--- title: On Track for the 2030s Great Depression description: Federal spending cuts may sound impressive, but federal spending will continue to outpace tax receipts, leading to rising debt and interest expenses. image: https://blog.itreconomics.com/hubfs/BlogImage_BB_04172025.png --- 2030s Depression # On Track for the 2030s Great Depression Federal spending cuts may sound impressive, but federal spending will continue to outpace tax receipts, leading to rising debt and interest expenses. [ ITR Economics ](https://blog.itreconomics.com/blog/author/itr-economics) Apr 18, 2025 --- Conclusions: 1. The estimated reduction in federal spending sounds more impressive than it is. 2. The federal government’s interest expense is going to continue to rise. 3. Federal spending will continue to outpace tax receipts. ## **1. Cost Savings** The estimated cost savings from firing federal employees, cutting Medicaid, and slicing other programs are touted as running anywhere from $250 billion (low-end estimate from labor costs alone) to $1.2 to $2.0 trillion or more depending on what happens to Medicaid and other programs. That is a lot of zeroes! However, all these cost savings are estimated to **accumulate over 10 years**. The federal budget deficit for FY2024 *alone* was approximately *$1.8 trillion*. In other words, the plan is what we have seen numerous times before: *Slow the rate at which the national debt will rise*. ![Federal Government Receipts and Payments](https://blog.itreconomics.com/hs-fs/hubfs/Federal%20Government%20Receipts%20and%20Payments.png?width=550&height=308&name=Federal%20Government%20Receipts%20and%20Payments.png) ## **2. Rising Debt and Interest Expense** The national debt is going to rise. Therefore, the amount of interest to be paid will go up all else being equal. The annualized federal interest expense in 2024 was $1.124 trillion. By comparison, defense spending and investment was $1.111 trillion. We spend more on interest than we do on defense. Going back to the “all else being equal” premise, ITR Economics maintains that there is another extended period of inflation ahead of us, even if all the tariff hikes were rescinded. We have discussed this in numerous webinars, presentations, and blogs. Higher inflation means higher interest rates. Rather than seeing the yield on Treasurys go down in the hope of covering the increasing debt, interest rates are likely to work their way higher as the mountain of debt grows. This unvirtuous trend requires more and more of the government’s “free cash” or income just to service the existing debt. That means, eventually, tax hikes and/or much more aggressive spending cuts than are being proposed. ![US Total Public Debt Outstanding](https://blog.itreconomics.com/hs-fs/hubfs/US%20Total%20Public%20Debt%20Outstanding.png?width=500&height=281&name=US%20Total%20Public%20Debt%20Outstanding.png) ## **3. Deficit Spending Is Probable** Running on a fiscal austerity platform is not likely to get a politician very far in our current culture. Indeed, over the course of 2025, we are likely to see tax cuts get extended. The Wharton school is estimating that the current Administration’s plans, if enacted as proposed, would add an additional $5.1 trillion to our national debt (also over the proverbial next 10 years). ## **A Cure?** As ITR Economics Consulting Principal Jackie Greene recently pointed out, it is possible to rectify these trends, but the timeline now is so short that the degree of fiscal responsibility needed to avoid the wall of debt we are rushing headlong into would itself create a severe economic contraction. Self-inflicted economic pain is a nonstarter in the political realm as it currently exists. [2030s Depression](https://blog.itreconomics.com/blog/tag/2030s-depression) ## Similar posts 2030s Depression ### [2030s Great Depression Questions: Real Estate, Federal Deficit Spending, and Canada](https://blog.itreconomics.com/blog/2030s-great-depression-questions-real-estate-federal-deficit-spending-and-canada) ITR Economics CEO Brian Beaulieu answers three more questions from our 2030s Great Depression webinar on real estate, federal deficit spending, and... Brian Beaulieu Sep 14, 2023 News ### [Why Federal Spending Cuts Won’t Change Our US GDP Forecast](https://blog.itreconomics.com/blog/why-federal-spending-cuts-wont-change-our-us-gdp-forecast) Despite the dramatic headlines about federal spending cuts, discover why the data and timing does not support changing our economic forecast for 2025. ITR Economics May 22, 2025 Industry Updates ### [Federal Spending Is Setting Us Up for the Depression](https://blog.itreconomics.com/blog/federal-spending-is-setting-us-up-for-the-depression) The federal government has collected more revenue so far this fiscal year than last, but federal spending has also increased, and by a greater amount. Alan Beaulieu Apr 11, 2024 ### Free Economic Updates from ITR Economics Hear the latest economic news from our experts, stay in the know with our frequent blogs, and get a first look at ITR Economics’ latest promotions – all free with our economic updates! 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