An Overview of Federal Spending...

Dear Friend,

A reduction in future spending and work requirements for able-bodied adults with no dependents are the primary hangups with the debt ceiling negotiations. We are at this point because the federal government continues to spend more than the amount of revenue collected. In a recent newsletter, I outlined how the federal government spent $6.27 trillion in 2022 while only collecting $4.9 trillion in revenue. The annual federal budget covers three spending areas:

Mandatory spending (funding for Social Security, Medicare, veterans benefits, and other spending required by law.)
- $4.13 trillion in FY 2022.
Discretionary spending (the portion of spending Congress appropriates annually. This includes national defense, transportation, education, housing, and social service programs, as well as science and environmental organizations.)
- $1.6 trillion in FY 2022.
Interest on the debt
- $475 billion in FY 2022.

As you can see above (and in the chart below), mandatory spending constitutes the vast majority of the $6.27 trillion in spending, and it is on autopilot until we enact a meaningful set of fiscal constraints.

Below, you will find a breakdown of mandatory vs. discretionary spending to help demonstrate why sensible spending reforms are necessary as Congress and President Biden negotiate to prevent a default and protect the good faith and credit of the United States.

Closing Thoughts...

As you can see, mandatory and discretionary spending account for about 91 percent of the total federal budget, and it is the very reason why U.S. debt continues to increase at an unsustainable pace. While our national debt is unsustainable, there is still time to implement sensible spending reforms to reverse course on our runaway spending.

The Limit, Save, Grow Act passed by our Republican majority is a responsible step forward. By coupling a debt limit increase with pro-growth policies and meaningful spending cuts, we can get our fiscal house in order and protect taxpayer dollars.

A debt limit increase without implementing some spending reforms will simply set us up for another debt limit debacle under even more difficult circumstances in the future.

A divided government necessitates compromise to move forward, which means that any achievements on spending reforms coupled with a debt limit increase will very likely be modest. I expect permitting reform measures to be included in any possible deal. This would advance energy production and infrastructure projects so badly needed.

With negotiations underway, it’s time for the U.S. Senate and President Biden to finalize an agreement with Speaker McCarthy which caps future spending and responsibly increases the debt limit to avoid default on our payment obligations.