And the promise being made, must be kept. — Abraham Lincoln
And the promise being made, must be kept.
Net interest, Social Security, Medicare, health spending and veterans’ benefits now absorb 98.4% of total federal receipts on a trailing 12-month basis. Spending on these obligations now nearly matches every dollar the federal government collects, before accounting for defense, transportation, education, income security and many of its other responsibilities.
The chart groups several of the largest and most familiar federal commitments alongside net interest. CBO defines mandatory spending separately and includes a broader set of programs. Under that definition, mandatory spending plus net interest is projected to equal approximately 99.5% of federal receipts in fiscal year 2026, very close to the 98.4% shown here. The calculations are different, but both show major federal commitments and interest absorbing roughly the entire revenue base.
Almost all of the federal government’s current revenue is now effectively committed before many other government functions are funded. Interest payments cannot simply be deferred, while entitlement programs are politically and structurally difficult to alter quickly. In that narrow sense, the budget begins to resemble that of a sovereign with hard-currency obligations: a growing share of revenue is committed before other spending decisions are made. The United States retains substantial capacity to raise revenue and borrow, but those options do not change the underlying budget constraint: the payments still have to be made.
The 98.4% figure captures only part of federal spending. The Treasury categories outside the chart account for another approximately $2.0 trillion, equal to 37.8% of receipts. They include national defense, income security, transportation, education, justice and other government functions. On the same trailing 12-month basis, total federal outlays were $7.32 trillion against $5.37 trillion of receipts. Total spending therefore equaled 136.2% of revenue. For every dollar collected, the federal government spent about $1.36 and financed the difference through borrowing.
Five years ago, the five categories shown in the chart consumed 75.8% of receipts, compared with 98.4% today. Net interest alone rose from 8.5% to 19.7% of receipts, accounting for 11.2 percentage points of the 22.6-point increase. Social Security and Medicare also increased materially over the period. Entitlement commitments have represented a large share of federal spending for decades, while interest expense has driven much of the recent increase. With a larger debt stock and higher borrowing costs than several years ago, net interest has become a much larger claim on federal receipts and cannot be reduced through the annual appropriations process.
Approaching 100% shows how little room remains inside current revenues before the rest of government is funded. The United States can still borrow, raise revenue and change spending programs, but the budget begins from an increasingly constrained position when major benefit programs and net interest already absorb nearly all receipts. With total outlays still well above revenues, the practical result is straightforward: more of the remaining government must be financed through borrowing unless policymakers increase revenues or reduce spending elsewhere.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
