How the U.S. Federal Government Spend Tax Money:
You know that all U.S. citizens must pay taxes that are then collected by the United States federal government. In recent years, the federal government has been spending more money than it collects, which contributes to a federal deficit and national debt. So what exactly does the government spend on?
In general, there are two types of spending: mandatory and discretionary. Mandatory spending refers to federal spending that is not changed by Congress from fiscal year to fiscal year. They usually depend on the number of people eligible for programs that fall under the mandatory spending category. On the other hand, discretionary spending usually requires an appropriations bill, which if it is approved by Congress, allocates part of the discretionary spending portion of the federal budget for certain activities like foreign aid. Discretionary spending can have different funding levels every fiscal year as, unlike mandatory spending, it must be approved by the President and Congress.
Health programs like the CHIP (Children’s Health Insurance Program), Medicaid, and Medicare. Individual states are required to match payments for Medicaid and CHIP, so about 60% of the federal health program budget. These health programs, in total, make up 25% of the federal budget in 2019.
About 23% of the 2019 federal budget is put towards Social Security payments for retirement, disability payments, and survivors’ benefits. Social Security is included as mandatory spending in the federal budget, and its funding is dependent on the number of eligible recipients
9% of the 2019 federal budget is also allocated towards safety net programs. These programs are for families in the low to mid-income range who don’t otherwise qualify for any of the major health programs or Social Security. Examples of these programs include food stamps, housing assistance for low-income, abused or neglected children programs, and insurance for unemployment.
When the federal government spends more money than it has, it borrows money from other countries to reduce the federal deficit. When the government borrows money, it adds to the national debt, which means that they must pay a certain amount of interest every year. In 2019, the government spent about 8% of the total budget on interest.
The rest of the federal budget is usually put towards discretionary spending. This can include benefits for veterans, education, national defense, and scientific or medical research. All in all, understanding how your tax dollars are used by the federal government is an important step to being an informed citizen.
Written by Allie Chang