The Numbers: How does the federal government spend its money?
About 55 percent of federal government spending in fiscal 2010 was mandatory, covering all expenditures that are controlled by laws other than appropriations acts (see figure 1). Almost all such spending is for entitlements, expenditures for which depend on individual eligibility and participation, and which are funded at whatever level is needed to cover the resulting costs. Just under 40 percent of spending in fiscal 2010 was discretionary, covering activities that Congress must reauthorize each year. The remainder went to pay interest on the national debt.
- Mandatory spending has claimed a much larger share of the federal budget over the past four decades, more than doubling from about one-fourth of federal spending in 1962 to just over half today (see figure 2). In contrast, the share of the budget going for discretionary spending has fallen from two-thirds in 1962 to about two-fifths now. Interest on the national debt has fluctuated over the period: it climbed from 6 percent in 1962 to more than 15 percent in the mid-1990s, fell to about 7 percent in the early 2000s, and has fluctuated more recently as interest rates have fallen to historically low levels. Debt service accounted for just 5 percent of federal spending in 2010, the lowest level in nearly 50 years.
- About half of fiscal 2010 discretionary spending paid for defense, and most of the rest went for domestic programs such as agricultural subsidies, highway construction, and the federal courts (see figure 3). Only 3 percent of discretionary spending funded international activities, such as foreign aid.
- Social Security claimed one-third of mandatory spending in fiscal 2010 (see figure 4). Medicare and Medicaid took up 25 percent and 13 percent, respectively. The remaining 29 percent covered income security programs (such as food stamps), retirement and disability programs (including pensions for federal retirees), and other programs.