Steve Ballmer outlines the key facts behind the dramatic growth of US government debt over the last 15 years, spurred by the Great Financial Crisis and the Pandemic. The US government has limited room to manoeuvre: health, pensions, grants, and interest payments are mandatory. While the defense budget is technically discretionary, in practice, there is little scope for significant cuts.
With a 38% budget deficit, the US cannot sustain this for much longer. Another war (even a regional war), a civil war, a terrorist attack, an economic downturn, or even another pandemic - any of these could deal a severe blow to its economic stability. With the US, the rest of the world will experience severe tremors too. Interest payments alone consume approximately 10% of the overall budget and 15% of federal revenue. If the US were a household, it would be considered caught in a debt trap.
What are the potential solutions?
The government could inflate away the debt, boost export revenues, or increase productivity in key sectors to generate more value per labour hour. It could also look to improve its benefits and healthcare systems. However, each of these is on long-term trends - trying to change course may prove extremely unpopular, making significant changes difficult to achieve quickly.
Taxing the high incomers may not prove effective as they seem to be picking up a significant portion of the tax revenue - the top 5% of earners contribute to 66% of tax revenue. A further increase could see capital flight and talent exodus.
There doesn't seem to be an easy way out - it all looks very scary!
The YouTube video from Steve Balmer - USAFacts Channel: https://www.youtube.com/watch?v=aQoh9jdRZPM
Federal spending: In 2023, the federal government spent $6.2 trillion.
Federal revenue: In 2023, the federal government took in $4.5 trillion, mostly from taxes.
Budget Deficit: The difference between federal spending and revenue in 2023 was $1.7 trillion.
National Debt: The total national debt is close to $35 trillion.
Mandatory Spending: In 2023, mandatory spending was $3.8 trillion, representing 60% of all federal spending.
Social Security Spending: In 2023, Social Security cost $1.4 trillion and accounts for 22% of the total federal budget.
Social Security Beneficiaries: There are over 67 million people receiving Social Security benefits.
Average Social Security Benefit: Retirees receive an average of $1,900 per month, while disabled and surviving spouses receive about $1,500 per month.
Social Security Trust Fund: The Social Security trust fund is projected to be exhausted by 2035.
Medicare Spending: In 2023, Medicare cost the federal government $850 billion, representing 14% of all federal spending.
Medicare Beneficiaries: Medicare covers 67 million Americans.
Average Medicare Spending Per Beneficiary: In 2022, the average annual spending per Medicare beneficiary was about $16,000.
Medicaid Spending: In 2023, the federal government paid $616 billion for Medicaid.
Medicaid Beneficiaries: As of December 2023, about 78 million Americans are on Medicaid.
Veterans Benefits: In 2023, veterans benefits cost $299 billion.
Federal Grants to States and Local Governments: In 2023, Washington sent nearly $1.1 trillion in grants to states and local governments.
National Defense Spending: In 2023, National Defense spending was $820 billion.
Active Duty Military Personnel: America has 1.3 million active-duty service members.
Military Reserves: America has 767,000 people in the reserves.
Military Civilians: There are 779,000 civilians working in support roles for the military.
Veterans: America has 16 million veterans.
Defense Spending as a Share of GDP: Defense spending is about 3% of American GDP.
Individual Income Taxes: In 2023, individual income taxes generated $2.2 trillion in revenue.
Payroll Taxes: In 2023, payroll taxes generated $1.6 trillion in revenue.
Corporate Income Taxes: In 2023, corporate income taxes generated $420 billion in revenue.
Top 5% of Taxpayers: In 2021, the top 5% of taxpayers (earning at least $253,000) paid $1.4 trillion in income taxes, representing 66% of all income taxes collected.
Tax Cuts and Jobs Act of 2017: The Act lowered individual tax rates and increased the child tax credit to $2,000. It also reduced the corporate income tax rate from 35% to 21%.
National Debt Increase: In the last 15 years, the national debt has increased by $24 trillion.
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