Policy Basics: Where Do Our Federal Tax Dollars Go? (ccpp.org)

[pinto]

Policy Basics: Where Do Our Federal Tax Dollars Go?
Center on Budget and Policy Priorities
Updated December 4, 2009

The federal government collects taxes in order to finance various public services. As policymakers weigh key decisions about revenues and expenditures, it is instructive to examine the recent usage of federal tax dollars.

In fiscal year 2008, the federal government spent $3 trillion, amounting to 21 percent of the nation’s Gross Domestic Product (GDP). While 2008 expenditures — as a share of GDP — slightly exceeded those of recent years, they roughly equaled the average for the last three decades. Of that $3 trillion, more than $2.5 trillion was financed by federal tax revenues. The remaining $459 billion was financed by borrowing; this deficit will ultimately be paid for by future taxpayers. (See box on below for the recession’s impact on the budget.) As shown in the graph below, three major areas of spending each made up about one-fifth of the budget:

■ Defense and international security: In 2008, some 21 percent of the budget, or $625 billion, went to pay for defense and security-related international activities. The bulk of the spending in this category reflects the underlying costs of the Department of Defense and other security-related activities. The total also includes the cost of supporting operations in Iraq and Afghanistan, for which Congress appropriated approximately $188 billion in 2008 (note that this amount represents funding, not actual spending).

■ Social Security: Another 21 percent of the budget, or $617 billion, went to Social Security, which provided retirement benefits averaging $1,041 per month to 35 million retired workers (and their eligible dependents) in September 2008. Social Security also provided survivors’ benefits to 6.4 million surviving children and spouses of deceased workers and disability benefits to 9.1 million disabled workers and their eligible in September 2008.

■ Medicare, Medicaid, and CHIP: Three health insurance programs — Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) — together accounted for 20 percent of the budget in 2008, or $599 billion. Nearly two-thirds of this amount, or $391 billion, went to Medicare, which provides health coverage to around 45 million people who are over the age of 65 or have disabilities. The remainder of this category funds Medicaid and CHIP, which in a typical month in 2008 provide health care or long-term care to about 55 million low-income children, parents, elderly people, and people with disabilities. Both Medicaid and CHIP require matching payments from the states.



Two other categories each accounted for about one-tenth of federal spending:

■ Safety net programs: About 11 percent of the federal budget in 2008, or $313 billion, supported programs that provide aid (other than health insurance or Social Security benefits) to individuals and families facing hardship.
These programs include: the refundable portion of the earned-income and child tax credits, which assist low- and moderate-income working families through the tax code; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income for the elderly or disabled poor and unemployment insurance; 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 other programs such as those that aid abused and neglected children.

A Center analysis shows that such programs lifted approximately 15 million Americans out of poverty in 2005 and reduced the depth of poverty for another 29 million people.

■ Interest on the national debt: The federal government must make regular interest payments on the money it has borrowed to finance past deficits — that is, on the national debt, which reached $5.8 trillion by the end of fiscal 2008. In 2008, these interest payments (net of some interest income) claimed $253 billion, or a little more than 8 percent of the budget.

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[Lydia Leftcoast]

1. The picture looks different if you take SS and Medicare out

which is a legitimate approach, since they have a separate funding source than the rest.

SS was not included in the budget pie until the mid 1960s, when LBJ put it there to hide the true cost of the Vietnam War.

[Demeter]

7. Absolutely They Should Be Taken Out!

and their surpluses should be shown as the liabilities they are on the general budget.

The bastards have been making war and tax cuts for the obscenely wealthy with our retirements and health insurances for far too long.

[depakid]

2. Always interesting to do a compare & contrast with other nations

Australian use of tax dollars:

[TexasObserver]

3. Recommend. This is the kind of thread needed in GD.

I've got to where I come to LBN and Editorials for useful OPs.

Great graphic.

[CRH]

4. Must be a clash in terminology, ...

because I have read many times the cost of the defense establishment in its total including CIA, NSA, and other security services, was very near 50%.

Maybe the fifty percent figure is for the 'discretionary budget', after the so called entitlements have been removed from the total.

[Igel]

5. Precisely.

You have to remove a lot of the spending. It has dedicated funding sources--not that Congress has to be bound by those labels, and it pays to remember that a lot of FICA money goes to fund non-SS-related activities (at least for now) while Medicare gets general revenue money.

That's not an unreasonable step to take, because it shows, at least, that there's a lot of military spending compared to other discretionary things. Of course, interest on the national debt is dubbed "discretionary" in those terms.

Both are useful ways of looking at the numbers. And, to be honest, both should be looked at.

But what happens afterwards is that people forget the assumptions and then say, If we spend so much money on the military, why not cut military spending and put that money to the incredibly underfunded social and entitlement programs? Now, if you remove entitlement programs you get a skewed figure, with a lot of money going for guns and not much for people--but your conclusion is dictated by your decision to skew the numbers. Leave them in, and suddenly "people" is the single largest category and your argument sounds a bit specious.

[CRH]

6. Thanks for the clarity ... n/t