Graph of the Day: Where Does the Money Go?

By Michael Diedrich, Policy Associate, December 8, 2011 at 12:45 pm

Many past Graphs of the Day have looked at our taxes: who pays how much of what kind to whom and so on. Today we're going to shift to what happens after those taxes get collected.

(click blog title to view graph)
(Data from CBO)

This is how our tax money was invested by the federal government in 2010. Beyond net interest, there are two broad categories to consider.

The first is discretionary spending, the areas the government chooses to invest in. Over half of this is defense spending (and, yes, this includes the wars in Iraq and Afghanistan; 2010 was the first year those payments were incorporated into these figures; for context, the two wars were responsible for 4% of total federal spending between 2001 and 2007).

The other half of discretionary spending is split between domestic and international investments, with a heavy emphasis on domestic work. Anything the government's going to do to stimulate the economy using fiscal policy is going to come from this black slice.

The other major category of spending is mandatory spending. These are payments that government is committed to through pre-existing programs. The two biggest chunks are Social Security and health spending in the form of Medicare and Medicaid. For as much as people have harped about Social Security, however, it's the coming expansion in Medicare and Medicaid brought on by the aging of the baby boomers that's going to bring the hurt to the budget in the long run.

Welfare payments of various sorts, as well as other mandatory programs, all get rolled into that orange slice of “Other Mandatory Spending.”

It's worth noting that this is not the budget of a socialized government. A big chunk of that defense spending and other discretionary spending will go to private contractors. Social Security checks will purchase things from private businesses, and many Medicare/Medicaid payments will make their way to private firms. We've already seen that how little actual redistribution takes place. Any conservative complaints about socialism should be confronted with the facts.

Posted in Fiscal Policy | Related Topics: Graphs  Federal Government  Income Tax