Government spending on social programs rising
Data from the Bureau of Economic Analysis showed that private wage growth in January and February was outpaced by rising spending from government social programs such as Medicaid.
New government data shows that rising government spending on entitlement programs is outpacing tax receipts and contributing to income growth.
Data from the Bureau of Economic Analysis (BEA) showed that private wages grew by $67 billion in the early months of 2025, while government payments to Americans through social programs increased by $162 billion.
In January and February, the BEA's data showed that workers in private industries saw income from wages and salaries rise by $29.6 billion and $55.8 billion, respectively.
At the same time, government benefits from social programs were up over $81 billion in both January and February. By contrast, personal current taxes paid during those months increased by just $25 billion.
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Compared with the first two months of 2024, wages and salaries in private industries were up $108 billion, while government payments of social benefits increased $140 billion. Tax receipts were also up $169 billion in those months.
In a separate report by the BEA, transfer receipts from government agencies increased by 6.3% from 2023 to 2024 across the country, with a pair of states leading the way.
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North Carolina saw government transfer receipts rise 11.8% in that period, the largest increase in the country, followed by California which saw a 10.4% increase in that period. The report noted that the increase was due to rising spending on Medicaid in those states.
"In North Carolina and California, the states with the first- and third-largest increase in personal income, growth in Medicaid benefits was the leading contributor to the increase in personal income," the BEA wrote.
In the case of California, the state's expansion of Medi-Cal – its version of Medicaid – to cover unauthorized immigrants contributed to the increase, as initial estimates of enrollments were understated.
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CalMatters reported that Medi-Cal had a shortfall of $2.8 billion for healthcare provider reimbursements, in addition to a $3.4 billion loan needed to make payments. It added that the coverage of unauthorized immigrants on Medi-Cal is projected to cost about $2.7 billion above what was budgeted, while the eligibility expansion costs the state of California about $8.5 billion from the general fund to cover those expenses.
FOX Business' Grady Trimble and Kevin Gora contributed to this report.
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