Government Spending Analysis

Growth Dragged Lower by Government Shutdown   This morning’s delayed 4Q2025 #GDP report was weaker than expected and, combined with slightly higher-than-expected December consumption deflator inflation, provides little cause for celebration in either the stock or bond markets.   Real GDP rose at an annual rate of 1.4% in the fourth quarter, compared to a consensus expectation of 3.0%.   While this is an unusually large miss, consensus expectations may have been biased up by the Atlanta Fed’s GDPNow model which, as recently as late January, had been estimating fourth-quarter growth of over 5%. However, this model is based on a mechanical extrapolation of monthly data as they come in the door, and reports earlier this week showing softer inventory growth and a much bigger trade deficit in December made a weak report much more likely.   Looking at the details, a very sharp 17% annualized decline in federal government spending was the main culprit for the weak report as real GDP, excluding the federal government rose by 2.7% annualized. The report noted that the federal government shutdown in October and the first half of November subtracted a full percentage point from real GDP growth. Other ongoing declines in federal employment presumably further dragged down the numbers.   Elsewhere in the report, consumer spending rose at a solid 2.4% pace and investment spending on equipment and intellectual property showed strong gains while spending on both commercial construction and home-building fell. The real trade deficit narrowed and inventories fell for the third consecutive quarter but neither of these sectors had much impact on growth.   Going forward, we expect first-quarter growth to be similarly weak, hurt, in part, by an unusually tough winter up and down the east coast and squeezed lower- and middle-income consumers. However, bumper income tax refunds and possible so-called “tariff rebate checks” should boost consumer spending and economic growth in general in the second and third quarters before moderating in the fourth. Overall, we expect fourth-quarter over fourth-quarter real economic growth of between 1.5% and 2.0% this year, down slightly from 2.2% in 2025. However, with consumption deflator inflation ending 2025 at 2.9% year-over-year compared to a 2.8% consensus expectation and the Fed’s 2.0% target, and with a still tight labor market, it is unlikely that the Fed will cut rates any time soon in response to sluggish numbers on real GDP.

Think federal government housing aid is focused on low-income families & largely funded by the Department of Housing & Urban Development? Think again. In new work at Urban Institute, Amanda Hermans, MPP and I provide a comprehensive account of the US government's many housing supports, which go far beyond HUD 🏘️ https://lnkd.in/eGekpAgM Our examination of federal housing supports shows how they are distributed through programs managed by HUD, the Treasury Department, the VA, Government-Sponsored Enterprises (like Fannie/Freddie), the USDA, and even DOT. We catalogue dozens of programs—showing which families they support & how much they cost. All-in-all, we estimate that the federal government spends ~$400 billion a year on housing-related expenditures, of which only about 1/4 is funded through HUD. Most housing spending goes through the tax code, and supports benefit homeowners & investors to a greater degree than low-income families. Because of the wide breadth of federal housing programs, they support tens of millions of households every year. Only about 5 million of those are supported by HUD—many other households are supported through low-interest loans & tax deductions. We have associated this investigation with a brand-new database of public data sources to understand housing assistance in more detail. We hope this can be a resource for folks to understand the federal government's full role in housing. Check out all the work here: https://lnkd.in/eGekpAgM

I analyzed US foreign assistance data for FY 25 and FY 26 YTD from usaspending.gov (directly sourced from Treasury) and below is a dashboard summary. Please note that the trend charts are in calendar years and cover the US FY 25 and 26 FY periods. I used usaspending.gov because foreignassistance.gov is usually delayed in updating and the website states that for most agencies, FY 25 data includes up to Q3. We already know that aggregate values are lower than in recent years. Other key findings: 1. Volatility across quarters: In both grants and contracts, there is volatility across quarters. 2. Multilaterals receive highest grant amounts: Despite the narrative that the US is abandoning multilateralism, this data suggests that multilaterals remain the primary implementing partners for US assistance. 3. Global health and humanitarian focus: The top 10 grants reflect a continued prioritization of global health and humanitarian assistance, in addition to economic growth (indicated by the IBRD allocation, which I believe was for Ukraine) 4. Democracy promotion is still in the mix: The obligation to NED occurred on the last day of FY 25 and is in the top 10 grant allocations. #ForeignPolicy #InternationalDevelopment #ForeignAid #Geopolitics #USAID #GlobalDevelopment

