Uncle Sam Is $136 Trillion in the Hole — And San Joaquin County Is Already Feeling It
Uncle Sam Is $136 Trillion in the Hole — And San Joaquin County Is Already Feeling It
What the Treasury's Own Numbers Mean for the Nation, California, and Our Community
Published March 23, 2026 | Lodi411.com
Key Takeaways: The U.S. Treasury's own FY 2025 financial statements reveal $6.06 trillion in assets against $47.78 trillion in liabilities — a negative net position of $41.72 trillion. Including off-balance-sheet obligations for Social Security and Medicare, total federal commitments exceed $136.2 trillion. Social Security faces trust fund depletion as early as 2032. Medicare's Hospital Insurance fund is projected to run dry in 2033. And San Joaquin County is already facing $50.9 to $76.9 million in annual revenue losses from H.R. 1 alone.
The Numbers Washington Doesn't Want You to See
The U.S. Treasury Department quietly released its consolidated financial statements for fiscal year 2025 last week. The timing — buried in the news cycle with zero fanfare — may have been deliberate. The numbers are staggering.
As of September 30, 2025, the federal government reported $6.06 trillion in total assets against $47.78 trillion in total liabilities. That's a negative net position of $41.72 trillion — a deterioration of nearly $2.07 trillion in a single year. Total liabilities now stand at nearly eight times the value of everything the government owns.
Writing in Fortune today, Steve Hanke, a Johns Hopkins economics professor, and David Walker, the former Comptroller General of the United States, used a word rarely applied to governments by serious economists: insolvent.
Their conclusion isn't based on opinion. It's drawn directly from the government's own audited (or more precisely, unauditable) books. For the 29th consecutive year, the Government Accountability Office was unable to issue an opinion on whether the federal financial statements are fairly presented — largely due to ongoing accounting failures at the Department of Defense and weaknesses in tracking transactions between agencies.
What's Driving the Red Ink: The Spending Side
The federal government spent $7.1 trillion in FY 2025 while collecting only $5.3 trillion in revenue — a deficit of roughly $1.8 trillion. But the raw deficit only tells part of the story. Understanding where that money goes — and why the trajectory keeps worsening — requires looking at the three massive spending categories that are eating the budget alive.
FY 2025 Federal Spending: Where the $7.1 Trillion Goes
The Big Three: Social Security, Health Care, and Interest
Social Security is now the single largest line item in the federal budget. Benefits, cost-of-living adjustments, and the sheer volume of Baby Boomers entering retirement are driving relentless growth. Spending on Social Security, Medicare, and Medicaid increased by $104 billion (8%) in just the first five months of FY 2026 compared to the same period in FY 2025, reflecting higher enrollment, cost-of-living increases, and rising health care costs. This is the demographic math: We are in the middle of "Peak 65" (2024-2027), when more than 4.1 million Americans turn 65 each year — the largest surge of retirements in the nation's history. In 1960, there were more than five workers paying payroll taxes for every Social Security beneficiary. That ratio has fallen to roughly 3-to-1 today and is projected to drop below 2.5-to-1 by mid-century.
Federal health care programs — Medicare, Medicaid, ACA subsidies, and CHIP — together accounted for roughly 24% of all federal spending in FY 2025, or approximately $1.7 trillion. Medicare alone exceeded $912 billion. The growth rate of Medicare Part B (outpatient services) is projected to average 8.8% per year over the next five years, and Part D (prescription drugs) 7.1% — both far exceeding GDP growth. More than half of all Medicare beneficiaries are now enrolled in Medicare Advantage plans, which cost the program an estimated 20% more per recipient than traditional Medicare, further inflating costs.
Net interest on the national debt has become the fastest-growing "program" in the federal budget — and it's not even a program at all. The government spent $970 billion on interest payments in FY 2025, equivalent to roughly $7,300 per American household and consuming 19% of all federal revenue. Interest was the third-largest expenditure, behind only Social Security and Medicare. The Peterson Foundation calculates that the government now spends more than $2.8 billion every day just servicing its debt. By FY 2035, interest costs are projected to nearly double to $1.8 trillion — growing faster than Social Security (58%), Medicare (75%), or any other budget category (76% growth for interest). CBO projects that by 2056, interest alone will consume 25% of the entire federal budget.
