Where Does U.S. Federal Spending Go?

The Congressional Budget Office (CBO) counts Medicare together with Medicaid, the Children’s Health Insurance Program (CHIP) and marketplace subsidies for health insurance as the major health care programs. In its projections for fiscal 2026 these programs come to $1,908 billion, about a quarter of the $7,449 billion total and the largest part of federal spending. But the largest single program is Social Security, at $1,666 billion.

Most federal spending does not need a new vote each year. In the words of the Treasury’s guide to federal spending, mandatory spending “does not require an annual vote by Congress”. It covers Social Security, the health care programs and the other mandatory programs. In CBO’s 2026 figures it comes to $4,529 billion, 60.8% of outlays.

By contrast, Congress and the President approve discretionary spending each year in appropriations. It comes to $1,880 billion, or 25.2%, and holds defense and the nondefense programs. Net interest is 13.9%.

Defense, at $885 billion, costs less than any of the other five categories. Net interest on the debt, at $1,039 billion, costs more than defense and more than all the nondefense discretionary programs together.

Net interest on the debt passed national defense in fiscal 2024, by the Treasury’s count of outlays by function. Interest cost $881.7 billion that year and defense $874.0 billion. A year earlier defense had still cost more, $820.7 billion against $659.2 billion for interest. In the table of outlays by function of the Office of Management and Budget (OMB), which starts in 1940, no earlier year has interest above defense.

The gap widened in fiscal 2025, to $970.4 billion for interest against $916.6 billion for defense. It has held in fiscal 2026 so far. In the first quarter of fiscal 2026, October to December 2025, interest cost $270.3 billion and defense $266.9 billion. Through August 2026, eleven months into the year, interest came to $1,017.0 billion. Over the same months defense came to $876.2 billion.

The Treasury’s national defense figure is larger than the defense line of the Congressional Budget Office (CBO). CBO’s line counts only discretionary spending. For fiscal 2025 the Treasury’s figure was $916.6 billion and CBO’s $893 billion. On either measure, interest cost more.

The average interest rate the Treasury pays has risen. On its interest-bearing debt the rate was 1.60% in August 2021 and 3.49% in August 2026, by the Treasury’s monthly figures. CBO expects net interest to keep growing “as longer-term interest rates rise and debt mounts”.

In CBO’s projections, net interest grows from $1,039 billion in 2026 to $2,144 billion in 2036. As a share of GDP it rises from 3.3% to 4.6%. By 2036 it is nearly twice CBO’s defense line, $1,100 billion that year.

Debt held by the public is what the government owes to lenders outside it, from individuals and companies to foreign governments and the Federal Reserve. Gross federal debt also counts what the government owes its own trust funds and other accounts. In CBO’s projections, debt held by the public is $32.1 trillion in 2026, or 101% of GDP. It rises to 120% of GDP in 2036, above its previous high of 106% in 1946.

Download this conclusion: is defense the government’s biggest cost?

This card takes apart the claim that defense is the government’s biggest cost. It shows the Treasury’s outlays for net interest and national defense in two years. In fiscal 2023 interest cost $659.2 billion and defense $820.7 billion. In fiscal 2025 interest cost $970.4 billion and defense $916.6 billion. It is 1,080 by 1,350 pixels, and anyone may download it and post it.

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The United States spends far more on health care per person than any other member of the Organisation for Economic Co-operation and Development (OECD), a group of 38 countries. In 2024 U.S. health spending came to $14,823 per person, in dollars converted at purchasing power parities, which adjust for differences in price levels between countries. That is about 2.4 times the OECD average of $6,097. Switzerland, the next highest, spent $9,927.

The federal government sponsored 31% of the nation’s health spending in 2024, by the count of the Centers for Medicare & Medicaid Services (CMS). It sponsored more than households, businesses or state and local governments did. On CMS’s own measure, national health expenditure, the country spent $5.3 trillion on health in 2024, or 18.0% of gross domestic product (GDP). The OECD’s measure, used in the table, gives 17.2%.

Figures marked * are the OECD’s estimates or provisional values. The average is the unweighted mean of the members with a 2024 figure. All 38 members have one for spending. For life expectancy 37 do, and for infant deaths 35.

