Current U.S. Federal Government Spending
How Congress Really Spends Your Money
Before the recession, the government kept federal spending below 20 percent of GDP. It grew no faster than the economy. On average, growth was 2 - 3 percent per year. During the recession, spending grew to a record 24.3 percent of GDP in FY 2012. The government spent more on economic stimulus and engaged in two overseas wars.
At the same time, growth slowed. That reduced tax receipts. Congress worried about the ballooning U.S. debt. No one could agree on how to reduce it. As a result, Congress enacted a 10 percent budget cut, called sequestration. That finally reduced spending to 20.7 percent of GDP in FY 2015. Since then, spending has started creeping up again despite the sequester.
Where the Money Goes
Almost two-thirds of federal spending pays Social Security, Medicare, and Medicaid benefits. These are part of mandatory spending. Those are programs established by prior Acts of Congress. The mandatory budget will cost $2.739 trillion in FY 2019. It's skyrocketing because more baby boomers are reaching retirement age. By 2030, one in five Americans will be older than 65.
Social Security costs the most at $1.046 trillion. Current payroll taxes provide $905 billion of the income. Interest from the Social Security Trust Fund pays for the rest. But the costs will outpace income by 2030. That means Social Security benefits will drain the general fund. It also means Congress can no longer "borrow" from the Social Security Trust Fund to pay for other federal programs.
Medicare ($625 billion) and Medicaid ($412 billion) are the next largest expenses. Medicare taxes pay for $275 billion of this cost. The rest comes from the general fund.
All other mandatory programs cost $656 billion.
- Income support programs like food stamps, Unemployment Compensation, Child Nutrition, Child Tax Credits, Supplemental Security Income, and Student Loans. Unemployment insurance pays for $50 billion of this. Contrary to popular opinion, welfare programs are not the biggest cause of government spending.
- Retirement and disability programs for civil servants, the Coast Guard, and the military.
Interest Payments on the National Debt
In FY 2019, interest payments on the national debt will be $363 billion. That's enough to pay for 10 Justice Departments. It's also one of the fastest growing expenses. By 2028, it will more than double to $761 billion, becoming the second largest budget item after Social Security. It's not a mandatory program, but it must be paid to avoid a U.S. debt default. Interest rates are expected to rise. If that happens, these estimates will also increase.
The discretionary budget is $1.203 trillion. It pays for everything else. Congress decides how much to appropriate for these programs each year. That means it's the only government spending that Congress can cut.
There is an additional fund for emergencies. Congress allocates this outside of the budget. For FY 2019, the emergency fund is $111.4 billion. The largest component is for Overseas Contingency Operations, which is for wars.
Once you include the OCO fund, then military spending is $886 billion. It's spread out among different agencies and budget categories, so you must add it all together. It includes:
- Defense Department base budget: $597.1 billion.
- DoD Overseas Contingency Operations: $88.9 billion.
- Departments that support defense: $181.3. They include the Department of Veterans Affairs, State Department, Homeland Security, FBI and Cybersecurity and the National Nuclear Security Administration.
- Emergency funding for support departments: $18.7 billion
The next largest department, Health and Human Services ($69.5 billion) is less than one-tenth of total military spending. Its primary function is to spend mandated benefits for Medicare, Medicaid, and the Affordable Care Act. Other important federal government functions get even less funds.