The Debt Spiral: Deficits increase the debt, which increases interest costs, which increases the deficit, which increases the debt further. Each percentage point rise in interest rates now carries enormously higher consequences than it did a decade ago because of the sheer mass of outstanding debt. On March 17, 2026, the gross national debt exceeded $39 trillion for the first time.
Projected Spending Growth Through FY 2035 (% Increase from FY 2025)
The Big Three Squeeze Everything Else
The Committee for a Responsible Federal Budget projects that more than four-fifths of all spending growth through 2035 will come from just these three categories. As Social Security, health care, and interest consume ever-larger shares of the budget, everything else — defense, infrastructure, education, scientific research, law enforcement, environmental protection — gets compressed. As a share of GDP, discretionary spending (both defense and non-defense) is projected to decline even as mandatory spending and interest balloon.
Two massive line items also dominate the liability side of the Treasury's balance sheet specifically: Federal debt and interest payable surged by $2 trillion to reach $30.33 trillion. Federal employee and veteran benefits payable grew by $438.8 billion to $15.47 trillion, reflecting the accumulating cost of pension and health care promises made to millions of current and retired government workers.
What's Driving the Red Ink: The Revenue Side
The spending side is only half the equation. Federal policy choices have simultaneously reduced the government's ability to collect revenue to keep pace with its commitments.
The One Big Beautiful Bill Act (H.R. 1)
The most consequential recent legislation is H.R. 1, the "One Big Beautiful Bill Act," signed into law on July 4, 2025. According to the Congressional Budget Office and Joint Committee on Taxation — the nonpartisan official scorekeepers in Washington — OBBBA will increase federal deficits by $3.4 trillion over the next 10 years, and more than $4 trillion when including additional interest costs on the resulting debt. On a dynamic basis (accounting for economic feedback effects), CBO's score rises to $4.7 trillion over the full 2026–2035 window.
H.R. 1 (OBBBA): How the $3.4 Trillion Deficit Increase Breaks Down
The math breaks down as follows: The law reduces federal tax revenues by approximately $4.5 trillion over a decade, mostly through the permanent extension of 2017 Tax Cuts and Jobs Act (TCJA) provisions that were scheduled to expire at the end of 2025, plus new tax cuts including deductions for overtime pay, tips, auto loan interest, and an increased senior standard deduction. It permanently increased the estate and gift tax exemption to $15 million per individual. It increased certain federal spending by $325 billion, mostly on military and immigration enforcement. And it reduced other federal spending by approximately $1.4 trillion — primarily through cuts to Medicaid, SNAP (food stamps), and federal student loans.
In other words, OBBBA is the most expensive legislation passed by Congress since the 2012 American Taxpayer Relief Act. The tax cuts cost roughly three times more than the spending cuts save. And the spending cuts fall disproportionately on programs that serve lower-income Americans — the very programs that California and San Joaquin County depend on most heavily.
The distributional analysis is stark: CBO found that the bottom two income deciles of American households will see a net reduction in resources available to them, while benefits for higher-income groups are regressive — meaning the wealthier you are, the more you benefit. Meanwhile, the Bipartisan Policy Center notes that if temporary tax provisions in the law are eventually made permanent (as is widely expected), the total cost could rise to approximately $5 trillion with interest.
The Structural Revenue Gap
Even before OBBBA, the federal tax system was collecting a declining share of national income relative to commitments. Half of all federal revenue comes from individual income taxes, and another 34% comes from payroll taxes that fund Social Security and Medicare. Corporate income tax receipts actually decreased by $78 billion (15%) in FY 2025 because OBBBA allowed corporations to take larger deductions for certain investments. The one bright spot — customs duties increased by $118 billion (153%) due to increased tariffs on imported goods beginning in February 2025 — is widely offset by the economic drag those tariffs create through higher consumer prices and disrupted supply chains.
CBO projects that deficits will average more than 6% of GDP over the next decade. The January 2025 baseline already projected an unsustainable trajectory; OBBBA has made it measurably worse.
The $88 Trillion They Don't Put on the Books
The $47.78 trillion in official liabilities doesn't include the government's unfunded promises under Social Security, Medicare, and other social insurance programs. Those obligations are disclosed separately in the Statement of Social Insurance — essentially treated as off-balance-sheet items.
In FY 2025, the 75-year unfunded social insurance obligation jumped by $10.1 trillion in a single year — from $78.3 trillion to $88.4 trillion. The primary drivers were a $6.9 trillion increase in projected Medicare Part B shortfalls and a $2.5 trillion increase for Social Security.
Add the on-book liabilities to the off-book obligations and total federal commitments now exceed $136.2 trillion — roughly five times the entire U.S. annual GDP.
Total Federal Obligations: On-Book vs. Off-Book (FY 2025)
The Treasury's own Statement of Long-Term Fiscal Projections shows the 75-year fiscal gap widening from 4.3% of GDP in FY 2024 to 4.7% in FY 2025. Under current policy, the federal debt-to-GDP ratio is projected to reach 535% by 2099.
Making It Real: The Household Analogy
Hanke and Walker offer a useful way to grasp these numbers. Divide every figure by 100 million — drop eight zeros — and federal finances look like a household budget:
| Category | Household Equivalent |
|---|---|
| Annual Income | $52,446 |
| Annual Spending | $73,378 |
| Annual Deficit | −$20,932 |
| Total Assets | $60,554 |
| Total Liabilities & Unfunded Promises | $1,361,788 |
That household is $1.3 million in the hole on a $52,000 income. No bank would extend it a loan. No financial advisor would call it solvent.
Social Security: Seven Years and Counting
The 2025 Social Security Trustees Report projects that the Old-Age and Survivors Insurance trust fund will be depleted in 2033 — just seven years from now. The combined OASDI trust fund reserves are projected to run out in 2034.
At that point, if Congress takes no action, benefits would be automatically cut to approximately 81% of what's currently scheduled — declining further to roughly 72% by 2099. For the average retiree, that initial hit represents a 19–23% reduction in monthly income.
The situation has arguably worsened since the Trustees Report was published. In August 2025, Social Security's chief actuary reported that the "One Big Beautiful Bill Act" (H.R. 1), signed July 4, 2025, could advance trust fund depletion to 2032 — potentially just six years away.
Why the Trust Fund Is Draining Faster
Several forces are converging simultaneously. The worker-to-beneficiary ratio has fallen from more than 5-to-1 in 1960 to roughly 3-to-1 today, and is projected to decline below 2.5-to-1 by mid-century. We are in the middle of "Peak 65" (2024–2027), the largest surge of retirements in American history. Meanwhile, the Social Security Fairness Act, signed January 5, 2025, repealed the Windfall Elimination Provision and Government Pension Offset — adding nearly $200 billion to the program's shortfall over the next decade by increasing benefits for some state and local government workers.
The payroll taxes that fund Social Security are also levied on a shrinking share of total national income: just 83% of all earnings are subject to the payroll tax today, compared to 90% in 1983. As income inequality has concentrated more earnings above the taxable wage cap ($168,600 in 2025), the effective tax base has eroded.
The 75-year actuarial deficit has grown to 3.82% of taxable payroll — meaning that to make Social Security solvent over 75 years without benefit cuts, the payroll tax (currently 12.4% split between employer and employee) would need to increase by nearly a third, immediately. Every year of delay makes the required adjustment larger.
