 trillion, or 74 percent. The rest (26 percent) was borrowed. This $1.8 trillion in deficit spending is deferred taxation. Inevitably, borrowing will be paid for by new taxes or inflation, meaning our children and grandchildren will pay the price for higher spending today.

Where did all that money go?

The federal government spends the most on transfer programs. That is when the government redistributes money from one group to another rather than supplying governmental services like national defense.

As the chart below shows:

Major entitlements—Medicare, Medicaid, and Social Security—devoured nearly half of the 2024 budget. ($3.1 trillion)
Other non-defense discretionary and mandatory programs, primarily benefits and subsidies, consumed another 32 percent. This includes a vast range of programs, such as welfare for food and housing, federal employee retirement, disability benefits, veterans’ benefits, and unemployment benefits. ($2.3 trillion)
Overall, two-thirds of government spending went to pay some sort of benefit to someone.
Interest on the US federal debt consumed another 12 percent of the budget. ($881 billion)
Slightly less, $850 billion, or 12 percent, went toward national defense, meaning we spent more this year financing past fiscal irresponsibility than on the military.

The federal government’s budget outlook is quite dismal as well. Federal health care programs and Social Security make up more than half of projected spending growth over the next 30 years. Interest costs from servicing the federal debt account for another quarter of 30-year spending growth. Together, $8 in $10 of spending growth is traceable to major entitlement programs and interest costs on the national debt.

Meanwhile, most Americans seem more focused on the Department of Government Efficiency (DOGE) and its efforts to cut waste, fraud, and abuse. Eliminating waste and improving efficiency are laudable objectives, but our fiscal trajectory will remain largely unchanged without reforming major entitlement programs.

If legislators continue to refuse to take health care and old-age entitlement reform seriously, there isn’t much they’ll be able to do to avoid massive (unpopular) middle-class tax increases. Medicare and Social Security are responsible for 100 percent of long-term unfunded obligations. The benefit growth for these programs is simply unsustainable, and the alternative of doing nothing risks a future fiscal crisis. Taxing the rich isn’t a catch-all solution either, given there’s not enough money to take from higher-income earners to make the math work.

And there is no way to “grow” our way out of this fiscal situation either. Social Security is indexed to grow with average wages, and Medicare spending is growing faster than economic growth. Both face similar demographic problems due to declining birth rates and improvements in longevity. No amount of new debt financing or political promises of a booming economy will make these fundamental realities go away. More likely, our worsening fiscal situation will accelerate our current financing problems, with the federal government’s massive debt burden slowing growth, boosting inflation, and raising interest costs. Delaying reform contributes directly to this problem.

Sadly, Washington’s most recent budget-related action was to approve a Senate fiscal framework that hides more than $5 trillion in deficit-increasing tax cuts. Extending the 2017 tax cuts is a great opportunity to lower tax rates and eliminate loopholes, but it must be done alongside shrinking the size of government in a fiscally responsible manner. That means demanding that legislators have the courage to cut spending, which is the real tax rate. While the final tax package has yet to be crafted, history would caution that Washington will likely continue rampant spending. Perhaps this time will be different.

Deficits today represent tax increases tomorrow. So, if you thought your taxes were too high and burdensome this year, here’s some more bad news: without reducing the growth in Medicare and Social Security benefits, Congress will have no choice but to raise taxes on most Americans at some point in the future.

0
FacebookTwitterGoogle +Pinterest
previous post
I’m Saying Goodbye to the Cato Daily Podcast
next post
“Once Jews and Muslims Were Best Friends. They Can Be Again”

You may also like

State Officials Can’t Appoint Federal Officers in Gulf...

March 25, 2024

Is Freedom Falling? Take a Closer Look in...

April 4, 2024

New Defending Globalization Essay Just in Time for...

November 26, 2024

Higher Interest Rates Have Ramifications for Public Pension...

October 13, 2023

Questioning the Housing Crisis: A First Look at...

December 10, 2024

Trump Assassination Attempt: Investigation Update

July 15, 2024

Spotlighting Protester Surveillance: FOIA Lawsuit Edition

May 2, 2023

New Survey: Private School Enrollment Grew from the...

March 26, 2024

American Businesses Face a New Caesar

November 4, 2024

A “Bidenomics” Cautionary Tale

July 7, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • House Dems urge GOP to condemn DHS for handcuffing Rep Nadler staffer, order Noem to testify

      June 3, 2025
    • EXCLUSIVE: Comer hails DOJ’s Biden probe as House investigation heats up

      June 3, 2025
    • Trump reaffirms hard-line on Iran nuclear deal: ‘will not allow any enrichment of uranium’

      June 3, 2025
    • Trump criticizes Rand Paul over tax bill opposition: ‘Votes no on everything’

      June 3, 2025
    • HHS ends Biden-era COVID-19 testing program that bled taxpayers years after pandemic

      June 3, 2025
    • The FTC Event that Wasn’t: The Attention Economy Workshop Misses an Opportunity for Meaningful Discussion

      June 3, 2025

    Categories

    • Business (8,129)
    • Investing (2,003)
    • Politics (15,490)
    • Stocks (3,122)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved