Patchwork budgeting leads to out of control federal spending

February 25th, 2025

Happy Saturday morning. Thanks for joining us again for what we hope will be time well spent as we take a smart look at an important topic – federal spending.

In one of Dolly Parton’s many philanthropic endeavors there is a program, “Imagination Library,” that sends high quality books to children from birth to age five. While that incredible program isn’t today’s topic, it did help equivocate today’s thought piece to terms that four to five year old’s today are reading. One of the books currently making the rounds centers on Parton’s own experience, a schoolgirl from a modest home whose mother fashions together a patchwork jacket from various pieces of material lying about the house. She stretches some fabric here, plugs some holes there, and voila, a jacket.

The girl goes to class and is predictably made fun of – but she perseveres in the “coat of many colors my mama made for me.” It’s a cute tale. 

In fact, Dolly Parton should write a sequel in which the girl’s mother runs for Congress, because that’s how lawmakers have constructed much of our federal budget.

In the next few years, no fewer than 15 major spending programs that impact, in one way or another, every person in this country will expire.

They will expire because federal lawmakers have not yet been able to craft programs with a long term vision of budget impacts. Instead, budget math is explained by writing into law a “sunset” for their various initiatives.

Consider this – a program that costs $50 billion per year only has a long-term cost of, say, $200 billion because it has a four-year expiration date. When the fourth year comes around, they pass it for another four years, and so on and so forth in perpetuity.

It’s a patchwork jacket, not a rational spending plan for the largest economy the world has ever known.

The result of this patchwork? Fiscal cliffs that flare up every few years and this year we’re facing the largest one in history. They don’t get much attention, so we’re going to talk about them.

Here’s a sampling of the federal programs that are set to “expire” in the coming months or years.

• Medicaid Assistance for States, or FMAP, is money the federal government sends to states to defray costs for social programs. The federal government enhanced its payments in 2020, and it’s this “bonus” that has in part enticed North Carolina lawmakers to support Medicaid expansion. The bonus is set to sunset in steps over the course of this year.
• Student loan repayments have been paused since March 2020, when the U.S. Department of Education suspended them for “two months.” Interest on student loans has not accumulated since. The pause is now scheduled to expire in August of this year.
• The National Flood Insurance Program is insolvent because premium payments are nowhere near reflective of actual flood risk. Congress reauthorizes the program every few years, promising to fix it. The next reauthorization is up in September 2023.
• Medicaid Disproportionate Share Hospital payments are federal funds sent to hospitals that serve a large number of Medicaid and uninsured patients. The amount of money sent to these hospitals is scheduled to decrease beginning in 2024. Hospitals claim indigence in just about every conceivable environment, and that will no doubt continue on this issue.
• If hospitals got a boost, then it’s only fair for physicians to get one, too. Doctors received a “temporary” 3% bonus payment through Medicare in 2022 that the FY 2023 omnibus extended into 2024.
• Increased Affordable Care Act insurance subsidies expire at the end of FY 2025, just like they were set to expire late last year.
• A litany of tax exemptions expire at the end of 2025, including the wind energy investment tax credit, the tax exclusion for student debt forgiveness, the paid family leave tax credit, and more.

This isn’t even close to the entire list.

It’s over $31 trillion with no signs of slowing down, much less a plan to reverse it. The University of Pennsylvania’s Penn Wharton Budget Model predicts U.S. debt held by the public will eclipse $1 quadrillion in 2080 – and that’s the optimistic scenario.

Why? Because we do not yet have a long term strategy in place to get spending under control. Each of the programs described above has its own special constituency that, taken together, are driving the country into fiscal oblivion.

We’ve written two smart pieces so far this year on the national debt: “The U.S. national debt is in uncharted territory” and “National debt on the fast track to a quadrillion” that have been widely read and shared by our subscribers. We thank you for that. 

We’ll keep writing about it with the hopes that you will keep sharing it – and turn towards our elected officials to let them know the severity of this looming crisis, and find ways to engage to start righting this ship.