Social Security Worker-to-Beneficiary Ratio: The Shrinking Base
What Benefit Cuts Would Actually Mean
A 23% across-the-board cut to Social Security benefits would be devastating for millions of Americans who depend on the program as their primary income source. The average retired worker receives approximately $1,976 per month. A 23% cut would reduce that to roughly $1,522 — a loss of over $5,400 per year. For the roughly 40% of retirees for whom Social Security represents 90% or more of their income, this would push many directly into poverty.
Local Impact: In San Joaquin County, where the median household income is already well below the state average and a significant share of the population is at or near retirement age, the effects would be felt acutely in consumer spending, housing stability, and demand for county social services.
Medicare: A Parallel Crisis with Even Higher Stakes
Medicare's financial situation is, in some ways, more alarming than Social Security's — because the costs are growing faster and the solutions are more complex.
The Hospital Insurance Trust Fund: 2033
The 2025 Medicare Trustees Report projects that the Hospital Insurance (HI) trust fund — which pays for Medicare Part A (inpatient hospital care, skilled nursing, home health, and hospice) — will be depleted in 2033, three years earlier than projected just one year ago. At that point, incoming revenues would cover only 89% of Part A costs, meaning an automatic 11% cut to payments to hospitals and other providers.
The acceleration caught analysts off guard. The primary cause was that actual 2024 expenditures came in significantly higher than projected, raising the baseline for all future spending estimates. The Trustees also revised upward their assumptions about growth in inpatient and hospice services.
The HI trust fund had a balance of $238 billion at the beginning of 2025 and is projected to run small surpluses through 2027 before deficits begin eating through reserves. To eliminate the 75-year actuarial deficit entirely would require an immediate 14% increase in the HI payroll tax (from 2.90% to 3.32%) or an immediate 9% reduction in expenditures — or some combination.
Trust Fund Depletion Timeline: Social Security & Medicare
Parts B and D: Technically Solvent, Practically Explosive
Unlike the HI trust fund, Medicare's Supplementary Medical Insurance trust fund (covering Part B outpatient services and Part D prescription drugs) technically cannot go "insolvent" because its financing is automatically adjusted each year — beneficiary premiums and general fund transfers from the Treasury cover the costs. This is not reassuring. It means that as Medicare Part B and D costs rise, they simply consume a larger and larger share of the general federal budget — money that could otherwise go to defense, infrastructure, education, or anything else — while also increasing premiums for beneficiaries.
And those costs are rising fast. The Trustees project average annual growth of 8.8% for Part B and 7.1% for Part D over the next five years — far exceeding GDP growth or inflation. Total Medicare expenditures (all parts combined) are projected to grow from approximately 3.5% of GDP today to 5.3% by mid-century and 8.8% by 2099 under an alternative scenario the Trustees consider more realistic than the current-law baseline.
The explosion in Medicare Part B is the single biggest reason the 75-year unfunded social insurance obligation jumped $10.1 trillion in a single year — from $78.3 trillion to $88.4 trillion. Of that increase, $6.9 trillion was attributable to Medicare Part B shortfalls alone.
Medicare Advantage: A Growing Fiscal Problem
More than half of all Medicare beneficiaries — about 51% in 2025, projected to reach 58% by 2034 — are now enrolled in Medicare Advantage (MA) plans run by private insurers. Research consistently finds that MA plans cost the program roughly 20% more per recipient than traditional Medicare. The Medicare Payment Advisory Commission (MedPAC) and CBO have both estimated that MA overpayments could total more than $1.3 trillion over the coming decade. Reducing these excess payments is widely regarded as one of the most straightforward paths to improving Medicare's finances — but the political difficulty of cutting payments to private insurers with millions of enrollees has so far prevented action.
What This Means for Seniors — and for Taxpayers
For current and future retirees, the convergence of these two crises means that the programs they've paid into their entire working lives face either benefit cuts, higher taxes, or both. For taxpayers of all ages, it means that an ever-growing share of every tax dollar will go to servicing past commitments rather than investing in the future.
"The sooner solutions are enacted, the more flexible and gradual they can be."