I analyzed every U.S. Department of Homeland Security contract award in FY25. 34,335 awards. $32.9 billion in total spend. Then I mapped where the money is actually flowing: • Which contracting offices are awarding • How much they’re spending • How many offers they’re seeing per award • And where competition is lower than most people expect One finding stands out: 71% of top-tier DHS spending averages fewer than 5 offers per solicitation. That’s not a saturated market. That’s opportunity — if you position early. In the attached report, I break down: • The top DHS buying offices and where they’re located • What those offices actually buy • Which offices combine high spend + manageable competition • Why serious DHS capture work starts by June, not September This is the same analysis framework we teach at GovClose — how to analyze federal spending, identify buyers early, and increase government contract wins without chasing RFPs. If you work in federal sales, consulting, or business development, follow me Richard C. Howard, Lt Col (Ret) here on LinkedIn. For those who want to learn how to do this analysis themselves, you can find Gov Close Certification Program through the link in my profile. — Richard C. Howard CEO, GovClose Lt Col (Ret), USAF

Over the past decade, government spending has surged, driven by pandemic relief, rising costs for entitlement programs and increased defense budgets. Let's take a look under the hood at where the money is going and where spending has grown the most since 2015. The U.S. government has been running budget deficits for nearly 25 years. That is due partly to a structural gap between tax collections and federal spending and partly to emergencies that prompted significant tax cuts and spending. Measured in unadjusted dollars, spending has jumped to nearly $6.8 trillion in fiscal year 2024 from about $3.7 trillion in 2015. Revenue rose, but not nearly as fast as spending. A straight count of dollars doesn't give an apples-to-apples comparison though. Growing population and recent inflation can skew the picture. Tax revenue per person dipped following the 2017 tax cuts, which lowered rates on individuals and on corporations. But tax collections jumped during the postpandemic recovery, especially as people sold stocks and cryptocurrency that soared in the asset boom of 2021. Meanwhile, federal spending has followed a more complex trajectory over the past decade. Congress pumped money into the economy during the pandemic to keep households, businesses and state governments afloat. Though those programs largely receded, long-run budget challenges remain because of growing interest costs and the aging population. Social Security benefits climb with inflation automatically. In addition, over time, a greater share of the population becomes eligible. As America ages, the number of beneficiaries, and the program's cost, grows. The fastest-growing big category, net interest, reflects the cost of past tax and spending decisions. The pandemic spending increased the overall debt. On top of that, a long period of low interest rates ended. Now, interest consumes a growing share of the budget. This category increased by +185% per person since FY 2015. The cost of Medicare, the health program largely for older people, is projected to grow in the years ahead as the population ages and healthcare gets more expensive. It increased by +15% in the past 10 years. National Defense, though a significant category increased by relatively low +7% from $2,453 to $2,623 per capita in budget spending. The other big way the government stepped into the economy during the pandemic was by propping up households. The income security category includes programs such as food stamps—and during the pandemic, the stimulus checks, expanded unemployment insurance and refundable child tax credit. However, comparing today with 2015, per person spending in constant dollars is actually down. #Economy

