How Are Our Federal Tax Dollars Spent?

Denise Chow
Life’s Little Mysteries Staff Writer
Thu Apr 15, 2010

We all grumble about having to pay taxes, but few people really know how the government spends that money. Where do our tax dollars really go?

In fiscal year 2008, federal government spending reached $3 trillion, which is roughly 21 percent of the country’s gross domestic product (GDP). Of that amount, more than $2.5 trillion was financed by federal tax revenues collected by the government. The remaining $459 billion was financed by government borrowing to make up for the budget deficit, which occurs when total government expenditure exceeds total tax revenue in a given year. [Graphic details spending]

Three main areas each accounted for approximately one-fifth of the budget, while two sections of spending each made up about one-tenth, and the remaining fifth of the budget was used to finance a variety of programs. According to the Center on Budget and Policy Priorities, here are the most expensive programs:

  • Defense and international security: In fiscal year 2008, $625 billion, or roughly 21 percent of the government budget was spent on the military and other initiatives to protect the nation. This figure also includes the cost of supporting American operations in Iraq and Afghanistan.
  • Social Security: An additional 21 percent of the budget, equal to about $617 billion, was earmarked for Social Security, one of the largest government programs in the world. Social Security provides retirement benefits, survivors’ benefits anddisability benefits to millions of retired or disabled workers, or surviving children and spouses of deceased workers.
  • Medicare, Medicaid and CHIP: In 2008, $599 billion, or 20 percent of the government budget, was used to finance threehealth insurance programs – Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). Approximately $391 billion went to Medicare, which provides health coverage to people who are over the age of 65 or who meet other criteria such as disability. The remaining amount helped to finance Medicaid and CHIP, which provide health care or long-term care to low-income children, parents and seniors and people with disabilities. Both the Medicaid and CHIP programs involve the federal government matching payments made by the state.
  • Safety net programs: The federal government supports so-called safety net programs that provide aid (other than, or in addition to health insurance and/or Social Security benefits) to individuals and families in need. Safety net programs accounted for approximately 11 percent of the 2008 federal budget, which equaled $313 billion. According to the Center on Budget and Policy Priorities, safety net programs include: the refundable portion of the earned-income and child tax credits; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income; various forms of in-kind assistance for low-income families and individuals, including food stamps, school meals, low-income housing assistance, child-care assistance, and assistance in meeting home energy bills; and various additional programs that assist at-risk individuals and families.
  • Interest on the national debt: For every dollar that taxpayers send to the federal government, about a dime goes toward paying interest on the national debt. The federal government is required to make regular interest payments on money it has borrowed to close past budget deficits. This borrowed money makes up the national debt, which currently exceeds $12 trillion. In fiscal year 2008, interest payments accounted for 8 percent of the budget, or roughly $253 billion.

The remaining fifth of federal government spending goes toward financing a variety of other programs and public services, including: providing benefits and health care to veterans and retired federal employees; investing in education, scientific and medical research, and basic city infrastructure such as roads, bridges and airports. A small amount – about 1 percent – went to non-security international programs, including those that provide humanitarian aid.

12 responses to “How Are Our Federal Tax Dollars Spent?

  1. btw, I don’t believe this chart. I’ve seen budget charts for the US federal gov showing our defense spending is HALF of all spending, not 1/5.

    just saying

  2. Well we spend about half of all military expenditures in the world:

    World military exp

    But it’s all murky, since some stats don’t count Iraq and Afghan costs and I have read several places that last year military expenditures topped $1Trillion, so it seems to depend on what they include in the basket.

    Since the image is cut off on the page, see the whole one at:

  3. Claudia, will you PLEASE tell me how to upload a pic in a comment?

    Otherwise, in response to John, and to add to this discussion, see my new post, US Spending Priorities.

    Or, lemme try this:

  4. Pingback: US Spending Priorities « COTO Report

  5. And I found more info too: see Defense Spending Is Much Greater than You Think: more than $1Trillion a year which also has a good graphic

    • right! Damn, I forgot to use that source before I posted this at another site. I can update my new post here at COTO.

      thx for the reminder.

  6. Pingback: 2010 US Spending Priorities: 58% to Military : Infowars Ireland

  7. Pingback: Militant Libertarian » More than 50% of US Government Spending Goes to the Military

  8. Pingback: More than 50% of US Government Spending Goes to the Military! « Socio-Economics History Blog

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