— 2025 Social Security & Medicare Boards of Trustees
Every year of inaction narrows the options and increases the severity of the eventual reckoning.
What This Means for California
California receives more federal dollars than any other state, and those dollars are under direct threat.
The enacted state budget for 2025-26 includes nearly $175 billion in federal funds — over one-third (35.2%) of the total state budget. Nearly 4 in 5 of those federal dollars ($136.6 billion) support health and human services programs, with $119.3 billion flowing through the Department of Health Care Services for Medi-Cal, which provides health coverage to nearly 15 million Californians.
The state is already reeling from the combined pressures of federal policy changes and its own fiscal challenges:
H.R. 1 cuts are hitting hard. The Republican megabill enacted in July 2025 included the largest funding cuts to health care and food assistance in U.S. history. According to the California Health and Human Services Agency, H.R. 1 could cause up to 2 million Californians to lose Medi-Cal coverage and cost the state tens of billions in annual federal funding. CalFresh (food assistance) could see annual cuts of $2.3 to $5.1 billion, putting more than 3 million households at risk of losing some or all of their food benefits.
The state budget is under strain. California faces a projected deficit of approximately $18 billion for FY 2026-27, even with strong tax revenues driven by the AI sector. The Legislative Analyst's Office projects structural deficits growing to $35 billion by 2027-28. The state has already drawn $7.1 billion from its Rainy Day Fund and implemented cuts to Medi-Cal, including freezing enrollment for undocumented immigrants and reimposing asset tests for seniors and people with disabilities.
Higher education is being squeezed. Both the UC and CSU systems have faced deferred funding commitments, with promised 5% base increases pushed to future years. Community colleges saw $150.5 million cut from their data sharing platform.
The deeper question is this: if the federal government's fiscal trajectory continues — and these Treasury numbers suggest it will — the flow of federal dollars to California will inevitably face further reductions regardless of which party controls Congress. You can't spend money you don't have forever.
San Joaquin County: Where Federal Dysfunction Meets Main Street
For residents of Lodi and San Joaquin County, the federal fiscal crisis isn't an abstract concern. It's already manifesting in concrete ways.
The H.R. 1 Impact: $50.9 to $76.9 Million in Annual Revenue Losses
On March 10, 2026, the San Joaquin County Board of Supervisors received a detailed fiscal impact report on H.R. 1. The numbers are sobering:
| Program Area | Estimated Annual Loss | Key Details |
|---|---|---|
| Medi-Cal Revenue | $30.4–$34.4M | 314,058 enrolled; 35% est. coverage loss; unfunded admin workload |
| SJ General Hospital | $11–$30.8M | Reduced federal match; capped state-directed payments |
| SJ Health Clinics | $5–$9M | 85% Medi-Cal patients; 10–15% projected disenrollment |
| Behavioral Health | $22.5M | 35% increase in uninsured; included in HCS figures |
| CalFresh/SNAP | $3.2M + $2.7M costs | 18,000 face work requirements; nutrition ed cut |
| In-Home Supportive Svcs | $0.1–$2.4M | 60.4% caseload growth; 19.7% admin funding decline |
| Total Estimated Impact | $50.9–$76.9M/year |
San Joaquin County H.R. 1 Fiscal Impact by Program Area
"H.R. 1 does not eliminate service demand. Instead, it shifts fiscal and operational responsibility to local government."
— Supervisor Rickman, San Joaquin County Board of Supervisors
The County Budget: Stable Today, Storms Ahead
San Joaquin County adopted a $3.02 billion balanced budget for FY 2025-26 — its twelfth consecutive balanced budget without drawing on reserves. The midyear report released March 19, 2026 projects General Fund savings of $23.7 million and $10.1 million more in local tax revenue than budgeted.
But county leaders are sounding the alarm. Property tax growth is projected to slow from 7% to just 2% in 2026-27. Labor costs are projected to increase by approximately $22.4 million, driven by negotiated salary increases and health insurance premium increases of up to 29.9%. Several departments — including the Human Services Agency, Public Health Services, and San Joaquin General Hospital — have already instituted targeted hiring freezes.
