Running the Numbers

What four decades of federal data reveal - and what it doesn't.

As readers are aware, we recently looked at the national debt from a quisling point of view - the political postures toward taxes and spending that change depending on which party is in the White House. If you haven’t read them, now is a good time. They are:

May 09 The Inheritance Thieves: Volume II - Part 1 of 2

May 12 The Inheritance Thieves: Volume II - Part 2 of 2

The inheritance in the titles, of course, being the national debt to be inherited by our children and grandchildren (and beyond).

The thieves? It’s us.

In this piece, we’re not naming more quislings - just sharing some numbers that can provide better perspective.

It’s worth a 5 minute read to understand - because our children and grandchildren will have to deal with this if we don’t.

Everyone has heard the arguments that the government is too big. That Washington is out of control, and Federal spending is bankrupting the country. It’s one of the most durable talking points in American politics - but let’s look at the numbers.

Turns out, the story is more nuanced.

Below is a look at the data spanning 1981 (the year the debt started to balloon) to 2024 (the last full year of data we found). It’s the federal workforce, the budget, the national debt, and tax rates. The figures are drawn from government sources (noted below) and are presented here without editorial interpretation.

Has Government Actually Grown?

The standard accusation is that the federal bureaucracy has swelled. Here are the actual data.

In 1981, the US had about 229 million people and 2.96 million federal civilian employees (excluding active-duty military and the US Postal Service). In 2024, the population had grown to about 341 million - a 49% increase - while federal civilian employment sat at just 3.01 million.

Over 43 years, the population grew by almost half, while Federal civilian employment was nearly unchanged. The ratio of federal workers per 1,000 residents fell from 12.9 to 8.8.

Budget Growth and Inflation

The annual federal budget went from $678 billion in 1981 to an estimated $6,752 billion in 2024, an increase of about 5.5% per year. Over that same period, the Consumer Price Index (CPI) rose from 87 to 315.6 - a 3.6x increase, or about 3% per year.

So the budget rose about 2.5% per year after inflation. Why?

• Programs - primarily Social Security and Medicare - whose beneficiary populations have grown proportionally larger as the country has aged. In 1980, 11.1% of the population was 65+. In 2024, the percentage was 17.9%.

• The military budget went from $135 billion to $842 billion. 4.4% per year; 1.3% after inflation. Easily explained by increasingly complex armaments (and their use).

• Interest costs on the national debt grew from $69 billion in 1981 to $882 billion in 2024 - from 10% of the federal budget to 13%. Interest grew 12.8-fold over the period, faster than overall spending, and unlike Social Security or defense, it cannot be reduced by legislation.

Inflation-adjusted growth rates: Federal Budget +2.5% per year. National Debt +5.6% per year.

The national debt grew at a meaningfully different rate than the budget - after inflation, about 2.3x faster.

Understanding Interest Costs: The Coverage Ratio

A more direct measure of fiscal health is the coverage ratio: what percentage of annual federal spending is actually covered by that year’s tax revenues? The remainder must be borrowed.

In 1981, federal revenues covered about 88 cents of every dollar the government spent. By 2024, that had fallen to roughly 73 cents - meaning approximately 27 cents of every dollar spent in 2024 was borrowed. Interest is itself a budget expenditure, which widens the deficit, which adds to the debt, which drives up future interest costs.

It’s a compounding self-reinforcing feedback loop, and, in 2024, interest payments exceeded the the total defense spending for the first time in modern history.

What Happened to Tax Rates and Revenue?

Over the same period, federal tax rates changed significantly, particularly at the top. Here is how that translated into actual dollars collected - and what share of the total revenue pie each source represents.

Corporate Taxes

In 1981, corporations paid a top federal rate of 46% on income above $100,000. After the 2017 Tax Cuts and Jobs Act, they pay a flat 21% on all income. Corporate tax collections grew from $61 billion in 1981 to $530 billion in 2024 - 8.7-fold in nominal terms. Despite dramatically lower rates, the larger corporate profit base partially offset the cut. Even so, corporate collections grew more slowly than federal spending.

Personal Income Taxes

The top personal income tax rate in 1981 was 70%, applied to income above roughly $215,000 (approximately $730,000 in today’s dollars). That rate is now 37%, applied to income above $600,000 for joint filers. Individual income tax collections grew from $286 billion to $2,427 billion - 8.5-fold.

The rate cuts were partially offset by bracket creep (when inflation pushes incomes into higher tax brackets without Congress acting to adjust them) and by the Tax Reform Act of 1986, which eliminated many deductions while lowering rates. These forces helped sustain collections even as top marginal rates fell. But again, collections grew more slowly than federal spending.

