America needs to balance the budget by weaning off the gargantuan mandatory social spending programs and use the surplus towards large portions of debt.

Big Picture

The fiscal cliff of American peacetime spending is looming in the distance. It is not taken seriously in the current iteration of domestic politics. Deficit spending has long been regarded as an effective, viable option for the federal government to bolster its position. The origins of this philosophy can be traced back to British economist, John Maynard Keynes, during the Great Depression of 1929. Spending sprees on social programs under F.D.R. and L.B.J. propelled the debt to new heights. Despite this, it pales in comparison to the spending of administrations during the 21st century, especially since COVID-19.

If the American people and their legislators are unwilling to seriously rethink the way spending is done, the debt’s interest will only grow. Massive omnibus bills and the country’s mandatory social programs are exacerbating this issue. But, the government has a few tools in its belt to address the debt and have the privilege of a choice: inflate the currency sufficient to pay outstanding debts, radically increase taxes and/or cut spending.

America needs to balance the budget by weaning off the gargantuan mandatory social spending programs and use the surplus towards large portions of debt. An attempt to do this without raising taxes will carry significant challenges, but the result of massive tax hikes will greatly reduce revenue and make any possibility of a surplus negligible. Cuts to these programs will not be digested easily, but the consequences of ignoring this issue – double digit inflation, default and/or recession –- are far worse.

Operative Definitions

1. Mandatory Spending: previous legislation’s guaranteed spending

2. Discretionary Spending: yearly spending that is approved by Congress 

3. Interest on National Debt: the amount of money paid on the interest of bonds, t-bills and other forms of U.S. debt instruments to individual holders

4. Medicaid: joint federal and state program(s) that help to cover insurance costs for the needy

5. Social Security: retirement and Disability spending. The largest mandatory spending program ($1.5 trillion FY 2024). The basic structure is much like a pyramid scheme. All those who receive income pay. Those paying into the system now do not put their money in a lock box for when they are 65+. Rather, the government takes that money and hands it to an existing senior.

Important Facts and Statistics 

1. The percentage of revenue being spent solely to service the interest of the national debt has jumped from nine percent in 2021 to 18 percent in 2025. 

2. The federal deficit in 2018 was $780 billion. The last three years of deficits, FY 2022 toFY 2024, are $1.4 trillion, $1.4 trillion and $1.7 trillion, respectively.

3. DOGE’s efforts are set to codify $10 billion in cuts of waste, fraud and abuse from $1.8 trillion (FY24) of discretionary spending.

4. The mandatory spending of FY 2024 was $4.1 trillion. 

Four-Point Plan to Eliminate Deficit (Numbers from CBO FY24)

1. Social Security 66 percent Phaseout ($1.5 trillion to $500 billion, ~ $1 trillion in savings)

Lower benefit payout amounts by 66 percent and adjust withholdings accordingly by 2045. Apply a sliding scale for those between the ages of 45 and 65+, with those closest and already eligible receiving the greatest percentage of original payments. Announce to all those under the age of 45 that this program will be reduced by 66 percent by the time they reach 65. Adjust income withholding amounts accordingly.

2. Shift Medicaid Spending to the States ($618 billion to $155 billion, ~ $463 billion in savings)

Give wide authority and responsibility to the states to manage their medicaid programs. Set a goal of reducing spending on the federal level by 75 percent of current outlays.

3. Reduce Medicare spending by 25 percent ($865 billion to $649 billion, ~ $216 billion in savings).

Reduce reimbursement rates and eliminate abuse or fraud. Set a goal of reducing federal spending by 25 percent.

4. DOGE Initiatives

Sift through discretionary and mandatory spending to eliminate the remaining deficit amount.

Why this Initiative is Important 

Great regimes have been crippled by debt before, and the U.S. is no exception. Pre-revolutionary France allowed its interest payments on the debt to exceed 50 percent of total revenue, resulting in an inability to raise debt. Subsequently,the economic downturn turned fatal for the monarchy. While this is certainly a worst-case scenario, the U.S. will have to address this problem or face similar economic issues.

Some may argue for raising taxes, inflating the currency or cutting spending. Others may suggest a combination of all these efforts, which would be necessary if the problem is untouched until it’s impossible to ignore. If Washington begins turning the direction of spending now, it may be possible to avoid a serious catastrophe by taking the pain early. No one wants to hurt Americans dependent on these programs, but it’s a matter of choosing the bad to avoid having to accept the worst.

Acknowledgment: The opinions expressed in this article are those of the individual author.

Sources

How do we pay for Medicaid?. How Is Medicaid Funded? | Commonwealth Fund. (2025, March 14). https://www.commonwealthfund.org/publications/explainer/2025/mar/how-do-we-pay-for-medicaid

The federal budget in fiscal year 2024: An infographic. Congressional Budget Office. (2025, March 20). https://www.cbo.gov/publication/61181

Congressional Budget Office updates baseline: Deficit totals to third highest in American history. The U.S. House Committee on the Budget – House Budget Committee. (2025, January 21). https://budget.house.gov/press-release/congressional-budget-office-updates-baseline-deficit-totals-to-third-highest-in-american-history

Marx, K., 6, L. M. | J., 3, M. R. | J., & 30, L. M. | M. (2023, July 25). Debt, 1789 and 2023: Is history repeating itself?. GOLDBROKER.COM investment platform: purchase, storage, delivery of physical gold. https://goldbroker.com/news/debt-1789-2023-history-repeating-itself-3147