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unidentified
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Jonathan Turley, Amanda Becker, Clay Risa, and Paola Ramos. | |
| The Tucson Festival of Books, live this weekend beginning at 1 p.m. Eastern on C-SPAN 2. | ||
| C-SPAN, democracy unfiltered. | ||
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| Our first guest of the morning is Richard Rubin with the Wall Street Journal. | ||
| He is a tax policy reporter and in recent days put out this story. | ||
| Here's how the government spending has grown and where the money is going. | ||
| Richard Rubin, thanks for joining us. | ||
| Sure. | ||
|
unidentified
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Thanks for having me. | |
| You start the story by taking a look at changes over the last 10 years. | ||
| Let's start there. | ||
| What's changed in that time period? | ||
|
unidentified
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Yeah, so if you look just in terms of the nominal dollars, the number of dollars the federal government is taking in and spending, they've, you know, it's gone up significantly over the past decade. | |
| So if you look from 2015 to 2024, the revenue went up 51% and spending went up 83%. | ||
| But what we try to do is kind of dial that back a little bit and say, okay, well, we know there was, you know, this inflation that happened over that period and there was population growth that happened over that period. | ||
| So my colleague Kara DePana and I kind of went and said, okay, what if we adjusted for inflation and adjusted for population? | ||
| What do you see the increase in spending and revenue being? | ||
| And when you do that, you get about a 9% increase in revenue and a 32% increase in spending. | ||
| So it's definitely, spending has definitely gone up. | ||
| The federal government has spent more, spends more now. | ||
| We can talk about some of the reasons why than it did a decade ago. | ||
| But when you hear this, oh, we went from $4.5 trillion in 2019 to $7 trillion of spending in 2024, that sort of conflates a couple of things that are happening. | ||
| So let's start with that idea of the specifics of why spending went up. | ||
| Let's start there. | ||
|
unidentified
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Yeah, so you've got a couple of different things going on. | |
| One is just sort of the aging of the population and healthcare cost inflation. | ||
| So right, some of the biggest expenses of the federal government are Social Security and Medicare. | ||
| And Social Security has we've known for decades, right? | ||
| As the population ages, more people are eligible. | ||
| Those payments go up. | ||
| Medicare, same thing. | ||
| More people are eligible. | ||
| Healthcare is more expensive than general goods and services. | ||
| So those costs are going up. | ||
| So we've seen that kind of steady growth happen over time that was pretty well known 10 years ago. | ||
| A couple other things have changed. | ||
| So, you know, national defense spending has gone up a little bit. | ||
| We've also seen that one of the biggest categories that we've seen go up in terms of spending is interest costs. | ||
| So if you remember a decade ago, we had this long period between the 2000 and largely between the 2008 and 2009 financial crisis and the beginning of the pandemic, where interest rates, what the federal government has to pay to borrow, because we have deficits between what we collect and what we spend, what the federal government has to borrow was relatively low. | ||
| It was in the 2% range on a 10-year Treasury note. | ||
| Now we're sort of in the over four range. | ||
| And so those interest costs are going higher and higher. | ||
| And on top of that, the federal government is borrowing more money than it used to. | ||
| Some of that is just this structural gap between revenue and spending that we've had. | ||
| Some of that is the money that the government borrowed to get through the pandemic, the PPP money for small businesses, the stimulus payments, all of that. | ||
| That was basically borrowed money. | ||
| And so now the federal government is paying back the bill on that. | ||
| And so those are really the big categories. | ||
| The other stuff is there. | ||
| If you look at other healthcare programs, Medicaid costs have gone up. | ||
| If you look at other federal agencies, that's a relatively small slice of the budget, but there's been some growth there too. | ||
| But the federal government has largely driven the big factors on the spending side, Social Security, Medicare, defense, and interest. | ||
| Richard Rubin joining us for this conversation about government spending. | ||
| And if you have questions to ask them, you can do so on the lines. | ||
