Budget
Medicare, Social Security, defense and veterans, debt interest, plus assistance like stimulus checks and unemployment insurance accounted for 80.5% of spending. This includes funding distributed to states.
According to the National Priorities Project, the Federal Government reels in approximately $12,000 from every man, woman, and child annually. In the 2015 fiscal year, the federal budget was $3.8 trillion. “These trillions of dollars make up about 21 percent of the U.S. economy (as measured by Gross Domestic Product, or GDP).”
So where does this money go?
The U.S. Treasury disperses all federal spending into three groups: mandatory spending, discretionary spending, and interest on debts.
Mandatory Spendingtory spending looks like earned-benefit programs like Social Security, Medicare, and SNAP (food stamps). Their budgets are determined by eligibility criteria. These criteria or eligibility rules allow Congress to designate a program’s budget so that it can increase or decrease the budget every year. Mandatory spending consumes two-thirds of the total federal budget.
Discretionary Spending
Congress newly determines discretionary spending each year. Discretionary spending can vary from military programs to programs like Head Start (early childhood education). The programs’ budgets fluctuate. In 2015, Congress allocated $1.11 trillion to discretionary spending.
Interest on Debts
This group takes up the least room in all of the federal spending. “Interest on debt, which is a much smaller amount than the other two categories, is the interest the government pays on its accumulated debt, minus interest income received by the government for assets it owns (CBPP).” In other words, this group allocates spending for digging the Federal Government out of holes.
The Five
The allocated spending on each of these groups demonstrates clearly where the majority of our taxes go. According to the National Priorities Project’s analysis of mandatory and discretionary spending, the largest chunks of spending go to these groups:<
- Military (Discretionary)
- Social Security, Unemployment, and Labor (Mandatory)
- Medicare and Health (Mandatory)
- Government (Discretionary)
- Education (Discretionary)
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The government spends huge amounts of money each year on our behalf. In 2019−20, on the eve of the COVID-19 pandemic, UK government spending was almost £890 billion, or around £13,200 per person. This was equivalent to about 40% of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more – around the average for the post-war period. Following the onset of the pandemic, spending spiked sharply, rising to its highest level as a share of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more since the First and Second World Wars.
The total amount of money that the government spends each year is called total managed expenditure (TME). This can be broken down into a number of broad components. Around two-thirds of the total is ‘day-to-day’ spending on public services, such as the NHS, schools and prisons. Around a quarter of all spending is on social security, such as universal credit and the state pension. The remainder can be split into government investment (around 5% of the total) and (net) interest costs on government debt (around 3% of the total). The chart below shows how spending on each of these components has changed over time. One notable trend is a more than doubling of social security spending as a share of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more. Another is the steady reduction in net debt interest costs as a share of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more over the past 40 years.
Another way to break down overall spending is into areas, or ‘functions’, of government. This is done in the pie chart below. Health spending is the largest single area of government spending, representing almost £1 in every £5 spent. The next-largest areas are social security spending on pensioners (largely the state pension), social security spending on working-age adults and children (including universal credit and disability benefits) and spending on education. Together, health, social security and education account for more than half of all spending.
The major trend of the past 70 years has been a steady increase in the share of government spending devoted to health and a corresponding decrease in the share devoted to defence. Between 1955−56 and 2019−20, health increased from 7.7% to 18.5% of total spending. This rise was more than offset by a fall in defence spending from 20.9% to 4.8% of the total (shown in the chart below). In contrast, spending on education was largely stable.
We see similar trends if we instead look at spending as a share of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more, as in the table below. Health spending has grown steadily to account for an ever-increasing share of GDPGross domestic product (GDP) is a measure of an economy’s size. It is the monetary value of all market production in a particular area (usually a country) in a given period (usually a year).Read more, while education spending has been relatively stable. At the same time, the share devoted to spending on defence has fallen, as has the share devoted to spending on a number of other areas (notably housing and net debt interest costs). The broad picture is that of a state increasingly focused on providing healthcare, long-term (social) care and pensions to the elderly – a trend that is likely to continue as the population ages.