On the menu today: Your federal taxes were due yesterday, so I hope you either paid them or filed for an extension. Each month, the U.S. government takes in about $413 billion from income taxes, corporate taxes, Social Security taxes, estate and gift taxes, tariffs and customs duties, and a couple of other sources. (Fun fact: Depending upon how you calculate it, the U.S. government either broke even, made money, or spent just 12 percent of the costs of the Persian Gulf War in 1991. I hope the Trump administration reminds our wealthy Arab allies of this mutually beneficial arrangement.)
Unfortunately, while taking in roughly $413 billion per month, the U.S. government spends about $583 billion per month. Back in June 2025, I wrote a magazine piece about the Department of Government Efficiency that some readers deemed too negative and pessimistic. DOGE worked hard, but when you refuse to touch the entitlement programs, the deficit and overall national debt are just about guaranteed to keep going up. The fact that almost no one in Washington wants to think, talk, or do anything about this does not change the fact that it is happening. Read on.
A Taxing Topic
Unless the country is experiencing a bad recession, the U.S. federal government’s tax revenue goes up from year to year. This happens, year after year, even in a year after the U.S. government cuts tax rates.
So far, the U.S. government has collected $2.48 trillion in fiscal year 2026. U.S. government fiscal years begin on October 1, and end September 30. “Compared to the federal revenue of $2.26 trillion for the same period last year (Oct 2024 – Mar 2025) federal revenue has increased by $222 billion.” That’s a 10 percent increase.
A portion of that increase can be attributed to the Trump administration’s tariffs. In fiscal 2024, the U.S. government collected $79.1 billion. In fiscal 2025, which included the first year of Trump’s second term, that jumped to almost $195 billion. In fiscal 2026, through February, the U.S. government has collected $144 billion.
Still, tariffs and customs duties represent a small slice of the money coming into the U.S. government each year. “In fiscal 2025, customs duties made up 3.7 percent of total federal revenue. Despite record-high revenue in recent years, customs duties had not exceeded 2 percent of federal revenue from FY 1980 to FY 2024.”
Barring a deep recession between now and October 1, the total revenues of the U.S. government will hit another record, topping the $5.2 trillion that were collected in 2025.
If the U.S. government’s revenue, by itself, were a gross domestic product, it would be the third largest in the world.
With record tax revenues, you might think we would have a manageable deficit this year. You would be wrong. The U.S. government does not have a problem of insufficient revenue. It has a problem of out-of-control spending.
We are on pace for a $1.6 trillion — with a TR, not with a B — federal budget deficit this fiscal year. The U.S. government has spent about $3.6 trillion so far this year. That sum is $84 billion higher than the same time period the previous year. We spent $7 trillion last year, and the Congressional Budget Office projects that the U.S. government will spend about $7.4 trillion this year.
The favorite punching bag of the left when it comes to federal spending is the Department of Defense. The defense budget is just 13 percent of total federal spending.
A side note: In June 2025, our NATO allies agreed to increase defense and defense-related spending to 5 percent of each country’s gross domestic product by 2035. Considering the threat to their east, and the value of deterrence in a dangerous world, I think that’s a good idea. I would also note that the U.S. this year will spend about 3.3 percent of GDP on defense. But, as I noted when discussing Japan’s defense spending, when you have a really big economy, it gets harder to reach those percent-of-GDP thresholds. One percent of GDP in — to pick a country that’s been in the news quite a bit lately — Hungary is about $2.4 billion. One percent of GDP in the U.S. is about $308 billion.
President Trump’s budget proposal for next year included a gargantuan increase in defense spending for next year, a $1.5 trillion defense budget in fiscal year 2027, a staggering 40 percent year-over-year increase. There are those who wonder how effectively the Pentagon could spend such a massive influx of cash (and keep in mind, this is just a proposal; the federal government’s actual budget is created by Congress through the appropriations process . . . well, at least until they get tired and just roll it all into a giant omnibus bill).
