Federal Spending Restraint Could Have Prevented Washington's Debt Crisis

The federal government collected 65% more in tax revenue over the past decade, yet the national debt more than doubled. Washington's spending grew considerably faster than the revenue available to support it, leaving taxpayers with a growing debt burden despite substantial increases in federal tax collections.

According to Treasury data compiled by Charlie Bilello of Creative Planning, federal spending increased 92% between September 2016 and September 2026, reaching $7.4 trillion annually. Tax revenue rose 65% over the same period to $5.4 trillion. The national debt climbed from $19.8 trillion to $40.4 trillion.

If federal spending had grown by approximately 5% annually over the past decade, in line with tax revenue, spending as a share of the economy could have fallen from 20% to 19% of gross domestic product (GDP), bringing the federal budget closer to structural balance and reducing the need for additional borrowing.

Federal Revenue Has Grown, but Spending Has Grown Faster

Federal tax collections have increased substantially over the past decade, rising from approximately $3.3 trillion in 2016 to $5.4 trillion in 2026. Washington has benefited from a growing economy and a larger tax base, but those additional revenues have been overwhelmed by increases in federal expenditures.

Annual spending rose from approximately $3.9 trillion to $7.4 trillion during the same period. While some of the increase reflects emergency spending during the COVID-19 pandemic, federal expenditures remained elevated after the emergency programs ended and have continued to climb.

The federal government now spends approximately $2 trillion more each year than it collects. Continued borrowing to cover that gap has helped push the national debt above $40 trillion, while interest payments on existing debt place additional pressure on future budgets.

These figures undermine the claim that Washington's fiscal problems are primarily the result of insufficient tax revenue. Federal receipts have grown considerably, but Congress has allowed spending to increase at an even faster pace.

Spending Restraint Could Have Changed the Fiscal Outlook

A decade of more disciplined spending would have produced a substantially different fiscal picture.

If federal spending had increased by approximately 5% annually, in line with revenue growth, the federal government's share of the economy could have fallen from roughly 20% of GDP to 19%. Instead of expanding its claim on the economy, Washington could have allowed economic growth to gradually reduce the federal spending burden.

That approach would have moved the budget closer to structural balance, where federal revenue is sufficient to finance ongoing spending over the economic cycle. It also would have reduced the need for additional borrowing and limited the growth of interest costs.

Washington does not need to freeze spending indefinitely or reduce every program's budget each year to improve its finances. Allowing expenditures to grow more slowly than the economy can gradually reduce spending as a share of GDP and improve the government's fiscal position.

Had that discipline been maintained over the past decade, the federal government would be facing a far more manageable debt burden today.

Congress Should Focus on Controlling Spending

The federal government's fiscal trajectory will remain unsustainable as long as spending consistently outpaces revenue. Higher taxes cannot substitute for the spending reforms needed to address persistent deficits, particularly when additional revenue is accompanied by continued expenditure growth.

Congress should prioritize reforms that slow the growth of federal spending, including the major entitlement and benefit programs that account for a substantial share of the budget. Social Security, Medicare, Medicaid, and other large federal commitments will require changes to bring their long-term costs into line with the nation's fiscal capacity.

Spending restraint would also give Congress greater flexibility to address future economic challenges. Lower deficits would reduce the need for federal borrowing, while slower debt accumulation would help contain the budgetary pressure from interest payments.

The past decade demonstrates that substantial revenue growth alone cannot restore fiscal stability when spending increases even faster. A more disciplined federal budget would allow the benefits of economic growth to strengthen the government's finances rather than finance an ever-expanding spending commitment.

CFE Takeaway

Washington could have avoided much of its current debt problem by keeping federal spending growth in line with revenue growth. Over the past decade, tax collections increased 65%, but federal spending rose 92%, contributing to a national debt that more than doubled.

Holding spending growth near 5% annually could have reduced federal expenditures to approximately 19% of GDP and moved the budget toward structural balance. Congress should pursue sustained spending restraint rather than higher taxes to address the federal government's long-term fiscal challenges.