For fiscal year
2012, the U.S. Federal government received $2.450 trillion in revenue. Income taxes contributed the lion's share -- $1.132 trillion or 46.2%. Payroll taxes added 34.5%, as follows:
- Social Security - $570 billion
- Medicare -- $201 billion.
- Unemployment - $67 billion.
- Retirement -- $8 billion.
Corporate taxes added just $242 billion, or 9.8%. All other, including excise taxes, tariffs, and earnings on deposits at the Federal Reserve, contributed $215 billion.(Source: Office of Management and Budget, FY 2014 Budget
, Table S-5)
The government spent $3.537 trillion, less than the $3.7 trillion
originally budgeted. More than half went toward Mandatory programs
, such as Social Security, Medicare and Supplemental Security for the Disabled. These expenditures are mandated by law, and cannot be changed without an act from Congress. A whopping $225 billion was spent to pay the interest on the national debt
Mandatory programs cost $2.032 trillion, or 57.4% of the U.S. Federal budget. Social Security was by far the most expensive, at $768 billion. Medicare was $466 billion, while Medicaid was $251 billion. All other programs, such as Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, spent $548 billion. This included proposals enacted under the Economic Stimulus Act
, which added $35 billion. (Source: OMB, FY 2014 Budget, Table S-5)
Just over a third of spending, or $1.285 trillion, went toward Discretionary programs
. This percent will continue to decline because mandatory spending will only grow, leaving less money for all other government activities.This means there's less money that the President and Congress can appropriate each year.
Nearly half of that ($614 billion) was spent on all Federal government activities not related to defense. The largest non-security related departments ware: Health and Human Services ($78.3 billion), Education ($67.4 billion), Housing and Urban Development ($36.3 billion), Justice ($26.9 billion), and Agriculture ($23.7 billion). (Source: OMB, FY 2014 Budget, Table S-11)
Half of the Discretionary budget, or $671 billion, was spent on defense. This included $530.4 billion for the Department of Defense base budget
, and was an increase from the $528.3 billion spent in FY 2011. The budget focused on buying military equipment, including $2.2 billion in the nuclear weapons complex. It emphasized weapons research and cyber-security. Through some management and acquisition reforms, it planned to save $78 billion through 2016. Although that's a lot a money, it's still less than a 2% decrease in total security spending. It also included $126.5 billion in Overseas Contingency Operations, which paid for the War in Afghanistan.
Unlike prior year Obama budgets, this budget estimate did not include spending by other departments to support the DoD base budget. To accurately compare it to prior years, these things -- like the FBI (paid for by the Justice Department), the National Nuclear Security
Administration (paid for by the Department of Energy) -- should be included. That added an additional $153.6 billion. Prior year budgets also included Homeland Security ($39.9 billion) and the Veterans Administration ($58.7 billion). When all these are added, the true cost of military spending is $909 billion. (Source: FY 2012 Department of Defense Budget; OMB, FY 2014 Budget, Table S-10 & Table S-11).
Budget Deficit Started to Improve:
The budget deficit in FY 2012 came in at $1.087 trillion, less than the $1.327 trillion expected and the lowest deficit since the 2008 financial crisis. The deficit was lower than expected because revenues actually came in about $150 billion higher than forecast, while spending was roughly $150 billion lower. However, this deficit made the U.S. debt total more than annual economic output. This concerned many elected officials.
In the short term, deficit spending stimulates the economy. This is especially true if businesses are operating below capacity, and the spending focuses on activities that are efficient in creating jobs. To compare all U.S. budget deficits since the country began, see Federal Budget Deficit.
However, continued deficit spending puts downward pressure on the dollar's value. As the dollar declines, the price of imports increases, as does the risk of inflation. As the debt approaches 100% of GDP, it increases the expectation that this debt won't be paid until sometime in the distant future. This expectation of future taxes actually puts downward pressure on economic growth.
Budget Approval Process Complicated by Debt Ceiling Crisis:
The FY 2012 budget was approved in December 2011, just a few months past its September 30 deadline. However, the government almost came to a grinding halt in July, as a Republican majority
in the House of Representatives threatened to "Just Say No to the Debt Ceiling
. At issue was their desire to restrain Obama's excessive deficit spending
, which threatened to increase the debt to GDP ratio
However, the Gang of Six created a spending compromise plan that evolved into a deficit reduction committee that was charged with finding $1.2 trillion in savings. It met unsuccessfully in November. The budget passed without the savings, which just proves the following point: Talk about budget-cutting is popular, but actually cutting the budget doesn't get any politician elected. (Article updated April 15, 2013)
Compare to Other U.S. Federal Budgets