A report published by the Wall Street Journal stated that the US federal government’s expenditures amounted to $6.75 trillion in the last fiscal year that ended on September 30, which is equivalent to distributing $20,000 to each of the 337 million people in the United States.
This figure – according to the newspaper – demonstrates the large burden of government spending, which the new administration, led by President-elect Donald Trump, seeks to address through massive budget cuts.
Trump has tapped Elon Musk, along with biotech company founder Vivek Ramaswamy, to lead the efforts of the new government efficiency department.
Musk announced his goal of reducing government spending by $2 trillion, but he did not clarify whether this would happen annually or over a long period.
However, the new ministry will not have the power to make the final decision, as Congress actually controls the government’s finances, according to the Wall Street Journal.
Detailed spending analysis
The newspaper indicates that US government spending includes two main categories: mandatory spending and discretionary spending.
According to estimates by the Congressional Budget Office (CBO), mandatory spending, including social programs and interest on debt, makes up about three-quarters of the government budget.
1- Mandatory spending:
- Social Security expenditures amounted to $1.45 trillion.
- Expenditures for the health insurance programs “Medicare” and “Medicaid” amounted to $1.49 trillion combined.
- While the interest on the national debt reached $950 billion.
Mandatory spending has risen significantly due to increasing health care costs and an aging population that relies on programs such as Medicare and Social Security, according to the newspaper.
Mandatory expenditures rose from about 10% of GDP 20 years ago to nearly 15% last year.
2- Discretionary spending:
This spending includes defense and non-defense programs such as housing, education, and transportation.
- Defense spending reached $850 billion.
- While non-defense spending amounted to $950 billion, and included $139 billion for veterans’ benefits, $128 billion for transportation, and $117 billion for education, training, and social services.
Additional details about spending
The total salaries of federal civilian employees amounted to $384 billion, and when military salaries are added, the number reaches $584 billion, according to the Wall Street Journal.
About 2.3 million employees work in the federal government, excluding the Postal Service, and Veterans Affairs workers represent about 20% of them.
In addition, about 73 million people receive Social Security benefits each month, 68 million enroll in Medicare, and 72 million enroll in Medicaid.
Debt and fiscal deficit financing
The report stated that total government revenues amounted to $4.92 trillion last year, which came from individual income taxes, payroll taxes, corporate income taxes, and other sources.
However, the gap between revenues and expenditures reached $1.83 trillion, raising the deficit to 6.4% of GDP.
Mandatory spending and debt interest are expected to double over the next decade, putting additional pressure on the budget, according to the Wall Street Journal.
Political and economic challenges
Trump promised to protect the “Medicare” and Social Security programs, leaving “Medicaid” as the main target for cuts, a decision that carries major political challenges, according to the newspaper’s assessment.
56% of Medicaid benefits go to the elderly and disabled, and many nursing homes rely heavily on this program.
The Wall Street Journal says that, in light of the continued growth in financial obligations, Musk and Ramaswamy face major obstacles. While they have proposed reducing the number of federal employees as a way to save costs, their salaries represent a relatively small portion of the budget.
With expectations that mandatory spending will increase by more than $2 trillion over the next decade, and the deficit will continue to grow, the task of reducing US government spending appears to be a major challenge facing the new administration.