Back to the deficit: It is getting worse each year for a couple reasons. One is interest payments. The more you borrow, the more you must pay each month to continue carrying that debt. As recently as 2021, we were paying “just” $352 billion. (Quotation marks may not adequately communicate my sarcasm in saying “just.”) Last year, we paid $970 billion in interest costs; this year, we will surpass $1 trillion. Interest costs so far this year “have been the second-largest spending category for the federal government — outpacing outlays for all budget categories except for Social Security.”
But the other big reason the deficit keeps rising despite record tax revenues is because we have an unintended bipartisan agreement to refuse to do anything significant to control the costs of Social Security, Medicaid, and Medicare.
Credit where it’s due; someone in our government did try to control costs a bit earlier this year. In January, the Centers for Medicare & Medicaid Services issued a proposed “rate notice” for Medicare Advantage that would “would essentially flatline payment rates, while also reducing upcoding by eliminating ‘chart reviews’ and making other technical changes. These changes could save the government $22 billion in 2027 alone, and should be allowed to go into effect as written in the proposed rate notice.” Medicare Advantage is a privately managed alternative to traditional Medicare, run through insurance companies that contract with the government.
The Committee for a Responsible Federal Budget was thrilled to see anyone even trying to control costs.
But you can guess what happened next. The insurance companies that contract with Medicare screamed bloody murder, arguing that even these minor changes would endanger care for the elderly. They rolled out a slick, and effective, public relations campaign. And the administration and the Centers for Medicare & Medicaid Services backed down:
CMS’ final rate notice reversed course. Instead of its initially proposed 0.09 percent payment boost, CMS announced a 2.48 percent rate increase. Most significantly, this increased the starting “effective growth rate” from 4.97 percent to 5.33 percent and reduced the risk model revision and normalization adjustment from -3.32 percent to -1.12 percent. CMS estimates its finalized rate notice will increase MA spending by $13 billion in 2027 alone.
After the announcement, Wendell Potter noticed, “The share prices of UnitedHealth Group, Humana, CVS/Aetna and Elevance (Anthem) soared with all of them briefly gaining more than $20 a share almost immediately.”
Speaking of Elderly Americans . . .
A thought spurred by our nearly 80-year-old president of the United States saying that he believed that the AI image of himself as Jesus was depicting himself as a doctor, and that he said he believed was a painting created by “a very beautiful, talented artist.”
In 2024, 32 percent of the U.S. voting electorate were Baby Boomers. While we don’t know exactly who’s going to turn out on Election Day 2026, estimates based on population projections and past midterm elections suggest that Baby Boomers will comprise more than 30 percent of all voters in the 2026 midterm elections. (We have a Baby Boomer president who turns 80 on June 14.)
It is just our luck as a country that the stars have aligned to provide:
- the internet, a system that enables global communication from anywhere to anywhere;
- multiple hostile foreign states (Russia, China, and Iran, among others) that put considerable effort into foreign disinformation campaigns and efforts to sway American public opinion;
- no shortage of Americans who want to fool their fellow citizens into believing things that aren’t true as well;
- the widespread availability of artificial intelligence to create increasingly realistic looking and sounding fake video, audio, images, etc.;
- a significant chunk of the electorate that is aging, credulous, and more likely to believe what they see and hear on the internet; and
- two consecutive presidents who were octogenarians or impending octogenarians, with about the average discernment about AI that we’ve come to expect from this demographic.
ADDENDUM: Are we absolutely sure the New York Post headline, “RFK Jr. once chopped off a dead raccoon’s penis to ‘study later’ while on a family road trip” wasn’t a MadLib? I mean, you can fairly argue that Robert F. Kennedy Jr. himself is a “Mad Lib,” but I mean the other kind.
Kennedy is scheduled to testify before seven congressional committees or subcommittees over the next week. We will see if by now he’s figured out which one is Medicare and which one is Medicaid.