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What is the U.S. Budget and Where does the Money Go?

The U.S. budget is a financial blueprint guiding the nation's spending and revenue collection. It allocates funds to defense, healthcare, education, and welfare, reflecting the government's priorities. Taxpayer dollars fuel this intricate system, ensuring public services and national growth. Wondering how these decisions impact your daily life? Let's explore the intricate flow of America's financial resources together.
L. S. Wynn
L. S. Wynn
L. S. Wynn
L. S. Wynn

The actual payments made by the U.S. government in 2002 amounted to just over two trillion dollars - that's 2,000 billion dollars! We have taken a close look at the budget and pulled out some of the major categories to give you an idea of the allocations. The amounts below are in millions of dollars (1,000,000). See the "notes" section below for further descriptions of the categories.

category millions of dollars
Social security 456,413 United States Budget: Social security
National defense 348,555 United States Budget: National defense
Medicare 230,855 United States Budget: Medicare
Health 196,545 United States Budget: Health
Interest 170,951 United States Budget: Interest
Other 97,794 United States Budget: Other
Fed. employee retirement 83,193 United States Budget: Federal employee retirement
Education/soc. services 70,544 United States Budget: Education and Social services
Transportation 61,862 United States Budget: Transportation
Veterans services 50,984 United States Budget: Veterans services
Unemployment 50,645 United States Budget: Unemployment
Administration of justice 34,316 United States Budget: Administration of justice
Food assistance 33,228 United States Budget: Food assistance
Natural resources 29,454 United States Budget: Natural resources
International affairs 22,357 United States Budget: International affairs
Agriculture 22,188 United States Budget: Agriculture
General government 17,385 United States Budget: General government
Space flight 13,473 United States Budget: Space flight
Community development 12,991 United States Budget: Community development
General science 7,242 United States Budget: General science

Notes:

  • Social Security: Disability Insurance (DI) and Social Security payments.
  • National defense: military personnel, operations, procurement, research.
  • Medicare: Hospital Insurance (HI), Supplementary medical insurance (SMI).
  • Health: Medicaid grants, National Institute of Health, health care services.
  • Interest: interest payments on government debt.
  • Other: all other payments not specifically listed in this chart.
  • Federal employee retirement: Federal employee retirement, disability, and related programs.
  • Education/social services: public broadcasting, library of congress, education expenses, financial aid for students.
  • Transportation: administration, maintenance and building of transportation infrastructure.
  • Veterans services: Financial and medical aid for veterans.
  • Unemployment: unemployment insurance.
  • Administration of justice: law enforcement, border control, prison system.
  • Food assistance: food stamps and child nutrition programs.
  • Natural resources: pollution control, land management, recreational resources.
  • International affairs: international security assistance, humanitarian assistance, State department.
  • Agriculture: Farm subsidies, research, programs.
  • General government: central fiscal operations, general government expenses.
  • Space flight: procurement, operations, research and supporting activities.
  • Community development: disaster relief, community programs, Indian programs.
  • General science: Basic research funding through National Science Foundation and Department of Energy (does not include space research).

Frequently Asked Questions

What is the U.S. federal budget, and how is it created?

The U.S. Congress is said to have the "power of the purse" because it must approve the federal budget.
The U.S. Congress is said to have the "power of the purse" because it must approve the federal budget.

The U.S. federal budget is a financial plan that outlines the government's expected revenue and expenditures for the upcoming fiscal year. The process begins with the President submitting a budget request to Congress, which includes proposed spending for various federal agencies and programs. Congress then reviews, modifies, and passes budget resolutions, which are reconciled into appropriations bills that allocate specific funding. The President signs these bills into law, finalizing the budget.

Where does the U.S. government get its revenue?

Money from the U.S. budget funds military operations.
Money from the U.S. budget funds military operations.

The U.S. government primarily generates revenue through taxation, including individual income taxes, payroll taxes for Social Security and Medicare, corporate income taxes, and excise taxes. According to the Congressional Budget Office, individual income taxes are the largest source of federal revenue, accounting for about half of the total revenue. Payroll taxes are the second-largest source, followed by corporate income taxes and other sources.

What are the largest categories of spending in the U.S. budget?

National parks and memorials, such as Mount Rushmore, are funded through the U.S. federal budget.
National parks and memorials, such as Mount Rushmore, are funded through the U.S. federal budget.

