Breakdown of Government Spending

By Muffy Marracco , last updated July 6, 2011

Understanding the breakdown of government spending will help you gain an appreciation for where your tax dollars go. As with any budget, certain things are prioritized. You may be surprised to learn how much we spend on certain programs. It could be more or far less than you thought.

The government doesn’t just collect taxes to vex you every April. Those monies are used to finance a wide variety of public programs. In 2010, the federal government spent $3.5 trillion, which was 24 percent of the nation’s GDP (Gross Domestic Product). About $2.2 trillion of that comes from federal tax revenue. The $1.3 billion deficit is borrowed and adds to the national debt.

There are three segments that make up a large chunk of the budget, including defense and security spending, Social Security spending, and Medicare and Medicaid spending. About 20 percent of the budget - $705 billion dollars – went to defense. $170 billion of that went towards financing the ongoing wars in Iraq and Afghanistan. Another 20 percent, $707 billion, pays for Social Security. Social Security pays retirement benefits of about $1200 a month to over 34 million retired Americans. Social Security also pays benefits to almost 3 million spouses of retirees, over 6 million surviving spouses and children of deceased workers and over 10 million disabled workers. A little over 20 percent of the budget goes to Medicare, Medicaid and CHIP (Children’s Health Insurance Program). The combined cost of these health insurance programs is $732 billion. $452 billion of that goes to Medicare, which provides health coverage to 47 million Americans over the age of 65 or with disabilities. The rest goes to Medicaid and CHIP, which provides health care to about 60 million low-income people, including children, the elderly and people with disabilities. Medicaid and CHIP get matching payments from the states. Another 14 percent of the budget, $496 billion, went to programs that provide other forms of assistance to poor individuals and families. These programs include Supplemental Security Income for the elderly and the disabled, in-school meals, food stamps as well as housing and home energy bill assistance. Programs like these help keep millions of Americans from falling into poverty.

About 6 percent of the budget, or $196 billion, went towards interest payments on the national debt. The national debt was nearly $9 trillion in 2010. That is added to whenever tax revenues are not enough to meet the budgetary expenditures.

The last 18 percent of the budget is devoted to a variety of public programs. These include veterans’ benefits, food and drug safety, environmental protecting, infrastructure like roads and bridges and investments in education and scientific research. Just about one percent of the total budget is devoted to foreign humanitarian aid.

Although many people want a balanced budget or reduced deficits, and worry about the national debt, the public is often unwilling to hear about cuts to programs or tax increases. People appreciate the services and safety net that government alone can provide to a society. Large-scale projects like highways, national defense, and food and drug safety for all Americans are most easily undertaken at the national level by the government.

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