U.S. Federal Budget Breakdown

The Budget Components and Impact on the US Economy

In fiscal year 2017, the federal budget is $4.073 trillion. The U.S. government will receive $3.632 in revenue. That creates a $441 billion deficit for October 1, 2016, through September 30, 2017. 

Spending breaks down into Mandatory ($2.606 trillion), Discretionary ($1.241 trillion) and Interest on the National Debt ($266 billion). Here are a more detailed breakdown and links to past budgets. (Source: "Mid-Session Review Fiscal Year 2017," Office of Management and Budget, July 15, 2016.)


US Tax Time
Most of the government's revenue comes from you. Photo: David Freund/Getty Images

The Federal government will receive $3.632 trillion in revenue. Most of the taxes are paid by you, either through income or payroll taxes:

  • Income taxes contribute 48 percent.
  • Social Security, Medicare and other payroll taxes are 32 percent.
  • Corporate taxes are 11 percent.
  • Excise taxes and tariffs contribute 3 percent.
  • Earnings from the Federal Reserve's holdings add 2 percent. For more see Quantitative Easing.
  • Estate taxes and other miscellaneous revenue contribute the remaining 3 percent.

It's estimated that each taxpayer works until April each year to pay for all Federal revenue collected. That's Tax Freedom Day. Can you think of any other purchase you make that you've worked as hard and as long for? More


The Federal government spends more than it takes in. Photo: John Kuczala/Getty Images

The government will spend $4.073 trillion. Most of this (64 percent) pays for mandated benefits, such as Social Security, Medicare, and Medicaid. 

Interest on the national debt must also be paid to avoid a U.S. debt default. So far, the U.S. has been lucky because interest rates are low. That's due to a flight to safety that has increased demand for Treasury notes. As the global economy strengthen, Treasury yields will rise- and so will interest payments. Interest on the $19 trillion debt is already the fastest growing federal expense.

The remaining 36 percent of the budget pays for everything else. It's called discretionary spending. Congress can change this amount each year. It uses the President's budget as a starting point.  More

Mandatory Spending

The lion's share of Federal spending goes toward mandatory programs. Photo: Getty Images

Mandatory spending is $2.606 trillion. Social Security is by far the biggest expense, at $948 billion. Medicare is next, at $592 billion, followed by Medicaid at $385 billion.

Social Security costs are currently 100 percent covered by payroll taxes and interest on past payroll taxes that have been invested. Until 2010, there was more coming into the Social Security Trust Fund than being paid out. Thanks to interest on investments, the Trust Fund is still running a surplus. However, the Trust Funds' Board estimates that this surplus will be depleted by 2036. Social Security revenue, from payroll taxes and interest earned, will cover only 77 percent of the benefits promised to retirees.

Medicare is already underfunded. Medicare taxes don't pay for all benefits, so this program relies on general tax dollars to pay for a portion of it. Medicaid is 100 percent funded by the general fund. More

Discretionary Spending

How much do you think should be spent on education? Photo: Getty Images

The discretionary budget is $1.241 trillion. More than half goes toward military spending, including Veterans Benefits and other defense-related departments. The rest must pay for all other domestic programs. The largest are Health and Human Services, Education, Housing and Urban Development, and the Judicial system.

There is an additional emergency fund of $84 billion that's not included in the budget. Most of that goes to Overseas Contingency Operations to pay for wars. More

Military Spending

Iraq soldier
ISKANDARIYA, IRAQ - JULY 14: Soldiers with the 3rd Armored Cavalry Regiment participate in a patrol on July 14, 2011 in Iskandariya, Babil Province, Iraq. Photo by Spencer Platt/Getty Images

Military spending is budgeted at $773.5 billion. The biggest expense is the Department of Defense base budget ($523.9 billion). Overseas Contingency Operations will cost $73.7 billion. It also includes $175.9 billion for defense-related departments such as Homeland Security, the State Department, and Veterans Affairs. For more on military spending, see  War on Terror Costs, War in Iraq Costs and Economic Impact of 9/11. More

The Deficit

Bush and Obama added the most to the debt. Photo: Brendan Smialowski / Getty Images

The budget deficit will be $441 billion. That's the difference between $3.632 trillion in revenue and $4.073 trillion in spending. For more, see Deficit by President and Deficit by Year. More

How the Deficit Contributes to the National Debt

deficit vs debt
Each year's deficit adds to the debt. Photo: Image Source/Getty Images

Each year, the deficit adds to the U.S. debt, already more than $19 trillion. Over the long run, it's a tax on our children and grandchildren. This anticipated tax slows economic growth, like driving a car with the brakes on. That could be one reason why U.S. growth hasn't recoved strongly since the recession. Over the long run, a large debt weakens the dollar. That increase inflation in imports, and higher costs.

As the economy recovers, deficit spending should be curtailed to reduce the national debt burden. Of course, politicians who slice popular programs are usually cut, themselves, in the next election. More

Budget Process

budget process
The budget process to distribute your hard-earned cash is not being followed. Photo: Getty Images

The Executive Office of Management and Budget (OMB) prepares the budget. The President submits it to Congress on or before the first Monday in February. Congress responds with spending appropriation bills that go to the President by June 30. The President has ten days to reply.

Most important, the deadline for budget approval is September 30. If it isn't approved, the government can shut down, as it did in 2013 More

Compare to Earlier Budgets

4 Presidents
U.S. President George W. Bush (2R) shakes hands with President-elect Barack Obama (2L), as former President Bill Clinton (R), and former President George H.W. Bush (L) look on in the Oval Office January 7, 2009 in Washington, DC. Photo by Ron Sachs-Pool/Getty Images

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