The US government spends more than it brings in.
In the last 40 years, the government outlays as a percentage of GDP have averaged 20.5% while government revenues as a percentage of GDP have averaged 17.4%.
Outlays are expected to rise 2% in FY 2014 up to $3.5 trillion, and revenues are projected to be around $3 trillion, meaning there will be a deficit of $506 billion.
Source: US Trust
Spending on mandatory programs is surging.
In 1970, mandatory spending (on programs such as Social Security, Medicare, Medicaid and other entitlement programs) was 37% of the federal budget. In FY 2013, mandatory spending was up to 68% of the federal budget.
Discretionary spending also has increased since the 1970s, but has declined in FY 2013 by 11% from a 2010 peak "almost entirely due to the drop in defense spending."
Source: US Trust
Spending on healthcare is exploding.
From 2000 to 2013 spending on Medicare increased by 170% and spending on Medicaid increased by 125% because of America's aging population and the expanding federal healthcare program.
Federal spending on income security increased by 154% in that same time period.
And for 2014, the CBO expected spending on major health programs to increased by 9%, or $74 billion.
Source: US Trust
The major sources of government revenue are individual income and payroll taxes.
The individual income tax accounted for 7.9% of GDP in 2013, while the payroll tax accounted for 5.7% of the GDP in that same year.
Source: US Trust
Government spending on defense has been declining, but the US-led effort to defeat ISIS might cause a reversal.
Government spending went up from $20 billion in 2001 to $200 billion by the end of the decade. In 2011, defense spending topped out at $699 billion, and has been in decline since.
As a percentage of GDP, however, the US used to spend way more on defense in the 1980s.
Source: US Trust
The annual cost of servicing America's debt is greater than the annual budgets of most departments of the US government.
Interest payments on America's total debt came to $221 billion in FY 2013.
Source: US Trust
The US government has been borrowing on low interest rates that may not be sustainable.
"Thanks to aggressive Fed purchases of US Treasuries and strong foreign demand for US assets, the US government has been borrowing at teaser rates — or less that 2% in 2013," the US Trust report states.
However, the cost of capital is going to increase eventually, and then rates are going to increase.
Source: US Trust
The budget deficit is expected to decline for the 5th year in a row as a percentage of GDP.
The percentage is expected to fall to 2.9% of the GDP versus last year's 4.1%.
It's important to note the difference from 2010, when the deficit was 10% of the GDP.
"Note also the surpluses posted in the last 1990s. Thanks to two tax increases over the 1990s, reduced military spending, and strong federal revenues, the US posted a budget surplus for four straight years, starting in 1998. At the time, many in Washington worried that the surpluses were becoming too large, although those fears proved to be wildly off the mark," the US Trust report states.
Source: US Trust
The debt has increased every single year since 1956.
In pre-crisis 2007 the debt held by the public was a "manageable" 35% of the GDP. In 2013, the debt held by the public was up to 72% of the GDP.
From 2000 to 2013, debt held by the public soared from $3.4 trillion to nearly $12 trillion.
The CBO notes that "America's jump in debt carries serious negative consequences for the US, including a rise in federal outlays on interest payments; slower long-term growth; less policy flexibility for lawmakers; and the increased risk of a financial shock given the leveraged state of America."
Source: US Trust
Interest payments, healthcare, and social security will consume 85% of the increase in outlays over the next decade.
Net federal spending on Social Security, Medicare, and Medicaid is expected to continue rising as a percentage of GDP. The CBO predicts that the share of people aged 65 and older is projected to expand from 13% in 2008 to 20% in 2035.
Meanwhile, the share of the population of people ages of 20 to 64 will drop from 60% to 55%.
The ratio of workers to retirees today is roughly 3.3 to 1 while in the 1950's it was 16 to 1. During this decade, the Social Security program will start to pay out more than it takes in thanks to boomers retiring in increasing numbers.
Source: US Trust