Current U.S. Federal Government Spending

How Congress Really Spends Your Money

government spending
Doesn't he look happy to be spending your money?. Photo: Brand X Pictures/Getty Images

Current U.S. government spending is $4.147 trillion That's the Federal budget for  fiscal year 2017 (October 1, 2016, to September 30, 2017).  It's 21.5% of economic output as measured by Gross Domestic Product (GDP). 

Before the recession, the government kept Federal spending below 20% of GDP.  It grew no faster than the economy. That was around 3% per year. Thanks to the recession, spending grew to a record 24.3% 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% budget cut, called sequestration. That finally reduced spending to 20.7% of GDP in FY 2015. But after that, spending began creeping up again. It rose to $3.952 trillion in FY 2016, or 21.4% of GDP.

Most Spending Goes Toward Social Security, Medicare and Medicaid Benefits

Social Security, Medicare, and Medicaid benefits are part of mandatory spending. Those are programs established by prior Acts of Congress. They will cost $2.606 trillion in FY 2017. That's nearly two-thirds of all U.S. government spending. It's skyrocketing because more aging Baby Boomers are reaching retirement age. By 2030, one in five Americans will be older than 65.

(Source: "Aging Population in the United States.)

Social Security costs the most at $967 billion. Payroll taxes provide $827 billion of 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't "borrow" from the Social Security Trust Fund to pay for other Federal programs.

Medicare ($598 billion) and Medicaid ($386 billion) are the next largest expenses. Medicare taxes pay for $254 billion of this cost. The rest comes from the general fund.

All other programs cost $651 billion. 

  • Income support programs Food Stamps, Unemployment Compensation, Child Nutrition, Child Tax Credits, Supplemental Security for the blind and disabled, and Student Loans. Unemployment insurance pays for $50 billion of this. For more, see Welfare Programs: Myths vs Facts.
  • Retirement and Disability programs for Civil Servants, the Coast Guard, and the Military. There's $10 billion tax revenue to pay for this.
  • Obama budgeted $1 billion to pay for immigration reform if Congress passes the Act. (It didn't.)

Interest Payments on the National Debt

Interest payments on the national debt are $303 billion for FY 2017. That's enough to pay for ten Justice Departments. It's also one of the fastest growing expenses.

 By 2026, it will more than double to $793 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. (Source: OMB FY 2017 budget, Table S-5.)

Discretionary Spending 

The so-called discretionary budget is $1.233 trillion. It pays for everything else. Congress decides how much to appropriate for these programs each year. It's also the only part of government spending that Congress can cut.  

Military spending is $773.5 billion. That consumes two-thirds of the discretionary budget. It's greater than all other departments combined. It's spread out among different agencies and budget categories, so you must add it all together. It includes:

  • Defense Department base budget: $523.9 billion.
  • Overseas Operations: $73.7 billion.
  • Departments that support defense: $175.9 billion. They include the Veterans Administration, State Department, Homeland Security, FBI and Cybersecurity, and the National Nuclear Security Administration.

    The next largest department, Health and Human Services ($78.3 billion) is just 1/10 of defense. Other important federal government functions get even less. For more details, see Current Discretionary Spending

    Understand the Current Federal Budget

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