Where Your Tax Dollars Go?
With all the talk around the One Big Beautiful Bill Act, understanding where our tax dollars go can help put the bigger economic picture into perspective—and this month's chart offers a breakdown of how the federal government allocates its spending.
The $1.83 trillion deficit in fiscal year 2024 shows us spending $6.75 trillion while collecting $4.92 trillion in revenue. The largest single expenditure? Social Security at $1.5 trillion, representing our nation's commitment to supporting Americans in retirement.
Retirement Reality
Social Security alone accounts for nearly a quarter of all federal spending, reminding us why retirement preparations remain essential. Social Security supports over 67 million Americans, primarily retirees but also survivors and individuals with disabilities. Healthcare programs like Medicare and Medicaid add another $1.8 trillion combined, underscoring how much of our federal budget goes toward supporting Americans as they age.
What's Protected
Social Security and Medicare are considered mandatory spending—they're not subject to annual budget negotiations. Defense spending ($874 billion) and interest on our debt ($882 billion) are also relatively stable. The areas subject to annual budget negotiations tend to be discretionary programs like education, transportation, and smaller line items.
The Big Picture
The federal budget reflects competing priorities: supporting retirees and vulnerable populations while maintaining national security and essential services. The challenge lies in balancing these needs with fiscal sustainability. Recent credit rating concerns highlight the importance of long-term fiscal health, though the U.S. maintains its reserve currency status and ability to finance operations.
Your Quick Takeaway
As costs continue to rise, these spending patterns will likely continue. In other words, spending won't lessen anytime soon.
Sherwood News, May 19, 2025
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.
