FY 2007 U.S. Federal Budget and Spending

The Last Budget Before the Great Recession

President George W. Bush at Walter Reed Army Medical Center

Pool / Getty Images

The fiscal year 2007 budget guided federal spending for the period October 1, 2006, through September 30, 2007. The $2.568 trillion in revenue received did not cover the $2.730 trillion in spending, creating a $162 billion deficit.

FY 2007 Revenue

Income taxes contributed most of the revenue, at $1.163 trillion. Social Security taxes made up $869.6 billion, and corporate taxes added $370 billion. The rest came from other taxes, such as excise ($65 billion), estate ($26 billion) and other miscellaneous taxes. (Source for all FY 2007 actual revenue and spending is the FY 2009 Budget Summary Tables.)

The Bush administration had estimated it would receive $2.416 trillion in its budget. (Source for all estimates is the FY 2007 Budget Summary Tables)


The Federal government spent $2.730 trillion. Over half ($1.451 trillion) went to mandatory programs, such as Social Security, Medicare, and Military Retirement programs. These expenditures are mandated by prior Acts of Congress, and therefore cannot be changed without a subsequent Congressional Act. That means all budgets for these categories are simply estimates of what will be paid to fulfill the mandates. That leaves $1.279 for discretionary spending, which includes Defense and all other departments. A whopping $237 billion was spent on nothing more than paying the interest on the (at that time) $8.9 trillion national debt. The government's original budget estimate for FY 2007 spending was $2.77 trillion.

Mandatory Spending: Mandatory spending was $2.019 trillion. Social Security ($581 billion) was the largest Mandatory expenditure. Health care spending was the second largest, at $568 billion. Of this, Medicare paid out $371 billion and Medicaid paid $197 billion in benefits. All other remaining mandatory programs cost $302 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition, Child Tax Credits, Supplemental Security for the Blind and Disabled, Student Loans, and Retirement/Disability programs for Civil Servants, the Coast Guard, and the Military.

Discretionary Spending: Less than half the budget ($1.279 trillion) was Discretionary. This is the part that's negotiated between the President and Congress each year to pay for the management of all departments.

The largest category was military spending at $721.5 billion. This includes: 

  • The base budget of the Defense Department - $431.5 billion.
  • Supplemental security spending for the War on Terror - $169.4 billion.
  • Departments that support military functions - $120.6 billion. These include Homeland Security ($33.4 billion), Veterans Affairs ($38.2 billion), State Department ($33.9 billion), FBI ($6 billion) and National Nuclear Security Administration ($9.1 billion). (Source for spending was each department's FY 2009 budget).

Non-military spending was $726.9 billion. The largest departments were: Health and Human Services ($67.6 billion), Education ($54.4 billion), Housing and Urban Development ($33.6 billion), and Agriculture ($29.7 billion). (Source for spending by the department is the FY 2008 Budget Request, Summary Tables, Table S-3 since it was not included in the FY 2009 budget.)

Budget Deficit

Thanks to higher than expected revenues, the FY 2007 budget only had a $161 billion deficit. However, when you stop to think about it, why was there even a deficit at all? Economic growth had been steady for several years, and the stock market hit its peak of 14,164 in October of that year. The government should have been using those "fat years" to save for the future and cool economic growth, not overheat it with deficit spending. This expansionary fiscal policy contributed to the economic bubble which became the Great Recession when it burst.

Continued deficit spending put downward pressure on the dollar's value over the long term. It increases the price of imports and the cost of living. At the same time, it acts as a tax on future generations, who must bear the burden of paying off our debt. This puts downward pressure on future economic growth.

Compare to Other U.S. Federal Budgets