For all the endless talk about “draconian” cuts, federal spending is running $172 billion ahead of last year, according to the Monthly Treasury Statement released Monday. And that includes a substantial increase in fraud-riddled Medicaid spending.

And spending continues to outpace increases in revenues, which means the deficit this year is now on track to top $2 trillion. The last time that happened was in the middle of the COVID-19 spending splurge.

To be sure, it’s not all bad news. Income and payroll taxes are running 6% ahead of last year, suggesting that – despite the doomsaying by Democrats and the media – the economy is creating more and better-paying jobs.

Trump’s tariffs are also bringing in much more revenue. They’re up $55 billion so far this fiscal year, compared with the same months in fiscal year 2025. That’s a 51% jump. (And a tripling from two years ago.)

We’re also seeing welcome spending reductions in departments such as Agriculture, Energy, Housing and Urban Development, Interior, State, and Labor.

Defense, meanwhile, has been getting a needed boost. It’s up $31 billion so far this year.

But the bad news is that spending is climbing faster than revenues are growing.

The really bad news is that Medicaid grants to states are up by a whopping $48.5 billion compared with last year. That’s a nearly 10% increase for a program beset with fraud that Republicans supposedly targeted for deep spending cuts, which readers of I&I have known all along was a lie. (See “One Chart To Kill The Medicaid Lies For Good.”)

Oddly, spending on “healthcare fraud and abuse control” is down.

Social Security payments are $63 billion higher. Medicare is up $47 billion. “Income security” is up $10 billion.

And interest on the debt? That’s running $78 billion ahead of last year.

Even Department of Education spending is up by $18 billion – all of it attributable to added costs of college subsidies.

In other words, “entitlement” spending is still out of control. And without reforms, they will swamp the budget and wreck the economy.

As the American Enterprise Institute’s Andrew Biggs put it, “Even today, eliminating discretionary spending entirely, including zeroing out the defense department, would barely balance the federal budget. In future years, entitlements plus debt service will take up nearly the entire federal budget.”

And that doesn’t even factor in the fact that both the Social Security and Medicare “trust funds” will soon be insolvent, which means neither program will be able to cover its costs. At that point, the choice for lawmakers is either benefit cuts, tax hikes, or some combination of the two.  

The Democrats’ answer to this is to vastly expand federal entitlement programs and pretend that raising taxes on the “rich” will pay for it all.

For Republicans, burying their heads in the sand isn’t an option.

— Written by the I&I Editorial Board

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