D.C. Decoder 101: How Washington spends your money
There's a lot of talk about cutting the US deficit but very little actual cutting of deficit. One reason? There's not much easy to cut. Decoder explains the six ways Washington spends money.
The federal government is the biggest spender in the US, and maybe the world. How big? So big that in 2011 Washington laid out a cool $3.6 trillion. (Not million, not billion, but trillion, with a “T”.) So big that its budget is equal to about 20 percent of the nation's entire gross domestic product. So big that if you’re like most citizens you have little idea exactly what it is that Uncle Sam is buying in your name.Skip to next paragraph
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Oh sure, you know generally that Social Security is expensive and the Pentagon isn’t cheap, and so on. But many Americans are unaware of the relative size of these and other general budget categories. Plus, despite what you may hear on cable news shout shows, there is no magic fount of wasteful spending the elimination of which will put the US budget in the black. Lazy bureaucrats? Too few. Foreign aid? Too small. Military bands? Please.
This doesn’t mean government operations don’t need to be efficient or effective. It does mean that the US budget is heavily entwined with the lives of the nation’s citizens. That’s why big cuts, however necessary to balance the budget, are so difficult for many politicians to make.
HEALTH CARE. As with many US family budgets, the largest single category of federal spending is “health.” Three big health programs – Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) – account for 21 percent of the $3.6 trillion 2011 federal budget, according to figures compiled by the Center on Budget and Policy Priorities (CBPP).
Of these, Medicare is the Big Kahuna. This program, which funds health care for the elderly and Americans with disabilities, accounts for two-thirds of federal health spending (about $486 billion), according to CBPP.
Medicaid provides health services for certain low-income people and families, and CHIP covers kids growing up in financially tight circumstances. Both are partly funded by states, as well as by Washington.
SOCIAL SECURITY. Just behind health is Social Security, which provides income benefits to retired folks, the disabled, and some other recipient categories. This program accounts for 20 percent of Washington’s budget, figures CBPP.
Social Security checks go out to a little more than 55 million people, according to the program’s own figures. Of these, 44 million are retirees or their dependents, and 10 million are disabled workers or their dependents.
For retirees, Social Security’s average monthly benefit at the beginning of 2012 was $1,230, according to the program.
DEFENSE. Defense used to be the biggest single item by far in the US accounts. In 1962, at the start of the cold war between the US and the Soviet Union, it accounted for 52 percent of US government spending. As recently as 1987, at the height of the Reagan-era military buildup, it was 30 percent of the budget, and still category No. 1.
But the end of the cold war enabled the US to pare back on some fixed military costs. The aging of the population and the dynamics of medical inflation have driven up health and Social Security expenditures. As a result, defense is now No. 3, by CBPP’s count. It’s also 20 percent of the US budget, but it’s a few billion bucks smaller than the Social Security program.