Now for the really bad news.
After World War II, politicians passed a bunch of laws that when you stop and think about it get government backwards. Instead of saying, we’ll decide how much we’re willing and able to collect in tax revenues and then divide that up on programs we deem important, they passed laws that spend money based on a formula.
Take Medicaid for an example. The amount of money we spend is based on how many people meet eligibility criteria, not on how much of a budget we have. So, when the cost of the service we’ve promised to provide goes way up, or more people become eligible, overall spending automatically goes way up too.
There are a few big programs that work like this: Medicare, Social Security, food stamps, etc. the bottom line is that they’ve gotten increasingly expensive in recent years and the problem is about to get way worse.
The reasons vary: more people aging and becoming eligible, healthcare costs going way up . . . But the upshot is, we have laws in place that we know are going to cause spending to skyrocket.
As shown below, debt is projected to spike to 160% of GDP by 2040:
To be clear: This is just what will happen if we change nothing, forget about how much worse it would get if we had a big unexpected cost like a new war to fight or another massive recession.