For fiscal year 2015, the U.S. government plans to spend $3.901 trillion. Nearly two-thirds, or $2.458 trillion, goes toward Mandatory spending like Social Security, Medicare and Military Retirement programs. These are estimates of how much it will cost to fulfill programs established by Congress. This is in addition to the $252 billion that will be spent on interest payments on the national debt.
The rest, called Discretionary spending, is negotiated between the President and Congress each year. The President's budget proposes that $1.186 trillion be appropriated to run the rest of the Federal government. Nearly two-thirds of that goes toward military spending. (Source: Office of Management and Budget, FY 2014 Budget, Table S-5)
Before the recession, the Executive Office of Management and Budget (OMB) kept Federal spending below 20% of GDP each year. This meant spending only grew as fast as the economy, which was about 3% per year.
Thanks to the recession, spending reached a peak of 24.3% of GDP in FY 2012. That's because growth slowed at the same time spending increased to stimulate the economy and engage in two overseas wars. Congress grew concerned about the ballooning U.S. debt, but couldn't agree on which programs to cut. They finally forced themselves into a 10% budget cut, called sequestration, that reduced spending to 21.4% of GDP.
Mandatory Spending Is the Largest Portion:
Mandatory spending is required by Federal law that's been already enacted by Congress. It includes:
- Senior programs, such as Social Security ($896 billion) and Medicare ($526 billion).
- Income support programs such as Medicaid ($336 billion), Food Stamps, Unemployment Compensation, Child Nutrition, Child Tax Credits, Supplemental Security for the blind and disabled, and Student Loans.
- Other Retirement and Disability programs for Civil Servants, the Coast Guard and the Military.
- It also included the TARP program, and a credit from health care reform starting in FY 2011.
The amount for Mandatory programs is increasing thanks to the huge number of Baby Boomers who are reaching retirement age. The two major senior programs, Social Security and Medicare, went from 28% of the budget in FY 1988 to 36% of the budget in FY 2015.
By FY 2023, the OMB projects that these two programs alone will rise to 40% of total spending. That's because of changing demographics, which increases Social Security spending. It's also a result of the recession, which has caused more people to live in poverty That's increases spending on Medicare and other assistance programs.
Interest Payments on the National Debt:
One of the fastest growing expenses is interest payments on the national debt. In FY 2015, it was just 6.5% of total spending, but that's $252 billion -- enough to pay for ten Justice Departments. By 2024, it will quadruple to $812 billion, eating up 14% of total spending. It will be third largest budget item after Social Security ($1.496 trillion) and Medicare ($863 billion). (Source: OMB FY 2015 budget, Table S-5)
Discretionary Spending Is Negotiated by Congress and the President:
Just 39% of the budget is Discretionary, That portion is governed by the appropriations that are passed each year. Military spending, at $756.4 billion, is greater than all other departments combined. This includes:
- Defense Department: $495.6 billion.
- War in Afghanistan: $85.4 billion.
- Departments that support Defense: Veterans Administration ($65.3 billion), the State Department ($42.6 billion), Homeland Security ($38.2 billion), FBI and Cybersecurity ($17.6 billion), and the National Nuclear Security Administration ($11.7 billion).
The next largest department, Health and Human Services ($73.7 billion), is just 1/10 of defense. Other important federal government functions get even less:
- Education: $68.6 billion.
- Housing and Urban Development: $32.6 billion.
- NASA: $17.5 billion.
- Justice: $9.7 billion.
Article updated April 6, 2015
Understand the Current Federal Budget:
- Economic Report of the President
- Current Federal Budget Breakdown
- Revenue and Taxes
- Current Deficit