Irresponsible emergency spending practices have eroded fiscal norms, contributing directly to America’s mounting debt challenge. Over the last three decades, Congress designated 1 in 10 dollars of federal spending for emergencies. Most of this emergency funding was provided through deficit spending with no plan to pay down the accumulated debt with future surpluses.
Downsizing Blog
Will Economic Growth Be Short‐Lived as Fiscal Challenges Abound?
The United States has been experiencing remarkable economic growth, even as debt and deficits soar to unprecedented heights. The economy has benefitted from lower interest rate sensitivity in the market and fiscal and monetary tailwinds. These dual trends are largely temporary, hiding the debt drag beneath the surface.
Business Subsidies and State Tax Climates
In researching Cato’s governor report cards, I’ve found that high‐tax states appear to hand out the most special‐interest breaks and subsidies. Let’s look at some supporting data.
Including Emergency Spending in Fiscal Projections Distorts the CBO Baseline
Congress recently approved a $95 billion foreign aid package to send aid to Ukraine, Israel, and the Indo‐Pacific region. Including this new “one‐time” emergency spending in fiscal projections distorts the Congressional Budget Office (CBO) baseline.
The High Cost of War: Ukraine Aid Could Top $240 Billion
To date, the US has committed about $114 billion in Ukraine‐related emergency funding, equivalent to the combined 2023 budget for the Department of Homeland Security and NASA. Should Congress decide to pass additional emergency funding, Ukraine aid plus interest could top $240 billion.
The Threat of Fiscal Dominance: Will the US Resort to Money‐Printing to Finance the Rising Debt Challenge?
With Congress currently unwilling to seriously address the entitlement spending problem that’s driving the US toward a fiscal cliff, it’s worth evaluating the possibility of more frequent episodes of fiscal dominance and their consequences.
Medicare and Social Security Are Responsible for 100 Percent of US Unfunded Obligations
Over the next 75 years, US taxpayers face over $73 trillion in long‐term unfunded obligations. What’s more, this unfunded obligation is entirely driven by only two federal government programs: Medicare and Social Security.
Biden’s Phony Deficit Reduction
President Biden’s new federal budget proposes high spending and huge deficits for years to come. The deficits are expected to boost government debt held by the public from $28 trillion this year to $45 trillion by 2034.
President Biden’s Proposed Budget
President Biden has released his proposed federal budget for fiscal year 2025 and beyond. The proposal includes a raft of spending increases, including new subsidies for childcare, housing, college, health care, paid leave, refundable tax credits, home care, and many other things. It also includes a bevy of large tax increases, including higher rates on individual income, corporate income, and capital gains.
DC Purple Line Cost Overruns and Delays Continue
The Maryland Department of Transportation recently announced yet another delay of the Purple Line’s opening to Winter 2027, five years after its initially planned completion in 2022. The 16.2‑mile light rail project, which will connect New Carrollton and Bethesda in Washington, DC’s northern suburbs is also way over budget.