- [Narrator] This penny isn't worth 1 cent.
It's worth 10 billion at least for this video, okay?
And it's going into the Treasury
to be spent on an entire year
of the Environmental Protection Agency.
Here's how much went to unemployment and NASA.
Last year, more than six trillion, or 627 pennies,
were spent on different programs,
but that required taking on more than $1 trillion in debt.
Let's go to the board to look at federal spending,
including that debt,
and the ways the U.S. could borrow fewer pennies.
But first, where did all the pennies spent
in 2022 come from?
Here's how many came from revenue.
Things like individual income taxes
and payroll taxes and corporate taxes.
Congress is responsible for both these totals.
They set the tax rate and they authorize the spending,
but since these don't match up,
the Treasury takes on debt to cover this difference.
They do that by selling securities like say, a 20-year bond.
An investor gives the Treasury money
and the Treasury would pay interest on that
every six months.
They'll do that until the 20 years is over
and then the investor will get their money back.
But those interest payments add up.
- That is one of the expenses
that people who worry about the debt and the deficit
like to focus on the most,
or they see as one of the biggest problems,
is how much does the US government pay on an annual basis
just on paying its previous debts?
- [Narrator] In 2022, it was a lot.
8.5% of all spending went to paying interest on that debt.
- The concern is that so much money over time
will start going just towards the debt
that you may not be able to spend
what you wanna spend on other issues.
- [Narrator] Here are the other places
the U.S. spent money in 2022.
This biggest section here is all Social Security.
These sections, Medicare and Medicaid.
This third biggest section is the military.
Then there's the Department of Education.
Most of this is student loans,
the cost of Biden's potential student loan forgiveness plan.
There's tax credits like child credits,
Veterans Affairs, and nutritional services, like SNAP.
The rest of this other category went to smaller places
like Coronavirus relief, the Department of Transportation,
or Homeland Security
- Beyond Medicare, Social Security,
interest payments on the debt, and the Pentagon budget,
everything you think of in terms of
what the federal government does on an annual basis
is actually a a small minority
of actual annual government spending.
- [Narrator] In 2022, more than 20% of that spending
was funded by taking on debt.
This is the total amount of debt built up every year.
It's currently a little over $30 trillion,
and there's a cap to how much this can be.
The infamous- - Debt ceiling.
- Debt ceiling. - Debt ceiling.
- [Narrator] That limit is currently 31 trillion.
An amount that the Treasury is set to hit in June.
When that happens, they'll be unable
to take on extra debt through those securities,
which means there won't be enough cash
to pay Social Security benefits.
Seniors won't get their checks,
neither would members of the military,
and these debt holders wouldn't get their interest payments.
- That would create all sorts
of financial and economic problems.
Because U.S. treasuries are viewed
as kind of this safe haven asset
for the global financial system,
there's this idea that if suddenly investors thought,
"Well, if I buy U.S. government debt,
I might not get my money back,"
that there could be a sell off in U.S. government bonds
and that would raise interest rates
across the world economy.
- [Narrator] It's up to Congress to pass a bill,
that the president then signs,
to raise this limit so that doesn't happen.
Both parties agree this chart should go down,
but they disagree on how to do that.
- If you're trying to reduce the deficit
or eventually even reduce the debt,
it is to either cut spending or to raise taxes.
- [Narrator] Many Democrats want to raise taxes
on the rich and corporations.
- I wanna make it clear, I'm gonna raise some taxes.
Many of you who're billionaires out there,
you're gonna stop paying at 3%.
- [Narrator] While Republicans
largely want to see spending cuts,
and they want those cuts
as a condition for raising the debt ceiling.
Kevin McCarthy even promised to do it
as part of his deal to become Speaker.
- The responsible debt limit increase
that puts us on a path towards a healthier economy.
- [Narrator] But Democrats want just a clean raise
to the debt limit to be able to pay for the spending
Congress already approved.
- It is something that should be done without conditions.
We should not be negotiating around it.
- [Narrator] So if there were cuts,
where might they come from?
Cuts to Social Security and Medicare
seem to not be an option.
- Social Security, Medicare is off the books now, right?
They're not be start. We got unanimity.
- [Narrator] And not all Republicans
support cuts to the military.
- I think there's room for savings in the military too.
- We've gotta get spending under control
but we are not gonna do it on the backs of our troops.
- [Narrator] Which only leaves these departments
and discretionary programs as places for cuts.
- It's safe to say that marginal cuts,
while you know something
that may be worth considering in various ways,
and whether it's a wise use of resources to begin with,
are not necessarily something
that's gonna make a major difference
towards reducing a deficit
or, you know, balancing the budget, for example.
- [Narrator] While Democrats and Republicans
may disagree how to do that,
they both agree that the U.S. can't let the pennies stop.
(upbeat music)