Will "Major" Spending Cuts Balance the Budget?
Published Thursday, November 9, 2023
We receive a lot of emails regarding confusion around government spending and the spending cut debate currently in Congress.
The good news, compared to the federal spending of $6.27 trillion for the same period last year (Oct 2021 - Sep 2022) our federal spending has decreased by $137 billion (-2%).
Will Spending Cuts in the appropriation bills balance the budget?
Let us look at some numbers:
- The U.S. government has spent $6.13 trillion in fiscal year 2023.
- The government received $4.44 trillion in revenue in fiscal year 2023.
- This brings us to a U.S. Deficit FY 2023 $1.7 trillion (spending minus revenue).
It would appear Congress is out of control and passing bloated spending bills, but is it?
Let us look at some more numbers:
- Mandatory spending accounts for just under three-quarters of all federal spending; that's $4.6 trillion in 2023.
- Discretionary spending (The 12 appropriations bills being debated in Congress) was $1.7 trillion in FY 2023, which accounts for just over one-quarter of all federal spending.
- Fiscal Year 2023 Defense Appropriations bill provides $797.6 billion in spending – an increase of $69.2 billion over FY22. This means Congress spends almost half the discretionary budget on defense programs.
- Congress will spend $800 billion in non-defense discretionary funding, such as education, transportation, infrastructure, income security, veterans' health care, homeland security, agriculture, parks, etc. This non-defense discretionary funding is less than half the deficit.
What say you, will "major" spending cuts, or even 100% spending cuts, to non-defense discretionary spending balance the budget?
What will balance or impact the budget the most?
- Economic growth
- Entitlements (mandatory spending)
- Revenue increase (outside of economic growth)
Note: We are not saying Congress should not be fiscally responsible with taxpayer money and spending.
Major Mandatory Spending Categories in Ranking Order:
- Social Security
- Medicare
- Medicaid
- Income Security Programs
- Student Loan Programs
- Other
- Plus, Net Interest
Major Revenue Sources in Ranking Order:
- Individual Income Taxes
- Payroll Taxes
- Corporate Income Taxes
- Other
Mandatory Spending: Primarily payments for benefit programs whose eligibility rules and benefit formulas are set by law.
Discretionary Spending: Spending that lawmakers control through the annual appropriation acts.
Net Interest: The government's interest payments on debt held by the public, offset by interest income the government receives.
According to the Committee for a Responsible Federal Budget:
In order to achieve balance within a decade, all spending would need to be cut by roughly one-quarter and that the necessary cuts would grow to 85 percent if defense, veterans, Social Security, and Medicare spending were off the table. These cuts would be so large that it would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program just to get to balance.
