What is the current U.S. federal government spending? How does Congress really spend your money? The present government spending is $4.829 trillion. Where do all these funds go? The American government spends money on programs that ensure the well-being of the people of the USA.
The Constitution explains the reasons why the federal government does it. It claims that the purpose of our 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.”
Keep on reading to learn more about the budget’s components and its impact on the U.S. economy.
Current Government Spending
Government spending comprises three categories: mandatory spending, discretionary spending, and interest on the national debt. Also, there are various subcategories in each of these categories of spending.
The federal budget proposal of $6.011 trillion was released by President Joe Biden in May 2021 for fiscal year (FY) 2022. It is estimated that the government will obtain $4.174 trillion in revenue through September 30, 2022, creating a $1.837 trillion deficit for October 1, 2022.
Most of these revenues come from earnings from quantitative easing as well as taxes. It’s true that consumers often struggle to cover all the necessary costs and pay taxes. Those who have issues with paying their taxes or experience urgent financial issues seek loans or guaranteed approval credit cards with $10000 limits for bad credit. While some consumers increase their spending, government spending is also rising.
The Reasons Why Government Spending Is Increasing
The government kept spending below 20% of GDP in the decade before the Great Recession. This figure used to grow about 2% to 3% annually. Federal spending increased to a record 24.4% of GDP in FY 2009. The main reasons for such an increase were two overseas wars and economic stimulus. On the other hand, tax receipts were reduced due to slower growth. The government didn’t know how to lower spending and it was worried about the rising U.S. debt.
In conclusion, Congress decided to make “sequestration” to reduce the budget costs. Finally, federal spending was lowered to 20.4% of GDP in FY 2015. Since that time, federal spending kept increasing despite the changes. The president together with Congress wanted to count on deficit spending to grow the economy but it didn’t work. As a result, spending is increasing each year even when there is an economic boost unlike rigid boxes wholesale that do not require further spending.
This is the biggest spending category. It is estimated to be $4.018 trillion in FY 2022. It comprises unemployment compensation and entitlement programs such as Medicare and Social Security. Medicare expenses are budgeted at $766 billion, while Social Security is budgeted at $1.196 trillion, and Medicaid is at $571 billion.
The expenses on Social Security are covered by payroll taxes and interest on investments. Social Security benefits paid out exceeded the income from investments in 2021 for the first time since 1982. While taxes withheld for Medicare don’t pay for all benefits, it is already underfunded. The general fund called “America’s Checkbook” funds 100% of Medicaid.
The budget for discretionary spending is $1.688 trillion this year. What does this category include? It comprises spending on Homeland Security, military spending, the Department of Veterans Affairs, as well as other defense-related departments. The biggest of these programs are Education, Health and Human Services, and Housing and Urban Development.
As for the Overseas Contingency Operations fund, it has paid for continuing military actions and wars. There is no money allocated into this fund in 2022 because the service budget covers its operations. What else? An increasing part of the discretionary budget spending is saved for hurricane and wildfire relief as well as other disaster relief.
National Debt Interest Payments
The interest payments on the national debt are estimated at $378 billion in FY 2021. What does this sum cover? It covers the expenses of the U.S. Department of Justice. The national debt interest payments present the fastest-growing costs for our country. These expenses will be about $665 billion by 2030.
This isn’t the mandatory spending category but it’s also significant or the U.S. debt default might happen. When the interest rates increase, these estimates will rise.
How Can Federal Spending Stimulate the Economy?
Federal spending is meant to assist in stimulating demand. In its turn, demand should help to boost the economy. The central theory behind Keynesian economics is the idea that the government needs to spend funds in order to stimulate demand. The federal stimulate the economy by providing the loan to small business owners.
This category is included in the budget. It belongs to the category of discretionary spending. The Department of Defense base budget is the largest cost for the military, estimated at $715 billion. The costs connected with the wars in Afghanistan and Iraq were included in the Overseas Contingency Operations request since 2001.
Nowadays, these expenses are listed in the base budget request. Military spending also comprises the Departments of State, Homeland Security, and Veterans Affairs. Together, all of these expenses equal $943.9 billion.
The difference between revenue and spending is a budget deficit. It is estimated at $1.837 trillion and this figure is added to the current national debt. People tend to blame each president for the increase in national debt because of the budgets their administration offers. Congress usually approved the budget. Thus, the president can’t take full responsibility for deficit or national debt generation.
Why Should the Federal Budget Be Created?
The main goal in making the federal budget is to define the source of revenue and set government spending priorities. The federal budget presents the main tool for executing the agenda of the government. In order to facilitate cooperation between Congress and the White House, the budget process was created.
On the other hand, it sometimes becomes a source of partisan gridlock. The government finances a budget deficit by selling bills, Treasury notes, and bonds to different creditors, including corporations, or local, state, and foreign governments. The federal government should repay the increasing national debt over time hobby lobby black friday.