The extra spending does not show up in life expectancy or infant deaths. Life expectancy at birth in the United States was 79.0 years in 2024, lower than in any of the eight other countries in the table. The U.S. infant death rate, 5.5 per 1,000 live births, was higher than in any of them.

Outcomes also depend on more than health care. Irene Papanicolas, Liana Woskie and Ashish Jha compared the United States with ten high-income countries in 2018, using data mostly from 2013 to 2016. The United States had the highest share of adults who were overweight or obese, 70.1%, and the second-lowest share who smoked daily.

The 2018 study, in the Journal of the American Medical Association, found that Americans used about as much care as people in the other countries. Americans did have more imaging than average. They had 118 magnetic resonance imaging scans per 1,000 people, second only to Germany. They also had the most computed tomography scans in the study, 245 per 1,000. The authors concluded that prices of labor and goods, including drugs, and administrative costs “appeared to be the major drivers” of the difference in cost. Generalist doctors in the United States earned $218,173, against at most $154,126 in the other countries.

How much administration costs depends on what is counted. Papanicolas and colleagues counted the planning, regulating and managing of health systems and services. On that measure they put administration at 8% of U.S. health spending. In the other countries it ranged from 1% to 5%. David Himmelstein, Terry Campbell and Steffie Woolhandler counted the administration done by insurers and providers. They estimated it at 34.2% of U.S. health spending in 2017, against 17.0% in Canada, counting only the kinds of spending whose administrative costs could be measured.

Drug prices are higher too. RAND, a nonprofit research organization, compared drug prices for the Department of Health and Human Services in 2024. It found that U.S. prices for brand-name drugs in 2022 were 422% of prices in 33 other OECD countries. After an adjustment for the rebates drug makers pay U.S. payers, they were 308%. Unbranded generic drugs were cheaper in the United States, at 67% of the other countries’ prices.

Single-payer usually means that one entity collects the money and pays for everyone’s health care. A 2017 review of 25 proposals found no agreed definition, and plans that differ widely.

In 2020 the Congressional Budget Office (CBO) analyzed five illustrative single-payer designs based on Medicare’s fee-for-service program, known as Original Medicare. Each would raise the federal budget’s share of health spending, whatever it did to the nation’s total. CBO projected that federal subsidies for health care in 2030 would rise by $1.5 trillion to $3.0 trillion under them, compared with current law. Under the same designs, national health expenditures in 2030 would change by between a decrease of $0.7 trillion and an increase of $0.3 trillion.

The design decides where in those ranges a plan lands. In CBO’s analysis, lower payment rates for providers and less administrative spending by payers did most to lower national health spending. Greater use of care did most to raise it, because coverage would be nearly universal and out-of-pocket costs lower.

The two 2018 estimates answer different questions. Charles Blahous of the Mercatus Center estimated that Medicare for All would add about $32.6 trillion to federal budget commitments in 2022 to 2031. Those are its first ten years of full implementation, and he called the estimate conservative. The Political Economy Research Institute (PERI), at the University of Massachusetts Amherst, studied the Medicare for All Act of 2017. It estimated that the nation’s health consumption spending would fall by about 9.6%. That fall rests on PERI’s assumption of savings of about 19.2%, against a rise in demand of about 12.0% that PERI calls a high-end estimate.

Download this conclusion: what would a single-payer system cost?

This card sets out what the Congressional Budget Office found five illustrative single-payer designs would cost in 2030, compared with current law, on two measures. Federal subsidies for health care would rise by $1.5 trillion to $3.0 trillion. National health expenditures would change by between a decrease of $0.7 trillion and an increase of $0.3 trillion. It is 1,200 by 630 pixels, and anyone may download it and post it.

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Revenue covers about three-quarters of federal spending. In the projections of the Congressional Budget Office (CBO) for fiscal 2026, the government collects $5,596 billion and spends $7,449 billion. The gap, the deficit, is $1,853 billion, or 5.8% of gross domestic product (GDP).

Deficits grow over the next ten years. CBO projects the deficit at $3.1 trillion in 2036, or 6.7% of GDP. But the primary deficit, which leaves out net interest, falls from 2.6% of GDP in 2026 to 2.1% in 2036. “Rising net interest costs drive much of that increase,” in CBO’s words. The Committee for a Responsible Federal Budget (CRFB), reading CBO’s figures, puts the average deficit over 2027 to 2036 at 6.1% of GDP.

