Stop Pouring Money Into a Leaky Bucket: Sustainable Budget Project Series

Originally published on Substack. 

Why does government keep spending more while so many problems remain unsolved?

Washington spent about $7 trillion in 2025. State governments spent trillions more. Yet families still struggle with affordability, businesses face rising costs, and politicians keep asking taxpayers for more.

The problem is not only how much government spends. It is how much value disappears along the way.

A ⁠Cato Institute study by Chris Edwards and Ryan Bourne, Thomas Savidge’s analysis for AIER’s The Daily Economy, and my ⁠Sustainable Budget Project at Americans for Tax Reform all point to the same lesson:

Policymakers should stop measuring success by dollars spent. They should ask whether programs produce more benefits than costs, avoid permanent promises funded by temporary money, and limit spending growth to what taxpayers can afford.

Government Spending Leaks Value

Economist Arthur Okun compared government transfers to carrying water in a leaky bucket. Before government spends one dollar, it must tax or borrow it from someone.

Source: Cato Institute

​Taxes do more than move money. They discourage work, saving, investment, and entrepreneurship. Edwards and Bourne estimate that raising one dollar of federal revenue can cause another 20 to 60 cents in economic harm. That means a $10 billion program may need to produce $12 billion to $16 billion in benefits just to break even.
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Americans also spent an estimated $546 billion complying with federal taxes in 2024. That money went toward paperwork, accountants, lawyers, and tax planning instead of better products, new jobs, and higher wages. Borrowing does not remove the cost. It delays taxes, adds interest, and sends the bill to future taxpayers.

Bigger Budgets Do Not Ensure Better Results

Once money enters government, it moves through politics and bureaucracy. Businesses receive feedback from customers, prices, profits, and losses. A company that wastes money may fail.

Government programs face less pressure to improve. Agencies can miss goals, run over budget, and still receive more funding. Political deals also send money toward favored districts, industries, and interest groups rather than the greatest public need.

Government has important duties, including courts, public safety, national defense, and basic infrastructure. But spending is not the same as success.

Measuring the Excess

This is why I created the ⁠Sustainable Budget Project with Americans for Tax Reform. The project asks whether spending has grown faster than population growth plus inflation. That benchmark lets government serve more people and cover rising costs without taking an ever-larger share of the economy. The ⁠methodology uses consistent state budget data and chained CPI, which better reflects how consumers adjust when prices change.

Federal spending increased 81.9% from 2016 through 2025. Population growth plus inflation rose only 32.4%. Had Congress followed that sustainable rate, spending would have been $1.9 trillion lower in 2025.
State-controlled spending rose 65.8% during the decade. Had states followed the benchmark, taxpayers would have kept about $1.8 trillion more.

Combined federal and state overspending exceeded $3.1 trillion in 2025 and $20.8 trillion during the decade. Those dollars could have supported savings, investment, jobs, and higher wages.

Temporary Aid Created Permanent Costs

Savidge’s ⁠AIER analysis explains why many states now face hard choices. Federal money funded 40.8% of state spending during the pandemic and still covered about one-third in fiscal year 2025.

Source: The Daily Economy

States expanded programs without asking their own taxpayers to cover the full cost. But federal aid came from taxpayers nationwide, often through more debt.

Now much of that aid is fading while the programs remain. States must cut spending, raise taxes, drain reserves, or seek another bailout. Temporary money created permanent expectations.

Rules Work Better Than Promises

The ⁠state results show restraint is possible.

Colorado, North Dakota, and Texas kept both state funds and all-funds spending below the sustainable benchmark. Iowa, Louisiana, Mississippi, Ohio, and Oklahoma controlled the spending their lawmakers influence most directly. California, Illinois, Minnesota, New Jersey, and New York moved far beyond sustainable levels.

This is not simply red versus blue. Colorado’s constitutional spending limit worked under different political leadership. Rules matter.

Fix the Bucket

Sustainable budgeting does not mean government can never grow. It means spending should grow no faster than population growth plus inflation.

Policymakers should reduce excess spending, review programs funded with temporary federal aid, end programs whose costs exceed their benefits, and use savings for tax relief, reserves, and debt reduction.
Government should do a few important things well instead of attempting everything poorly. The more money politicians pour into a leaky bucket, the less reaches the people it was meant to help.
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Which state should I examine next? Leave a comment or send me a message. Please share and restack this newsletter if you believe taxpayers deserve affordable budgets and better results.