State of the Middle Class

U.S. Government Debt

Is the U.S. in a Debt Spiral?

A famous politician once stated that deficits don’t matter. Unfortunately, as of the early 2020s, our leaders have taken us past the point of modest deficits to a debt spiral or debt trap. This is debt that every American household will pay for, through higher taxes, lower services, and/or inflation.

Government sticks households with soaring bills

Spending on government programs has more than doubled for each household since the 1960s. The numbers below reflect how much the average American household pays for government programs, not how much each household receives. The government shows no signs of controlling spending on programs, and you are on the hook to pay these bills.

Average Household Spending on U.S. Government Services

(in current year $)

$2,058 TOTAL

$52,015 TOTAL

  • Other programs
  • Interest
  • Defense
  • Health & Income Security
  • Social Security & Medicare
Sources

We’re in the debt spiral zone

When a family’s income doesn’t cover its debt payments and they have no money left for food, housing, and other essentials, it is called a debt spiral or debt trap. The U.S. government has now entered this dangerous territory. It uses all its tax revenue to pay interest on the debt, plus entitlement payments required by law. In other words, 100% of the government’s revenues don’t even cover its “debt” payments.

 

U.S. Government “Debt” Payments as a Percent of Tax Revenue

(debt payments: interest + support for entitlements required by law )

  • Entitlements
  • Interest
Sources

Do deficits make government programs unsustainable?

Social Security, Medicare, veterans’ benefits, and other entitlements contribute to a bulk of government spending, even before spending a penny on defense and other programs. This causes consistent deficits and growing debt. While these programs are extremely popular, sustaining them will likely require revenue increases, benefit cuts, or some combination of both.

U.S. Government Total Spending as a Percent of Tax Revenue

(entitlements are those required by law)

  • Programs
  • Defense
  • Entitlements
  • Interest
Sources

Add another quarter million to your debt

Now we’re looking at total debt instead of yearly deficits. The amount of U.S. government debt owed by the average American household has passed a quarter million dollars. A growing portion of that debt is owed to foreign investors and the Federal Reserve (who keeps bailing us out), showing our economy’s growing dependence on those two groups.

Debt per Household and Who You Owe

(in current year $)

$6,137 TOTAL

$291,900 TOTAL

  • Federal Reserve
  • Foreign Investors
  • Domestic Investors
  • Within Government
Sources

U.S. Government Spending Sources:

Federal spending for each expenditure is taken from historical tables from the U.S. Office of Management and Budget’s Table 8.5—Outlays for Mandatory and Related Programs and Table 8.7—Outlays for Discretionary Programs. Each expenditure is adjusted per household using FRED’s Monthly Household Estimates and adjusted for inflation using the monthly Consumer Price Index from the Bureau of Labor Statistics. Values are adjusted to a fiscal-year basis: October of the previous year through September of the current year.

U.S. Government Debt Payments Sources

Federal spending for each expenditure is taken from historical tables from the U.S. Office of Management and Budget’s Table 8.5—Outlays for Mandatory and Related Programs and Table 8.7—Outlays for Discretionary Programs. Entitlements include mandatory spending on Medicare, Social Security, veteran’s benefits, Medicaid, and other health and income security programs, as well as discretionary spending to pay staff to support these programs. Revenue is sourced from Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits. All values are adjusted per household using FRED’s Monthly Household Estimates and adjusted for inflation using the monthly Consumer Price Index from the Bureau of Labor Statistics. Values are adjusted to a fiscal year basis: October of the previous year through September of the current year. 

U.S. Government Spending as a Percent of Revenue sources:

Federal spending for each expenditure is taken from historical tables from the U.S. Office of Management and Budget’s Table 8.5—Outlays for Mandatory and Related Programs and Table 8.7—Outlays for Discretionary Programs. Entitlements include mandatory spending on Medicare, Social Security, veteran’s benefits, Medicaid, and other health and income security programs, as well as discretionary spending to pay staff to support these programs. Revenue is sourced from Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits. All values are adjusted per household using FRED’s Monthly Household Estimates and adjusted for inflation using the monthly Consumer Price Index from the Bureau of Labor Statistics. Values are adjusted to a fiscal year basis: October of the previous year through September of the current year. 

Debt per Household sources:

U.S. Government debt is obtained from FRED’s Federal Debt: Total Public Debt. Debt amounts owed to specific groups are obtained from FRED at the following locations: Federal Debt Held by Federal Reserve Banks (FDHBFRBN), Federal Debt Held by the Public (FYGFDPUN), Federal Debt Held by Foreign and International Investors (FDHBFIN), and Federal Debt Held by Private Investors (FDHBPIN). Each amount is adjusted per household using FRED’s Monthly Household Estimates and adjusted for inflation using the monthly Consumer Price Index from the Bureau of Labor Statistics. Previous-year values are provided at the end of the fiscal year in September.