It’s the Spending, Stupid!

With a few days’ perspective on the State of the Union address, which grows ever closer in spirit and content to outtakes from the prophetic 2006 comedy Idiocracy, it’s worth revisiting one of Milton Friedman’s most enduring insights. “Keep your eye on one thing and one thing only: how much government is spending,” the libertarian Nobel laureate counseled. “That’s the true tax.” Don’t be distracted, he added, by talk about balancing budgets or cutting marginal tax rates. Focus on how much money the federal government spends each year, because that’s the ultimate indicator of how much it costs.

Friedman was talking in the late 1970s, when top marginal income-tax rates were 70 percent and debates were focused on lowering the tax burden and, by implication, government spending. Back then, deficit spending was something that mostly happened during wartime or recessions, rather than being taken for granted the way it has been since Jimmy Carter occupied the White House. If you cut the amount of money the government brought in, went the general argument, you also cut the amount of money it could spend. Friedman was emphasizing that whether spending is paid for in the moment, it is the best proxy for government involvement in everyday life. It has to be paid for eventually, either by raising taxes, reducing services, or by inflating the currency—all actions that make us subordinate to politics and politicians.

In Tuesday’s speech, President Donald Trump reduced fiscal responsibility to a few lines about taming deficits by announcing a “war on fraud,” to be prosecuted by Vice President J.D. Vance. “He’ll get it done,” promised Trump. “And we’re able to find enough of that fraud, we will actually have a balanced budget overnight.” Thus ends nearly half a century of the Republican Party being, at least rhetorically, the party of less spending and smaller government.

Trump’s promise to balance the budget by clamping down on fraud is, to invoke the chief executive Trump replaced, utter malarkey. The barely cold corpse of the Department of Government Efficiency (DOGE) testifies to how surprisingly hard it is, even for wunderkind spreadsheet hotshots with battle names like Big Balls, to realize cost savings in a federal budget that tops $7 trillion. The absolute best-case scenario, wrote Reason‘s Eric Boehm, is that DOGE saved $170 billion rather than the $2 trillion that Elon Musk promised at its outset. (At least, that’s what DOGE finally claimed, but given the agency’s reputation for fudging its numbers, we should take it with a grain of salt or two.) Whatever numbers Vance comes up with should be met with similar skepticism. After all, this is the man who, when called out for circulating unsubstantiated stories of Haitian immigrants grilling pet cats in Springfield, Ohio, told CNN, “If I have to create stories so that the American media actually pays attention to the suffering of the American people, then that’s what I’m going to do.”

When it came to talking about spending in the State of the Union, Trump wasn’t at all tempered. He bragged about the $1 trillion defense budget he signed, the $1,776 “warrior dividends” sent to service members, and his Trump Accounts for babies born between 2025 and 2028, a program estimated to cost taxpayers over $15 billion through 2034.

To the extent he talked about the revenue side, he congratulated himself for instituting “tariffs, paid for by foreign countries,” that brought in “billions of dollars.” As many analyses show, Americans paid upwards of 90 percent of the cost of the tariffs, which were ruled illegal by the Supreme Court and will eventually be refunded. While refusing to acknowledge that tariffs are taxes paid by his countrymen, Trump did boast of last year’s tax cuts:

I urged this Congress to begin the mission by passing the largest tax cuts in American history….And with the great Big Beautiful Bill, we gave you no tax on tips, no tax on overtime, and no tax on Social Security for our great seniors. And we also made interest on auto loans tax-deductible. The first time, but only if the car is made in America.

But, following Friedman, let’s keep our eye on spending, not revenue. The results are as disheartening as they are bipartisan. Here are recent annual outlays, as tallied by the Treasury Department’s FiscalData site. The data are inflation-adjusted in 2025 dollars:

• 2015: $5.02 trillion
• 2016: $5.17 trillion
• 2017: $5.23 trillion
• 2018: $5.27 trillion
• 2019: $5.61 trillion
• 2020: $8.16 trillion
• 2021: $8.05 trillion
• 2022: $6.85 trillion
• 2023: $6.48 trillion
• 2024: $6.93 trillion
• 2025: $7.01 trillion

The current estimate from the Congressional Budget Office (CBO) for FY 2026 is $7.4 trillion. That’s for a country that is post-pandemic and not at war (at least not as of when I’m writing this). If we cannot reduce spending now through political means, it will ultimately be reduced through a recession, inflation, or an abrupt cut in government services. Given that the debt held by the public equals the size of our economy, it will be extremely difficult for the government to handle such a crisis.

Decades after Friedman’s initial warning at the start of chronic deficit spending, it’s still the spending, and it keeps getting worse with every passing year.