Where Does our Money Go?

Where Does our Money Go?

Federal spending is broken down into 7 major categories. The majority of which goes to entitlement spending. (7% Medicaid, 16% Medicare, 21 % Social Security) Defense is the largest discretionary spending with 20% of the 2008 budget going to defend our country. Non-defense discretionary spending (Education, International affairs, Health research and regulation, Veterans' benefits, Science and basic research) takes 18%. Paying interest on the national debt eats up 8% of the budget.

Foreign Ownership of the National Debt.

A portion of the national debt is held by the public (states, corporations, individuals, and foreign governments) in the form of treasury bills, treasury notes, US savings bonds, and state and local government series securities. Intra governmental Debt Holdings represent balances of Treasury securities held by federal government accounts, primarily federal trust funds such as Social Security, that typically have an obligation to invest their excess annual receipts over disbursements in federal securities. There is growing concern over foreign ownership of US Treasury securities. The two largest creditors are Japan and Mainland China. There is also a large portion owned by Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. It is feared that that some of these countries, China in particular, may have an agenda in buying up US debt,such as using its ownership of US securities as a leverage against US policy it opposes. The counter to these fears is the belief that foreign ownership of US debt is a vote of confidence in the US economy.

Where Does the Money Come From?

According to the Congressional Budget Office (CBO) the government will collect $2.6 trillion in revenues in 2008. Individual income taxes will account for $1.1 trillion (approx. 45%). corporate taxes contribute $326 billion (13%), Social Insurance $912 billion (13%), Excise taxes $69 billion (3%), Estate and Gift taxes $27 billion (1%), Customs and Duties $27 billion (1%), and Miscellaneous sources $45 billion (2%).


The United States has historically had a national debt. It began with the debt incurred to pay for the Revolutionary War, and has been constant other than a brief period under President Andrew Jackson. It has grown substantially through the years usually spiking after a major war. There are noticeable increases in the US debt as a % of the Gross Domestic Product (GDP) after the Civil War , WWI, WWII, and the September 11, 2001 terrorist attacks. The most honest way of comparing levels of debt is the ratio to the (GDP). The chart illustrates the figures since 1945.