Almost All Federal Revenue Is Already Spoken For

The federal budget is increasingly constrained because interest and major benefit programs now absorb nearly all federal receipts before other government functions are funded.

• Net interest, Social Security, Medicare, health spending and veterans’ benefits represented 98.4% of federal receipts on a trailing 12-month basis; the CBO projects mandatory spending plus net interest at approximately 99.5% of receipts in fiscal year 2026.
• These categories exclude approximately $2.0 trillion of other spending, equal to 37.8% of receipts, including defense, income security, transportation, education and justice.
• Total federal outlays reached $7.32 trillion against $5.37 trillion of receipts, meaning spending equaled 136.2% of revenue and the government borrowed roughly $0.36 for every dollar collected.
• The five categories rose from 75.8% of receipts five years ago to 98.4% today; net interest increased from 8.5% to 19.7%, contributing 11.2 percentage points of the 22.6-point increase.
• Higher debt and borrowing costs have made interest a much larger claim on receipts, while entitlement programs remain politically and structurally difficult to reduce quickly.

Takeaway: The United States retains the ability to borrow, raise revenue and change spending, but investors should view the budget as increasingly dependent on borrowing unless policymakers raise revenues or cut other expenditures.