CBO expects greater spending on Social Security and Medicare to push mandatory spending up relative to GDP, and the number of older Americans is rising. The 2010 Census counted 40.3 million people aged 65 and older. The Census Bureau’s 2023 projections put the number at 71.2 million in 2030 and 82.1 million in 2050.

Social Security’s long-range shortfall comes largely from rising costs “primarily due to demographic trends”, in the Congressional Research Service’s summary of the trustees’ 2026 report. In 2025 there were about 2.6 covered workers for each Social Security beneficiary, by the trustees’ count as the National Committee to Preserve Social Security and Medicare reports it.

CRFB says tax expenditures can be thought of as spending through the tax code. They are provisions, such as credits and deductions, that reduce tax owed, increase refunds, or both. The Joint Committee on Taxation (JCT) projected that they would total $2.3 trillion in fiscal 2026, as CRFB reports. In 2024 the Biden administration proposed raising the corporate income tax rate from 21% to 28%. The Treasury estimated the change would raise $1.35 trillion over fiscal years 2025 to 2034.

People who argue for more public spending, on health care above all, start from what the country already pays. In 2024 the United States spent more per person on health care than any other member of the Organisation for Economic Co-operation and Development (OECD), about 2.4 times the average. In the 2020 analysis by the Congressional Budget Office (CBO), some single-payer designs would lower the nation’s total health spending while covering nearly everyone. The fall would be up to $0.7 trillion in 2030.

Measured against its economy, Japan carries far more debt than the United States. By the International Monetary Fund’s figures, Japan’s gross government debt has been above 200% of its gross domestic product (GDP) since 2013. It was 214.5% in 2024, against 122.3% for the United States.

People who argue for cutting deficits start from where net interest is heading. Net interest already costs more than defense, and CBO projects it to double, to $2,144 billion in 2036. Debt held by the public, owed to lenders outside the government, reaches 120% of GDP that year, higher than at any point in the nation’s history. The Committee for a Responsible Federal Budget (CRFB) wants deficits brought down toward 3% of GDP. It warns that high and rising debt brings “greater risk of a fiscal crisis”.

Social Security’s trustees project that its retirement trust fund will run out in the fourth quarter of 2032. After that, CRFB notes, the law calls for benefits to be cut to match revenue.

The figures settle where the money goes and how fast net interest is growing, but not which side is right. That is a choice about what government should do and who should pay for it.

The figures do rule out two shortcuts. Ending foreign aid cannot close the deficit: all international affairs spending, aid included, was $45.2 billion in fiscal 2025, against a deficit of $1,775 billion. Closing the deficit through annual appropriations alone would mean ending almost all of them. That is because in CBO’s projections the 2026 deficit, $1,853 billion, is nearly as large as all discretionary spending, $1,880 billion, defense included.

Mostly to health care, Social Security and interest on the debt. These three are the largest parts of the $7,449 billion that the Congressional Budget Office (CBO) projected for fiscal 2026, in that order. Defense, at $885 billion, comes after each of them. Net interest overtook national defense in fiscal 2024, for the first time in the Office of Management and Budget’s table of outlays by function, which starts in 1940. CBO projects it to double by 2036.

Two claims about the budget do not fit these figures. Defense is not the largest cost. Ending foreign aid could not close the deficit either: all international affairs spending was 0.6% of outlays in fiscal 2025.

U.S. health care is also unusually expensive: in 2024 spending per person was about 2.4 times the average of the Organisation for Economic Co-operation and Development (OECD). In a 2018 study comparing the United States with ten high-income countries, prices and administrative costs, not more care, appeared to be the main drivers of the difference in cost.

Download the conclusion

The verdict above as one image, with four of the Congressional Budget Office’s projections for fiscal 2026 behind it. Health care programs take $1,908 billion and Social Security $1,666 billion. Net interest takes $1,039 billion and defense $885 billion. It also gives the $7.4 trillion total and the Treasury’s figure for international affairs, 0.6% of outlays in fiscal 2025. The image is 1,080 by 1,350 pixels, and anyone may download it and post it.

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