Where Do Our Tax Dollars Go?
From the Center on Budget and Policy Priorities:
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 budget deficit of $459 billion was financed by borrowing and, hence, will ultimately be paid for by future taxpayers. (The recession that began in December 2007 — and policies adopted in response to it — enlarged the budget deficit for fiscal year 2008 and will also impact the 2009 and 2010 deficits.)
As shown in the graph below, three major areas of spending each made up about one-fifth of the budget:
- Defense and 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 dependents of retirees) 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 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 provide health care or long-term care to more than 45 million low-income children, parents, elderly people, and people with disabilities. Both Medicaid and CHIP require matching payments from the states.