Ever wonder why the road in your locality, or the drainage or sanitation in your city is never really fixed despite decades having passed at times? 😅😅 If no, then the authorities in your city or Govt in your State must be doing a good job for your region. Else, you should really ask why. Because more often than not, the answer is not political, but rather financial. Let’s deepdive where the money really goes! .. Just look at the numbers below. 📛 Punjab Govt spends 91% of its entire revenue collection on subsidies, pensions, salaries, loan & interest repayment 📛 Of that, 74% goes towards pensions, salaries & loan repayments. And another 15% towards power subsidies. And another 2% towards other subsidy programs 📛 Means, for every 100 rupees that the State Govt earns, it is actually left with just Rs 9 to build roads, hospitals, schools, courts, better police infra or launch any new schemes This is why it keeps adding more and more debt every year, and with that, it has reached a breaking point. .. Now, it's a given that salary and pension spending can not be brought down. But, loan and interest payments? Subsidies? Can’t those be taken care of? And yet if the Govts don't address that part, then it's clearly not interested at all. .. Take Tamil Nadu’s case: 🔆 It spends ~68% of its revenues on pensions, salaries, loan & interest payments. And another 12% on subsidies 🔆 Overall, it saves Rs 20 out of every Rs 100 to spend on development versus Punjab's Rs 9! 🔆 And that small difference has made Tamil Nadu India's most industrialized State, given the judicious use of that Rs 20 towards capex, attracting industries etc .. Now, look at Gujarat! 🔆 It spends 45% on pensions, salaries and loan repayments. Another 13% on subsidies 🔆 And, for every Rs 100 of revenues earned, it saves a massive Rs 42 to spend on capex, infra& attracting industries! And when you go to Gujarat, that Rs 42 of spends shows on the class infra, state highways, top-notch bus depots and canals, etc 🔆 This is why Gujarat could give the biggiest subsidies to people to install rooftop solars, leading to a 48% share in India's entire rooftop solar capacity 🔆 This is why Gujarat can afford to give billions as incentives to Micron, Tatas & CG Power to build semiconductor plants, but Punjab can not .. And mind it. Of whatever is left after subsidies, pensions, salaries, loan & interest repayment, a big chunk also gets eaten away by corruption across all States. How much? Simply unquantifiable 📛📛 .. Thus, my only ask here is: 🔆 Next time you hear your State politicians announce a record-high budget, ask them, how much remains after paying for subsidies, pensions, salaries, loans and interest. 🔆 Because, that's the actual budget that builds your towns, cities & more Rest is vanity 🙌🙌 .. PS: I run a 15k+ member WhatsApp community called Biz News+. Check it out here: https://lnkd.in/gsP6ff2w Best, Jayant

Governments are gradually shifting away from growth-friendly spending, with public investment falling behind. As global debt rises and growth slows, reallocating resources—especially toward infrastructure, human capital, and R&D—can make a big impact. Just a 1% of GDP shift from government consumption to human capital investment could raise output by up to 6% in emerging and developing economies. Read our analysis in the latest Fiscal Monitor: https://lnkd.in/eWBuxYZi

More money = less inflation … Wassup? The Reserve Bank released its updated forecasts less than a week ago Now Treasury’s matching forecasts for inflation have been released Reports indicate Treasury sees inflation falling rather faster than the RBA does (https://lnkd.in/gUJPSAV3) Whereas the RBA forecast headline CPI growth of 3.8% to June 2024, Treasury has 3½%. And where the RBA has 3.2% over the year to June 2025, Treasury has 2¾% That’s a cumulative gap of ¾% in price levels What happened in the week between these two forecasts being made? A lot of new government spending was revealed The cut-off date for the RBA forecasts was 1 May. Queensland announced a $2.5 billion electricity subsidy for the coming year the very next day Then last week Victoria announced policy decisions that will add $3.25 billion for the coming year, while WA revealed it would spend $3.5 billion more in 2024-25 than it estimated just six months ago The feds will also announce their own extra spending on budget night So if state and federal spending is comfortably higher than was factored into the RBA’s forecasts, how can Treasury forecast lower inflation? That’s a great question, and you’ll be told it’s thanks to the magic wand of increased government subsidies. But there’s a problem with that answer - subsidies are stimulus, and they’ll tend to boost inflation more than they cut it. There is, however, something else that could help explain why Treasury sees less inflation than the RBA does Even though Treasury knows of a notable increase in government spending in the months ahead that didn’t factor into the RBA forecasts, it’s possible that Treasury thinks that the spending of families will be much weaker than the RBA has it I laid out that possibility herein recent days In brief, Treasury may think the lift in spending by governments may be offset by weakening in spending by families at the shops. Treasury's scenario for inflation and interest rates is a best case one in which the economy is in more pain than the RBA expected, but that pain is offset by more federal and state stimulus than the RBA expected That would leave Australia’s fight against inflation slow-but-doable That could be a stretch, and much depends on how many more dollars – and when – announced on budget night by the feds