Current US Federal Government Spending
How Congress Really Spends Your Money
Current U.S. government spending is $4.746 trillion. That's the federal budget for fiscal year 2020 covering October 1, 2019, to September 30, 2020. It's 21% of gross domestic product according to the .
Before the recession, the government kept federal spending below 20% of GDP. It grew no faster than the economy, around 2% to 3% per year. During 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. Since then, spending has crept up again despite the sequester.
Government Spending: Where the Money Goes
Almost two-thirds of federal spending goes toward Social Security, Medicare, and Medicaid. These are part of mandatory spending. Those are programs established by prior Acts of Congress. The mandatory budget will cost $2.841 trillion in FY 2020. It's skyrocketing because more baby boomers are reaching retirement age. By 2030, one in five Americans will be older than 65.
Social Security costs the most at $1.102 trillion. Current payroll taxes provide $949 billion of the income. Interest from the Social Security Trust Fund pays for the rest. But the costs will outpace interest and income by 2034. That means Social Security benefits will drain the general fund. It also means Congress can no longer "borrow" from the Social Security Trust Fund to pay for other federal programs.
Medicare ($679 billion) and Medicaid ($418 billion) are the next largest expenses. Medicare taxes pay for $289 billion of its cost. The rest comes from the general fund.
The following mandatory programs cost $642 billion:
- Income support programs like food stamps, , Child Nutrition, Child Tax Credits, Supplemental Security Income, and Student Loans. Unemployment insurance taxes pay for $46 billion of its cost. Contrary to popular opinion, welfare programs are not the biggest cause of government spending.
- Retirement and disability programs for civil servants, the Coast Guard, and the military.
Interest Payments on the National Debt
In FY 2020, interest payments on the national debt are estimated at $479 billion. That's enough to pay for 10 Justice Departments. It's also one of the fastest growing expenses. By 2029, it will more than double to $823 billion, becoming the third-largest budget item after Social Security and Medicare. It's not a mandatory program, but it must be paid to avoid a U.S. debt default. These estimates will increase as interest rates continue rising.
Discretionary spending is $1.426 trillion. It pays for everything else. Congress decides how much to appropriate for these programs each year. That means it's the only government spending that Congress can cut.
There is an additional fund for emergencies. Congress allocates this outside of the budget subject to sequestration. For FY 2020, the emergency fund is $200.1 billion. The largest component is Overseas Contingency Operations that pay for wars.
Once you include the OCO fund, then military spending is $989 billion. It's spread out among different agencies and budget categories, so you must add it all together. It includes:
- Defense Department base budget: $576 billion.
- DoD Overseas Contingency Operations: $174 billion.
- Departments that support defense: $212.9 billion. They include the Department of Veterans Affairs, State Department, Homeland Security, FBI and Cybersecurity and the National Nuclear Security Administration.
- Emergency funding for support departments: $26.1 billion.
The next largest department, Health and Human Services ($89.6 billion) is less than one-tenth of total military spending. Its primary function is to spend mandated benefits for Medicare, Medicaid, and the Affordable Care Act. Other important federal government functions get even less funds.