Washington, D.C., is out of control, and something needs to change – fast!
Partisan political commentators would have everyone believe that the government will be irreparably starved of resources if we cut taxes. This is simply not true. Federal tax receipts have historically risen year over year, even after tax cuts. The Tax Cuts and Jobs Act (the Trump tax cut) went into effect on January 1, 2018: from the end of 2017 to the end of 2019, federal tax receipts increased by 5.94%, rising from $2.051 trillion to $2.173 trillion. By the end of Trump’s term, even factoring in the COVID-19 economic shutdown, tax receipts were up to $2.288 trillion.
Unfortunately, while tax revenue grew, government spending soared even more. Between 2017 and 2019, federal expenditures rose by 11.11%, from $4.32 trillion to $4.80 trillion. During the pandemic, spending spiked to an unprecedented $9 trillion. Post-pandemic, it remained high, with annual expenditures fluctuating between $6 trillion and $8.3 trillion. As of the second quarter of 2024, tax receipts are a strong $3.09 trillion, yet expenditures have climbed to $6.8 trillion. For every dollar the IRS collects, Congress is spending $2.
Following COVID, federal debt exploded from $23.2 trillion to $26.4 trillion. Understandably, governments enter deficit spending to offset hardship during a global crisis. The issue is that Washington continued this spending spree long after the immediate crisis had passed, pushing our debt to unsustainable levels. When Trump left office, debt stood at $27.74 trillion; today, it’s a staggering $34.83 trillion – 25% higher.
This out-of-control spending has contributed to the severe inflation that Americans are grappling with today. If interest rates had remained “COVID-low,” we might have had a chance to grow our way out of this fiscal mess. However, the Federal Reserve’s rate hikes to combat inflation have made it costly to service our debt, endangering the government’s ability to function. Debt interest payments alone are now three times the amount of income tax revenue – leaving even less room to fund essential government programs.
Washington doesn’t have an income problem. They have a spending problem. If they don’t return to fiscal reality soon, we won’t have any fiscal runway to work with when the next real financial crisis arrives.