"Between the State budget and sweeping federal Medicaid reductions, San Joaquin County must plan wisely and spend carefully."
— Board Chair Sonny Dhaliwal, San Joaquin County
Lodi Specifically
The City of Lodi adopted a $291 million balanced budget for FY 2025-26 but faces its own challenges: a projected $4.8 million structural deficit over five years, a $1 million sales tax shortfall, and the lingering financial impact of the illegal business license tax refund. While the county's 80% state/federal revenue base provides some insulation from local economic cycles, Lodi depends more heavily on local sales and property taxes plus Measure L revenue, making it more exposed to downturns.
The county operates behavioral health services at a regional scale — including the permanent facility under construction on Sacramento Street, with county services at no cost to city resources. If federal Medicaid reductions force the county to scale back, Lodi has limited independent capacity to fill the gap.
On the food security front, the federal cuts are already being felt in Lodi. Grace and Mercy Charitable Foundation, a Lodi-based food bank, has reported losing approximately 500 boxes of food per week due to federal cuts — this while roughly 80,000 people countywide don't know where their next meal is coming from.
What Comes Next: The Policy Debate
The Hanke-Walker Fortune article proposes two specific legislative responses:
The Fiscal Commission Act (H.R. 3289) — a bipartisan bill that would create an independent commission to confront the fiscal reality, evaluate trade-offs, and present options for restoring fiscal health. It has 41 co-sponsors.
A Fiscal Responsibility Constitutional Amendment via Article V Convention (H.Con.Res. 15) — modeled on Switzerland's "debt brake," which would mandate a balanced budget over the business cycle and prohibit federal spending from growing faster than the economy.
Whether either gains traction is an open question. What's not debatable is the math. The federal government's own books show an entity that, by any private-sector accounting standard, is deeply insolvent — and the trajectory is worsening year over year.
The Bottom Line for Lodi and San Joaquin County
The federal fiscal crisis is not a future hypothetical. It is a present reality that is already reshaping the services available to residents of San Joaquin County. Whether it manifests as reduced Medi-Cal coverage, strained food banks, hiring freezes at county agencies, or the looming threat of Social Security benefit cuts, the consequences of Washington's fiscal trajectory flow downhill — and they land hardest on communities like ours that depend on federal and state support for essential services.
The $136.2 trillion question isn't whether there will be a reckoning. It's whether that reckoning will be managed through deliberate policy choices or imposed through crisis. For local leaders, the message is clear: plan for less federal money, build local resilience, and demand transparency about what's coming.
Sources & References
- U.S. Treasury FY 2025 Financial Report of the United States Government
- GAO Report GAO-26-108073: FY 2025 Consolidated Financial Statements Audit
- Fortune — "The Treasury just declared the U.S. insolvent. The media missed it" (Hanke & Walker, March 23, 2026)
- 2025 Social Security Trustees Report
- 2025 Medicare Trustees Report
- CBO — Dynamic Estimate of H.R. 1, One Big Beautiful Bill Act
- Bipartisan Policy Center — Deficit Tracker
- Bipartisan Policy Center — What Does the One Big Beautiful Bill Cost?
- Committee for a Responsible Federal Budget — OBBBA Dynamic Score
- American Action Forum — Sizing Up Interest Payments on the National Debt
- Peter G. Peterson Foundation — Understanding the Federal Budget
- Tax Foundation — One Big Beautiful Bill Act Tax Policies Analysis
- USAFacts — Federal Government Budget Fact Sheet 2026
- San Joaquin County — H.R. 1 Fiscal Impact Report (March 10, 2026)
- San Joaquin County — Midyear Budget Report (March 19, 2026)
- California Budget & Policy Center — Federal Funds Drive One-Third of California's Budget
- CalMatters — California Budget Outlook
- Lodi411.com — San Joaquin County FY 2025-2026 Budget Analysis