Off the Publisher’s Desk 1-29-2025
We spend more on interest than on defense
For this week’s column I am using the op-ed below. It was written by Robert Romano and appeared in the Capitol Guardian on January 15. It is about the amount of spending that our federal government does and how much it will increase over the years. Let’s use it as a guide on how well our new President will handle our money. The story will tell that we will spend some $400 billion more on interest on our debt than on defense. Read on.
“Consumer inflation has resumed increasing for the second month in a row, rising 0.4 percent in December, or a 2.9 percent annual rate, according to the latest data from the Bureau of Labor Statistics. That is up from its Sept. 2024 annual level of 2.4 percent and came off of increases in energy and food in the latest report.
Gasoline and fuel oil were both up 4.4 percent in December alone.
Electricity was up 0.3 percent.
Utility piped gas service was up 2.4 percent.
Food at home and away from home was up 0.3 percent.
Minus food and energy, inflation was up 0.2 percent, or 3.2 percent annually, news that caused markets to rally amid expectations of 3.3 percent instead. That included a 0.5 percent increase in transportation services, a 0.3 percent increase in shelter, a 0.5 percent increase in new cars and a 1.2 percent increase in used cars.
Since January 2021, consumer prices were up 21 percent total, but average weekly earnings were only up 17.2 percent. The American people were definitely not better off financially when prices and earnings were considered than they were four years earlier.
The silver lining is that since June 2023, earnings have kept trend above consumer inflation — overall earnings were up 3.65 percent in 2024 compared to the inflation rate of 2.95.
Looked at another way, the ratio of the Consumer Price Index to average weekly earnings — a measure of purchasing power — was 25.9 in 2024, whereas in 2020 as Trump was leaving office, it was 25.13.
The good news is that if earnings and inflation just kept their current levels, by 2028, the ratio would be back down to 25.18, about where it was when Biden began his term of office. The bad news is that in just December, inflation outpaced earnings 0.39 percent to 0.28 percent.
The news comes as the U.S. Treasury reports that for the first three months of Fiscal Year 2025 that began in October, the budget deficit has already hit $710 billion compared to $509 billion the same period last year and is on pace to hit about $1.87 trillion for the entire year compared to $1.61 trillion last year.
The increases mostly come off of increased outlays at $1.79 trillion the first three months versus $1.62 trillion a year ago, an increase of $176 billion. For the entire year, outlays are expected to hit $7.4 trillion compared to $6.7 trillion last year.
Of the increased $176 billion spending so far this year, $24.5 billion was for increased defense spending, $20.3 billion was for increased interest payments on the $36.17 trillion debt, $28.8 billion was for increased Social Security payments and $75.3 billion was for Medicare and Medicaid — almost $149 billion, or 84.6 percent of the increase.
Overall, the White House Office of Management and Budget forecasts those trends to continue at least for Social Security, Medicare and Medicaid. Social Security will increase from $1.4 trillion in 2024 to $2.4 trillion in 2034, Medicare will increase from $839 billion to $1.76 trillion and Medicaid will increase from $567 billion to $996 billion.
As for interest on the debt, that will increase from $890 billion to $1.57 trillion and defense spending will increase $852 billion to $1.1 trillion.
By then, the deficit should be about $2.2 trillion — and rising — going forward, and OMB conservatively projects the national debt will be more than $52.6 trillion.
Of the three largest expenditure increases, Social Security, Medicare and interest on the debt, those have to be paid by law. That’s why they’re called “mandatory” spending. There’s defense, which while not technically mandatory from a legal perspective is certainly necessary from a sovereign perspective to deter a devastating attack, and nevertheless Congress’ usual inclination is to increase military spending, albeit at a slower rate than entitlements that are being driven by the Baby Boomer retirement wave now about halfway done.
So what to do? Four options, and likely some combination of them might be attempted: cut spending where it can be, increase revenue where it can be, get a better rate of return on government trust funds and boost production of goods and services to cool prices.
For the first, Trump will be appointing Elon Musk and Vivek Ramaswamy to head up the Department of Government Efficiency, and with a Republican-led Congress, some cuts might be found.
To raise revenue, Trump has proposed an External Revenue Service to do a better job of collecting tariffs from foreign trade.
Thanks to lower fertility, the ratio of taxpayers to retirees is much lower than it was decades ago, and the American people have already had their fill of unrestricted illegal immigration. As for legal immigration, it should be noted that the same drops in fertility are being experienced almost everywhere, and so the average age of immigrants will keep increasing. Barring a baby boom, that situation looks to only be worsening.
Finally, there are economic incentives that could be put into place to boost energy, food and other production, which certainly factors into Trump’s proposed budget bill that will extend tax cuts, slash regulations and presumably find a way to increase energy production in particular. The current bout of inflation is too much money chasing too few goods, so if you know there’s still going to be too much money, then we need a lot more goods to offset — and critically the American people’s earnings need to keep pace.”
Robert Romano is the Vice President of Public Policy at Americans for Limited Government Foundation.
To view online: https://dailytorch.com/2025/01/as-inflation-rebounds-for-
Thanks for reading! ~Carlton