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In 2016, the U.S. government spent $3.9 trillion to run the country.  This amount is almost $1.2 trillion more than China, which has a population of approximately 700 million more people.  So, where exactly did this $3.9 trillion come from?  And, more importantly, where did it go?

U.S. government spending is categorized by Mandatory Spending ($2.671 trillion) and Discretionary Spending ($1.184 trillion).  Under Mandatory Spending, Social Security and Medicare/Medicaid cumulatively represent over 50% of the Federal budget.  Because these are mandatory line items in the budget, Congress has little authority over the spending amounts.  On the discretionary side of the ledger, defense spending equals $584 billion, or 49% of the discretionary budget.  Interest on debt totaled $241 billion, or roughly 6% of the 2016 budget.

2016 US Budget

Source: The Congressional Budget Office

To fund the $3.9 trillion budget, the U.S. Government collected $3.267 trillion in taxes and registered a deficit of $587 billion.  Almost $3.3 trillion of that tax revenue was generated from the following sources:

  • Individual Income Taxes: $1.546 trillion
  • Social Security & Other Payroll Taxes: $1.115 trillion
  • Corporate Income Taxes: $300 billion
  • Other Taxes & Duties: $306 billion

The last year the Federal budget was fully funded by tax revenue was 2001.  At that time, tax receipts totaled $1.991 trillion, which funded a budget of $1.863 trillion.  The Congressional Budget Office estimates that the U.S. will incur an additional $488 billion of debt in 2017 and $881 billion in 2018.

The $2 trillion budget increase since 2001 has been driven by Social Security and Medicare, which have increased by 112% and 191%, respectively over the last 16 years.

2001_2016 largest budget items

Source: The Congressional Budget Office

U.S. Government Debt

The United States of America has an estimated $19.9 trillion of outstanding debt.  U.S. debt has increased by more than $9 trillion over the last 10-years, taking the U.S. Debt-to-GDP ratio from 63% in 2007 to 106% in 2017.  U.S. debt is held by both government agencies ($5.6 trillion) and public entities ($14.4 trillion).  The Social Security Trust is the largest holder of U.S. debt at $2.8 trillion.  The largest holders of public debt are Japan at $1.1 trillion and China at $1 trillion.  For comparison, Japan has $11.1 trillion of outstanding debt and a Debt-to-GDP ratio above 250%, by far the world’s largest overage.  In second place is Greece with Debt-to-GDP ratio of 177%.  The World Bank’s latest tally of global Debt-to-GDP was just under 94% in 2015.  Since then, governments across the world have continued to use debt as a tool to spur economic growth.

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