The Revenue Picture, Side by Side

The table below shows what each revenue source actually collected in 1981 and 2024 - in dollars, as a share of total revenue, and how much it grew. For comparison, the final row shows how much spending grew over the same period.

Federal revenues grew 8.2-fold in nominal terms from 1981 to 2024. Federal spending grew nearly 10-fold. Every major revenue source grew more slowly than spending did.

Payroll Taxes: The Missing Piece

One major revenue source often left out of discussions about tax rates is the payroll tax. Payroll taxes fund Social Security and Medicare and represent the second-largest source of federal revenue - roughly 34% of total receipts in 2024. The combined employer-employee rate is 15.3% on wages, applied up to a wage cap of $168,600 in 2024, with no cap on the Medicare portion.

Unlike income taxes, payroll taxes do not apply to investment income, and the wage cap means the effective rate declines as earnings rise above the threshold - making them structurally regressive. Despite growing from $183 billion to $1,663 billion - 9.1-fold - payroll taxes still grew more slowly than spending.

Here Is a Summary of What the Data Shows

Federal workforce: Grew by less than 2% total over 43 years, while the US population grew by 49%.

Federal spending: Grew at roughly 2.5% per year after adjustments for inflation - driven largely by an aging population, rising entitlement costs, military spending and compounding interest.

National debt: Grew at about 5.6% per year, inflation-adjusted - about twice the rate of spending.

Interest costs: Grew faster than any other major spending category and exceeded defense spending for the first time.

Tax rates at the top: Top corporate and personal income tax rates fell sharply since 1981. Bracket creep and base-broadening reforms partially offset the cuts, but every major revenue source still grew more slowly than spending.

Coverage ratio: Federal revenues covered 88% of spending in 1981; by 2024, they covered roughly 73% - meaning more than one dollar in four is now borrowed.

So...

The gap between budget growth and debt growth is real. So is the shift in tax rates at the top. Whether those two facts are connected - and how - is a question the data raises but does not settle.

Is the national debt primarily a spending problem, a revenue problem, or some combination of both? Federal spending grew nearly 10-fold in nominal terms from 1981 to 2024. Federal revenues grew 8.2-fold. The difference between those two numbers - sustained over four decades - is the debt.

These are the questions worth sitting with. What’s your read?

Sources & Data

US Population 1981 - Census Bureau Current Population Reports (P25-898)

US Population 2024 - Census Bureau: U.S. Population Projected for New Year’s Day 2025

Federal Civilian Employment Since 1940 - Office of Personnel Management (OPM)

National Debt Historical Data - U.S. Treasury Fiscal Data

Federal Debt (GFDEBTN) - FRED, Federal Reserve Bank of St. Louis

Federal Budget & Revenue Historical Tables - Office of Management and Budget (OMB)

CPI Historical Data - U.S. Bureau of Labor Statistics

CPI (CPIAUCSL) - FRED, Federal Reserve Bank of St. Louis

Population Ages 65 and Above - FRED, St. Louis Fed

1980 Military Budget - DOD Historical Reports

2024 Military Budget - DOD Comptroller Budget Materials

Historical Corporate Tax Rates & Brackets - Tax Foundation

Corporate Income Tax Revenue - Tax Policy Center

Historical Individual Income Tax Rates & Brackets - Tax Foundation

Historical Individual Income Tax Revenue - Tax Policy Center

Economic Recovery Tax Act of 1981 - Wikipedia

Historical Federal Revenue & Outlay Data - OMB Historical Tables, Table 2.1

Payroll Tax Rates & Wage Base - Social Security Administration

Gross Debt vs. Debt Held by the Public - Committee for a Responsible Federal Budget

Federal Debt as % of GDP (GFDEGDQ188S) - FRED, Federal Reserve Bank of St. Louis

Federal Outlays: Net Interest (FYOINT) - FRED, Federal Reserve Bank of St. Louis

Monthly Budget Review: Summary for Fiscal Year 2024 - Congressional Budget Office

Note: All dollar figures are nominal (not inflation-adjusted) unless otherwise stated. Federal employee counts exclude active-duty military and the U.S. Postal Service. CPI figures use the BLS CPI-U series (1982-84 = 100). Coverage ratio and revenue composition figures are drawn from OMB Historical Tables 1.1 and 2.1; minor rounding applies. Net interest figures from FRED FYOINT series. Gross federal debt includes intragovernmental holdings; debt held by the public does not.