| 202748-8000 for Democrats, 202-748-8001 for Republicans, and 202-748-8002 for independents. | ||
| If you want to text us those questions or comments, 202748-8003. | ||
| Richard Rubin, you talked about the spending side. | ||
| Let's take a look at revenue over the last 10 years or so. | ||
| How has that been impacted? | ||
|
unidentified
|
Yeah, revenue has gone up in nominal terms. | |
| Just the number of dollars have gone up. | ||
| But as we talked about before, if you adjust it for inflation and for population, it's up about 9%. | ||
| So it's up. | ||
| But a couple of big things that have happened on the revenue side is number one, there were tax cuts in 2017 that Republicans pushed through. | ||
| Those, even though there's necessarily more dollars coming in, a lot of that is just because of inflation. | ||
| And so if those tax cuts had not been in place, there would be more revenue there. | ||
| The other thing is, then we saw kind of a surge in revenue coming out of the pandemic. | ||
| So if you recall, it feels weird to talk about it now because the stock market has been down in the past week, but in 2021, the stock market and cryptocurrency really soared in value as the economy recovered from the 2020 shock of the pandemic. | ||
| And a lot of people sold stocks, sold cryptocurrency, realized those gains and paid taxes. | ||
| So there was kind of a big surge in federal revenue in 21, 22. | ||
| And then that's kind of dipped back down to more of the levels that you would expect post-tax cut. | ||
| And now we're in this phase where Congress is debating about whether there should be additional tax cuts extended or additional tax cuts put on top of that. | ||
| But we're kind of heading down kind of roughly back to where we thought revenue would be. | ||
| So one of the charts in the story shows the revenues, shows the outlays, and then that dotted line, which says deficit. | ||
| And you mentioned it, but factor this into the discussions of where we are when it comes to spending and revenue. | ||
|
unidentified
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Yeah. | |
| So where we are in terms of the deficit is at a place we haven't really been before. | ||
| The U.S. has run deficits this large at times, but that's been during emergencies, war, pandemic, recessions, things where the government has had softer revenue collections because the economy is weaker, or and the spending has gone up to get through those periods, spending to fight a war, spending on stimulus payments and support for businesses to get through the pandemic. | ||
| Same thing for a recession. | ||
| So during those periods, you tend to have wider deficits. | ||
| And then during strong economic times, the deficit tends to close. | ||
| But we're at a place where we're in relative peace and prosperity. | ||
| There's stuff happening for sure. | ||
| But, you know, historically, we're at peace and prosperity. | ||
| And the federal deficit is 6 or so percent of GDP, 6 or so percent of the economy. | ||
| That's historically large. | ||
| We've got a structural gap between spending and revenue. | ||
| And if you look at the forecast going forward, that's basically where we're heading as the population ages even further. | ||
| That gap is going to continue to be there between where spending and revenue are. | ||
| And that's what Congress and the president are struggling with at some level right now. | ||
| Calls lined up for Richard Rubin of the Wall Street Journal. | ||
| This is Lawrence starting us off. | ||
| He's in Nevada, Independent Line. | ||
| The story takes a look at government spending and revenue. | ||
| Lawrence in Nevada, hello, go ahead. | ||
|
unidentified
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Good morning, Mr. Rubin, and hello, C-SPAN. | |
| I'm just curious, in light of what you're saying, what you think this fares for the strength of the U.S. dollar being weak or potentially strong when all this works out. | ||
| But also, I used to deal in distressed debt when I was on Wall Street. | ||
| And I remember trading Trump bonds when they were basically at 20, 30 cents on the dollar. | ||
| And I'm just curious, you know, when you have somebody who's such an expert at reorganization and bankruptcy running the country, I mean, it's great. | ||
| We're a capitalist country and everything, but, you know, how does that fare for a potential reorganization of the U.S. dollar? | ||
| Mexico, Russia, Argentina, their currencies have all devalued to zero several times. | ||
| And I'm just curious what you think about that. | ||
| When will it finally happen to the United States? | ||
| Yeah, that's really the big question: is, okay, we're carrying these deficits in federal debt that's heading to a place that's larger than it's ever been, right? | ||
