COLUMNIST: A return to pre-pandemic spending faces challenges
TL/DR –
U.S. Senator Ron Johnson advocates for a return to pre-pandemic spending levels, criticising the current budget bill for failing to reduce the $1.8 trillion federal deficit. A large portion of increased federal spending since 2020 can be attributed to interest payments, rising Social Security and Medicare costs due to the aging baby boomer population, and increased funding for Medicaid. Other notable spending increases include federal student aid, disaster relief, and Environmental Protection Agency state and tribal assistance grants.
Return to Pre-Pandemic Spending – U.S. Senator Ron Johnson’s Standpoint
“We need to return to a reasonable pre-pandemic level of spending,” opines the Republican U.S. Senator from Wisconsin, Ron Johnson. He criticizes the new budget bill, which does not aim to decrease the hefty $1.8 trillion federal deficit.
The Impact of Shrinking the Federal Government
Reverting to the federal structure of February 2020, with inflation adjustments, seems plausible. But what would be the implications? What caused the significant rise in actual federal spending since February 2020?
Breaking Down the Increase in Federal Spending
Interest payments account for one-third of the increase, doubling due to the federal debt surge from pandemic spending programs and higher interest rates. The country’s elderly social insurance programs, Social Security and Medicare, contribute another 23% of the rise, in line with the increasing number of baby boomers reaching eligibility. The House and Senate Republicans are not considering any changes here. The “health” budget contributes 15% more, primarily due to increased federal grants to the Medicaid program.
The Main Components of Increased Spending
Interest, Social Security, Medicare, and health spending together make up 71% of the spending hikes. Adding veterans benefits and services, which are primarily health care-related and not marked for significant cuts in the current budget, brings it up to 77%. What about the rest?
Other Components Contributing to the Increase
The “everything else” increase is attributed mainly to the following: Federal student aid up by $71 billion (81% increase), disaster relief up by $30 billion (174% rise), and the EPA state and tribal assistance grants up by $25 billion (505% rise).
The Future of Spending Reduction
Despite these facts, the main factors driving the overall spending increase since Feb 2020 remain unaddressed, except Medicaid. The U.S. could significantly reduce the deficit by adopting a national value-added tax, following the example of other advanced economies. However, this seems unlikely for this year.
—
Read More US Economic News