It’s officially Tax Day. Time to take stock.The federal government spent $6.3 trillion in 2022. Tax dollars paid for $4.9 trillion or 78 percent. The rest (22 percent) was borrowed. Borrowing is deferred taxation, so ultimately deficit spending too will be paid for by taxes.Where did all that money go?The federal government spends the most on transfer programs. That is when the government redistributes money from one group to another rather than supplying governmental services like national defense.As Figure 1 below shows:Major entitlements—Medicare, Medicaid, other health care, and Social Security—devoured nearly half of the 2022 budget, consuming 46 percent of all spending. ($2.9 trillion)Other federal transfer programs consumed another 18 percent. “Income security” and other benefits include federal employee retirement and disability, veterans’ benefits, unemployment benefits, and welfare programs such as food and housing aid.Overall, two‐thirds of government spending in 2022 went to pay some sort of benefit to someone. And that’s before accounting for student loan forgiveness.Interest on the U.S. federal debt consumed 8 percent of the budget. ($476 billion)Meanwhile, 12 percent of all federal spending went toward national defense. ($766 billion)Most noteworthy, spending on education more than doubled compared to 2021, due to $379 billion in student loan debt forgiveness, initiated by the Biden administration.
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