| Deficits are the annual gap between revenue and spending. | ||
| Debt is the accumulated borrowing of the United States. | ||
| Those are going to unprecedented levels. | ||
| The question is really when unprecedented becomes too unprecedented and becomes problematic. | ||
| So as the caller notes, the U.S. dollar is effectively the reserve currency of the world. | ||
| It's the treasury bills and treasury notes are among the most traded assets in the world. | ||
| The U.S. has an incredibly unique and strong position compared to the rest of the world because of that. | ||
| We're borrowing our own currency. | ||
| We've got, you know, people still want to see us as, and people do see us in the U.S. as one of the safest places to invest. | ||
| So we have a lot more running room for deficits than, say, some of those countries you mentioned, Mexico, Argentina, wherever, that have run into trouble with excessive borrowing and had to do those kinds of restructurings. | ||
| The U.S. has just always been in a different place. | ||
| The challenge is we don't quite know where the limits are. | ||
| So we don't know when that, there's two sort of elements of this. | ||
| One is we don't know where, you know, we assume that at some level the U.S. deficit right now is what we call crowding out private investment, that money is in the economy is going to for borrowing for the federal purposes as opposed to private investment. | ||
| The question of a crisis, a crunch where we can't, we're not liquid, where we can't go out and borrow and need to restructure, that's, I think, pretty, probably pretty far down the road, and we don't know quite where that limit is. | ||
| So it's a sort of slow, slow, slow, and then maybe really bad. | ||
| But all the experts I talk to suggest that the really, really bad crisis thing, because we're the world's reserve currency, is somewhat farther out. | ||
| And that keeping that status is really important. | ||
| Steve is in Indiana, Democrats line. | ||
| You're next up. | ||
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unidentified
|
Hi. | |
| Hi. | ||
| I was wondering, after you make $200,000, do you have to pay into Social Security, Medicare, Medicaid? | ||
| And also, back in the Bush years, during the Iraq war, did they take out of Social Security then? | ||
| That's all I've got to say. | ||
| Thank you. | ||
| Yeah, so it depends on the program. | ||
| So Social Security, you pay about the first $170-ish thousand, the number changes each year of your earnings are taxed for Social Security purposes, 6.2% from the worker and 6.2% from the employer. | ||
| Medicare and there are Medicare taxes that don't fully fund the program. | ||
| Those don't have an income cap, and there are some graduated rates on those as you go particularly higher. | ||
| Medicaid comes out of the general budget, and so covered by income taxes in general. | ||
| As far as Social Security paying for the war, Social Security has a trust fund or is sort of a separately accounted for program in a sense. | ||
| During the years when there was more money coming into Social Security than going out of Social Security for benefits, effectively that money was being used for general government purposes. | ||
| Now we're kind of in the reverse phase where Social Security is taking in less than it's paying out. | ||
| And you can think of it as the trust fund paying for benefits now or general government paying for benefits now. | ||
| And we're sort of on the back end of that. | ||
| So during the time when the baby boomers were in the workforce paying those Social Security taxes, the situation you described is kind of what was happening. | ||
| And now we've gone to the other side of that. | ||
| On your chart, on your story, in FY 2015, when it comes to outlay, Social Security was at $3,693 a person. | ||
| If you go forward to 2024, $4,385 a person, a 19% increase. | ||
| What were the causes of that increase? | ||
| Was it cost of living or were there other factors in there as well? | ||
|
unidentified
|
So I don't have the numbers in front of me, but I think that's, you know, if those are the inflation-adjusted numbers, then roughly that's going to, it's not going to be cost of living increases. | |
| There are cost of living increases built into Social Security every year so that benefits go up along with the cost of living. | ||
| What drives that is really the aging of the population and more people being eligible. | ||
| So, you know, a large portion of that is people reaching retirement age and claiming benefits. | ||
| Some of that is people who are newly eligible for disability, right, which is the other part of the Social Security program. |