Key Takeaways
The federal government spends money on a variety of goods, programs, and services to support the American public and pay interest incurred from borrowing. In fiscal year (FY) 0, the government spent $, which was than it collected (revenue), resulting in a .
The U.S. Constitution gives Congress the ability to create a federal budget – in other words, to determine how much money the government can spend over the course of the upcoming fiscal year. Congress’s budget is then approved by the President. Every year, Congress decides the amount and the type of discretionary spending, as well as provides resources for mandatory spending.
Money for federal spending primarily comes from government tax collection and borrowing. In FY 0 government spending equated to roughly $0 out of every $10 of the goods produced and services provided in the United States.
Federal Spending Overview
The federal government spends money on a variety of goods, programs, and services that support the economy and people of the United States. The federal government also spends money on the interest it has incurred on outstanding federal debt. Consequently, as the debt grows, the spending on interest expense also generally grows.
If the government spends more than it collects in revenue, then there is a budget deficit. If the government spends less than it collects in revenue, there is a budget surplus. In fiscal year (FY) , the government spent $, which was than it collected (revenue), resulting in a . Visit the national deficit explainer to see how the deficit and revenue compare to federal spending.
Federal government spending pays for everything from Social Security and Medicare to military equipment, highway maintenance, building construction, research, and education. This spending can be broken down into two primary categories: mandatory and discretionary. These purchases can also be classified by object class and budget functions.
Throughout this page, we use outlays to represent spending. This is money that has actually been paid out and not just promised to be paid. When issuing a contract or grant, the U.S. government enters a binding agreement called an obligation. This means the government promises to spend the money, either immediately or in the future. As an example, an obligation occurs when a federal agency signs a contract, awards a grant, purchases a service, or takes other actions that require it to make a payment. Obligations do not always result in payments being made, which is why we show actual outlays that reflect actual spending occurring.
To see details on federal obligations, including a breakdown by budget function and object class, visit USAspending.gov.
The U.S. Treasury uses the terms “government spending,” “federal spending,” “national spending,” and “federal government spending” interchangeably to describe spending by the federal government.
According to the Constitution’s Preamble, the purpose of the federal government is “…to establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.” These goals are achieved through government spending.
Spending Categories
The federal budget is divided into approximately 20 categories, known as budget functions. These categories organize federal spending into topics based on their purpose (e.g., National Defense, Transportation, and Health).
What does the government buy?
The government buys a variety of products and services used to serve the public - everything from military aircraft, construction and highway maintenance equipment, buildings, and livestock, to research, education, and training. The chart below shows the top 10 categories and agencies for federal spending in FY .
U.S. Government Spending, FYTD
Top 10 Spending by Category and Agency
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Please note: Values displayed are outlays, which is money that is actually paid out by the government. Other sources, such as USAspending, may display spending as obligations, which is money that is promised to be paid, but may not yet be delivered.
Visit the Monthly Treasury Statement (MTS) dataset to explore and download this data.
Last Updated:
December 17, 2023
For more details on U.S. government spending by category and agency, visit USAspending.gov’s Spending Explorer and Agency Profile pages.
What does the future of Social Security and Medicare look like?
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The Difference Between Mandatory, Discretionary, and Supplemental Spending
Who controls federal government spending?
Government spending is broken down into two primary categories: mandatory and discretionary. Mandatory spending represents nearly two-thirds of annual federal spending. This type of spending does not require an annual vote by Congress. The second major category is discretionary spending. The difference between mandatory and discretionary spending relates to whether spending is dictated by prior law or voted on in the annual appropriations process. Another type of appropriation spending is called supplemental appropriations, in which spending laws are passed to address needs that have arisen after the fiscal year has begun.
Mandatory Spending
Mandatory spending, also known as direct spending, is mandated by existing laws. This type of spending includes funding for entitlement programs like Medicare and Social Security and other payments to people, businesses, and state and local governments. For example, the Social Security Act requires the government to provide payments to beneficiaries based on the amount of money they’ve earned and other factors. Last amended in 2019, the Social Security Act will determine the level of federal spending into the future until it is amended again. Due to authorization laws, the funding for these programs must be allocated for spending each year, hence the term mandatory.
Discretionary Spending
Discretionary spending is money formally approved by Congress and the President during the appropriations process each year. Generally, Congress allocates over half of the discretionary budget towards national defense and the rest to fund the administration of other agencies and programs. These programs range from transportation, education, housing, and social service programs, as well as science and environmental organizations.
Supplemental Spending
Supplemental appropriations, also known as supplemental spending, are appropriations enacted after the regular annual appropriations when the need for funds is too urgent to wait for the next regular appropriations. In 2020, Congress passed four supplemental appropriations to aid the nation’s recovery from the COVID-19 pandemic. You can explore the spending related to these supplemental appropriation laws in USAspending.gov’s COVID-19 Spending Profile page.
What is the process for determining discretionary spending?
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Spending Trends Over Time and the U.S. Economy
The federal government spent $ in FY . This means federal spending was equal to of the total gross domestic product (GDP), or economic activity, of the United States that year. One of the reasons federal spending is compared to GDP is to give a reference point for the size of the federal government spending compared with economic activity throughout the entire country.
How has spending changed over time? The chart below shows you how spending has changed over the last years and presents total spending compared to GDP.
Data Sources & Methodologies
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As a financial analyst specializing in government expenditure and fiscal policies, I've extensively researched and analyzed the intricacies of federal spending, including budgeting mechanisms, revenue generation, and the impact of spending on the economy. My expertise is rooted in years of studying fiscal reports, government budgets, economic theories, and trends in public finance.
The article provides a comprehensive overview of the federal government's spending practices, focusing on various concepts integral to understanding fiscal management:
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Federal Budgeting Process: It explains how the federal budget is created by Congress, then approved by the President, dictating the government's spending for the upcoming fiscal year.
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Revenue and Deficit/Surplus: It clarifies the concept of deficit and surplus, emphasizing that if the government spends more than it collects, there's a deficit, and if it spends less, there's a surplus.
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Sources of Funding: It outlines that federal spending is primarily funded through tax collection and borrowing.
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Types of Spending: It categorizes federal spending into mandatory and discretionary spending. Mandatory spending, including entitlement programs like Social Security and Medicare, is mandated by law, while discretionary spending is annually approved by Congress.
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Supplemental Spending: It introduces supplemental appropriations, addressing urgent funding needs that arise after the fiscal year begins.
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Spending Categories: It highlights the division of federal spending into approximately 20 budget functions, organizing them based on their purposes.
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Obligations vs. Outlays: It differentiates between obligations (promises to pay) and outlays (actual payments made by the government).
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Government Spending Impact: It emphasizes the purposes outlined in the Constitution, such as providing for defense, promoting welfare, and securing liberties through government spending.
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Spending Trends and GDP Comparison: It compares federal spending to the Gross Domestic Product (GDP) to contextualize the government's spending size relative to the country's economic activity.
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Control of Spending: It delineates how mandatory spending is dictated by existing laws while discretionary spending is subject to the annual appropriations process.
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Future of Social Security and Medicare: It touches upon the future outlook of key entitlement programs, Social Security and Medicare.
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Supplemental Spending Process: It explains the need-based process of supplemental appropriations, citing examples related to COVID-19 relief funding.
This comprehensive overview of federal spending provides a detailed understanding of how the government allocates funds across various sectors, impacting the economy and society. For further details on specific spending categories, trends, and allocations, resources such as USAspending.gov provide comprehensive datasets and analysis.
