By Chana Wakslak, Business Manager and Senior Business Editor
Whether tuned into the news, scrolling through social media, or watching a presidential debate, you’ve probably noticed that government spending is one of the hottest topics on everyone’s mind. But, what’s the real deal? More importantly, what does it mean for you as a college student?
Government spending is what the public sector (federal, state, and local governments) spends on services and programs to support the public. It ranges from education and healthcare to social security, defense, infrastructure, and more. Essentially, it’s how the government tries to make life better for everyone and keep the country running.
In 2023, the U.S. federal government spent around $6.1 trillion – about 22.7% of the nation’s economic output (Gross Domestic Product, GDP). Social Security was the biggest at 22% of the budget, followed by national defense and veteran support at 18% and Medicare at 14%.
Just like a college student swiping their credit card for textbooks, the government often spends more than it can bring in. When that happens, the U.S. has to borrow money to make up the difference. This borrowing contributes to the national debt, which is essentially the government’s credit card bill.
As of December 2023, the U.S. government owed about $33.1 trillion. Of this, $26.5 trillion is held by the public and $12.1 trillion is owed to other parts of the government itself (intragovernmental debt). The interest alone on this debt was $726 billion in July 2023, taking up about 14% of federal spending. That’s like paying interest on a student loan that just keeps growing – and the government has to make room for it in the budget.
You may wonder why it matters if Uncle Sam racks up some IOUs. Here’s where it hits home: when the government takes on debt, it has to make decisions on spending priorities to keep up with interest payments. As debt rises, a larger portion of the budget goes to paying interest, which can crowd out other expenditures the government might spend on – like education programs, public infrastructure, and health care support.
Increased debt can also make borrowing more expensive. As the government competes with regular borrowers for loans, interest rates can go up. This affects your student loans, car payments, and even mortgages. The higher the debt, the more financial stress on the government to keep borrowing affordable.
Presidential candidates have different takes on whether government spending should be reined in or ramped up. From the Republican side, you’ll hear about debt reduction, meaning shrinking government debt through spending cuts, aiming to prevent future tax increases and reduce borrowing costs. This approach usually involves a tighter budget for some social services. The Democratic party will talk about investment in the future, arguing that spending on things like education, technology, and infrastructure is an investment that will pay off in a stronger economy. This can mean more borrowing now, but the hope is that these investments will boost economic growth later.
Who decides what the government should spend on or cut? That depends on government priorities, which often shift based on the party in power, economic conditions, and what voters care about most. Should we prioritize spending on defense, social programs, education, or infrastructure? Should spending be cut to reduce debt? These are questions policymakers constantly debate.
For college students, it’s a reminder to think critically about what we value and how we use our resources, both individually and as a society. Next time government spending comes up in the news or at the dinner table, you’ll have a bit more insight into what’s happening – and maybe even an idea or two about what you think should take priority.
Photo Caption: The White House, 2012
Photo Credit: Rene DeAnda / Unsplash