The largest categories of U.S. federal spending include mandatory programs such as Social Security, Medicare, and Medicaid, which together consume over half of the budget. Defense spending is also a significant portion, accounting for a substantial part of discretionary spending. Interest on the national debt is another major expense, representing a growing share of the budget as the debt increases.

How does the U.S. budget deficit affect the economy?

Agricultural money often goes toward farm subsidies.
Agricultural money often goes toward farm subsidies.

A budget deficit occurs when the government's expenditures exceed its revenues in a fiscal year. This can affect the economy by leading to increased borrowing, which may raise interest rates and crowd out private investment. Over time, persistent deficits can contribute to a growing national debt, which may impose a burden on future generations and potentially limit the government's ability to respond to economic crises or invest in key areas.

Can the U.S. budget be balanced, and what are the challenges involved?

Social Security disability payments are part of the federal budget.
Social Security disability payments are part of the federal budget.

Balancing the U.S. budget is theoretically possible but presents significant challenges due to political, economic, and social factors. It would require either increasing revenue, decreasing spending, or a combination of both. However, cutting spending on popular programs or raising taxes can be politically difficult. Additionally, economic downturns can reduce revenue and increase demand for government services, making it harder to achieve a balanced budget.

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Discussion Comments

anon299597

I am 14 years old and I understand why all of this money is being put toward these different categories but what about different schools? Why not just send money to the schools that really need it, to those that don't have not enough books for everyone? What's the point of you suggesting/telling us what you're going to do for me? They're telling us all these lies.

I know it might take some time, but five years is enough. I need change. I do well in school, but I'm not getting any reward for it, meaning why don't I have new books when I go to the next grade? I want a teacher who is going to want to be there to teach, not because they need money and they need to pay bills, and not a teacher who's going to give up on me.

So right now I'm trying to be the voice of students, and not just students, but kids all over the world who are not strong enough to stand up for themselves. I want to be their voice. We as children want to be heard and we want to tell adults what we need to grow up and be productive adults and be successful. I'm a student who's not afraid to make a change.

anon167579

How much money does the US give Guam? Let's see a list of pork going to the states.

Fiorite

@ Chicada- I would have to agree with you. Recent info from the CBO states that a repeal of the health care bill would actually lead to an increase in the deficit equal to .5% of the GDP. at the current GDP ($14+ trillion) that is the equivalent of $70 billion dollars a year, and would equal $90 billion a year in five. That would also erase a reduction of $145 to $240 billion in budget savings depending on whether some of the provisions in the bill were extended. Repeal would be the worst thing for the US budget deficit, and would actually more than wipe out the savings created by Secretary of Defense Gates discretionary military cuts. Sometimes you have to take the rhetoric from politicians with a grain of salt and rely on good old math. Math always tells the truth.

chicada

@ submariner- I personally think that your statements are foolish. I would like to point out that the budget and what is spent are two different things. A balanced budget would be when fiscal year outlays equaled receipts.

In 2009, the total receipts were a little over 2.1 trillion dollars, while spending was just over 3.5 trillion dollars. This left a deficit of about 1.4 trillion dollars for FY 2009. The biggest segments of budget spending were defense (23% of spending), Social Security (20% of Spending), and medicare/medicaid (19% of spending). All other mandatory and discretionary spending accounts for less than 30% of federal spending.

If real inroads are going to be made in balancing the Federal budget than the first three areas are where the cuts and restructuring need to occur. The Health care overhaul is a weak overhaul, but it is a step in the right direction. The truth is that everyone will need to sacrifice something to make this country competitive again.

submariner

I think that the health care bill needs to be repealed to help balance the budget. It is going to be one of the most costly blunders in American history, and it is an example of the federal budget overstepping its boundaries (mandating coverage). I hope the repeal goes through so we can move toward balancing the US Federal Budget.

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    • The U.S. Congress is said to have the "power of the purse" because it must approve the federal budget.
      The U.S. Congress is said to have the "power of the purse" because it must approve the federal budget.
    • Money from the U.S. budget funds military operations.
      By: daughter
      Money from the U.S. budget funds military operations.
    • National parks and memorials, such as Mount Rushmore, are funded through the U.S. federal budget.
      By: reb
      National parks and memorials, such as Mount Rushmore, are funded through the U.S. federal budget.
    • Agricultural money often goes toward farm subsidies.
      By: sima
      Agricultural money often goes toward farm subsidies.
    • Social Security disability payments are part of the federal budget.
      By: Roman Milert
      Social Security disability payments are part of the federal budget.