Some of you may think I lead a boring life, but I recently spent some time looking at 50 years of federal budget data. I wasn’t trying to prove anything or find anything new — just to understand what had changed. I learned a lot.
In 1976, the federal government spent $372 billion, 20.8% of GDP, and ran a $74 billion deficit, 4.1% of GDP. In 2025, spending was $7.0 trillion, 23.1% of GDP, and the deficit $1.8 trillion, 5.9% of GDP. Debt held by the public rose from 27% to roughly 100% of GDP.
GDP provides essential scale, but those percentages shouldn’t obscure the enormous increase in absolute spending — or imply that federal spending somehow “should” rise in lockstep with GDP.
The largest structural shift has been health care. Almost all the increase reflects Medicare, Medicaid, CHIP and ACA subsidies — the federal government assuming a much larger role in financing individual health care. By my calculation, roughly 40% of Medicare’s growth relative to GDP came from increased enrollment and 60% from increased spending per beneficiary. But without federal financing, costs would have shifted elsewhere, and much of today’s medical care and capability might never have developed.
Social Security tells a different story. Despite an aging population and longer retirements, its claim on the economy increased far less than most of us probably assume. Changes including the gradual increase in the full retirement age helped contain that growth. That doesn’t mean Social Security is adequately funded: its trust funds face a substantial financing shortfall. But over these 50 years, aging transformed federal health spending far more than Social Security spending. Meanwhile, declining shares devoted to defense, income support, education and other functions helped accommodate these shifts. The government isn’t simply spending much more; it is spending it very differently.
The long-term revenue picture changed far less than the tax-policy history might suggest. Despite repeated tax changes, federal receipts repeatedly returned to roughly the same share of the economy. Yet except for 1998–2001, the government ran a deficit every year. Those accumulated deficits drove publicly held debt from roughly one-quarter of GDP to approximately the size of the economy.
For years, falling rates masked much of the fiscal impact of accumulating debt. From 2000–2015, publicly held debt more than doubled relative to GDP while net interest expense actually fell, making the growing debt burden much easier to absorb. That tailwind has reversed. With debt approaching 100% of GDP, higher rates are increasing its carrying cost. Net interest now consumes roughly the same share of the economy as Medicare, other federal health spending or national defense individually — and is itself becoming an important source of future deficits.
Large crisis-driven deficits are neither new nor difficult to understand. What is different today is their persistence outside a major recession or national emergency. After the extraordinary deficits of the financial crisis and COVID, deficits remained around 6% of GDP in 2023–2025. At least for now, deficits once associated with severe downturns have become part of the fiscal landscape even in their absence.
None of these numbers tells us what federal spending, taxes or deficits should be. But they tell a different story about how the federal budget arrived where it is today than I understood before looking at the numbers.