Where Does Federal Money Go?
A plain-language breakdown of how the U.S. government spends approximately $7 trillion per year.
Key Takeaway
The majority of federal spending — about 65% — is mandatory: Social Security, Medicare, Medicaid, and interest on the debt. Discretionary spending (defense, agencies, grants) makes up the rest. PlainSpending tracks the discretionary and assistance flows across 50 states + DC + US territories (56 jurisdictions), 3,143 US counties plus equivalents (3,233 total entries), and 111 agencies using FY2024 USASpending.gov data.
Mandatory vs. Discretionary: The Two Budget Worlds
The federal budget has two fundamentally different parts that work on separate tracks:
- Mandatory spending is controlled by underlying laws — not annual votes. When more people retire, Social Security spending automatically rises. When drug prices increase, Medicare costs more. Congress can only change mandatory spending by amending the statute, not the appropriations bill.
- Discretionary spending is voted on every year through appropriations bills. Defense, federal agencies, education grants, infrastructure, and most of what people think of as "the government" lives here. This is the only part Congress can reduce year-to-year without changing underlying laws.
In FY2024, mandatory spending consumed roughly 65% of the budget, leaving only 35% subject to annual appropriations decisions.
Top Federal Spending Categories (FY2024)
| Category | Type | Est. FY2024 | % of Budget |
|---|---|---|---|
| Social Security | Mandatory | ~$1.46T | 21% |
| National Defense | Discretionary | ~$895B | 13% |
| Medicare | Mandatory | ~$1.05T | 15% |
| Medicaid & CHIP | Mandatory | ~$615B | 9% |
| Net Interest on Debt | Mandatory | ~$870B | 12% |
| Veterans Benefits | Mixed | ~$325B | 5% |
| Education (non-defense) | Discretionary | ~$238B | 3% |
| Income Security Programs | Mandatory | ~$520B | 7% |
| All Other | Mixed | ~$980B | 15% |
Estimates based on CBO and OMB FY2024 projections. Figures rounded. "All Other" includes transportation, justice, housing, international affairs, and remaining agency programs.
The Top Spending Agencies (Contracts + Assistance)
Within the discretionary and financial assistance categories tracked by PlainSpending's 111 agencies, the largest spenders in FY2024 were:
- Department of Defense: The largest single agency, obligating hundreds of billions in contracts for weapons systems, logistics, base operations, and professional services. Defense contracts flow heavily to states with large military installations and defense manufacturers.
- Department of Health and Human Services (HHS): Manages Medicare, Medicaid, and the NIH. Its grant-making through NIH alone exceeds $40 billion annually, flowing to research universities and hospitals across every state.
- Department of Veterans Affairs: Provides healthcare, benefits, and housing assistance to veterans. Its spending is concentrated in states with large veteran populations — California, Texas, and Florida lead by total volume.
- Department of Transportation: Funds highway, transit, aviation, and rail infrastructure through grants to state and local governments. Infrastructure Act funding significantly increased DOT grant flows after 2021.
- Department of Agriculture: Supports rural development, commodity programs, food assistance (SNAP), and conservation through a mix of direct payments and grants.
Per-Capita Federal Spending by State
Federal spending is not evenly distributed per resident. Several factors cause significant variation:
- Military presence: States with large bases (Virginia, Maryland, Alaska) receive disproportionate defense contract spending.
- Federal land: Western states host federal land management agencies (BLM, Forest Service, National Park Service), generating employment and contract spending locally.
- Demographics: States with older or lower-income populations receive more Medicare, Medicaid, and Social Security per resident.
- Congressional representation: Historically, states with powerful appropriators on key committees have been able to direct more discretionary spending to their regions.
Explore per-capita breakdowns for every state at PlainSpending's state pages. Hover over any state to see contracts vs. assistance split and per-capita figures.
How Interest on the Debt Is Reshaping the Budget
Interest payments on the national debt have become one of the fastest-growing budget items. As low-interest debt from the 2010s matures and refinances at post-2022 rates, net interest costs have exceeded $800 billion annually — larger than the entire non-defense discretionary budget.
This crowd-out effect means that even if Congress wanted to increase discretionary spending on education, housing, or research, rising interest costs consume an increasing share of available resources. The Congressional Budget Office projects interest costs to continue rising through the decade unless rates fall significantly.
Frequently Asked Questions
What is mandatory vs. discretionary spending?
Mandatory spending is set by laws (like the Social Security Act) and does not require annual appropriations. It automatically grows as more people qualify. Discretionary spending is controlled through annual appropriations bills — Congress must vote on it every year. About 65% of federal spending is mandatory; 35% is discretionary. Defense and most agency programs fall in the discretionary category.
What is the largest single line item in the federal budget?
Social Security is the largest, at roughly $1.4 trillion annually. Medicare is second at about $1 trillion. Together, these two mandatory programs account for more than 40% of total federal spending. National defense, while the largest discretionary program at around $900 billion, is smaller than either.
How much does the federal government spend per person?
At roughly $7 trillion in annual federal spending and 335 million Americans, per capita federal spending is approximately $20,900. However, this varies enormously by state. States with large federal facilities, high Medicare populations, or large low-income populations receive more than the national average. Some states receive less than $15,000 per resident while others exceed $30,000.
Why is the federal budget always in deficit?
The federal government has run deficits in most years since 2002 because mandatory spending and interest on the debt grow faster than revenue. Tax revenues are set by the Tax Code; spending on Social Security, Medicare, and Medicaid grows as the population ages and healthcare costs rise. Congress cannot easily cut mandatory programs without changing the underlying laws, making deficit reduction politically difficult.
What percentage of the budget goes to interest payments?
Interest on the national debt has grown sharply as interest rates rose. In FY2024, net interest payments exceeded $800 billion — roughly 12% of federal spending and more than the entire non-defense discretionary budget. Interest costs are projected to keep rising as debt matures and refinances at higher rates.
Does federal spending create jobs?
Yes, both directly and indirectly. Contracts with private companies create private-sector jobs. Grants to universities fund research employment. Direct payments boost consumer spending that supports local businesses. Defense spending supports a large industrial workforce. Economists estimate federal spending multipliers between 0.8 and 1.5 depending on the type of spending and economic conditions.
Explore the Data
- State spending pages — total, per capita, contracts vs. grants for all 50 states + DC + US territories (56 jurisdictions) and territories
- Agency spending pages — where each federal department's dollars flow geographically
- County-level data — federal spending reaching your county
Related Guides
Sources
- USASpending.gov — Federal Spending Data, FY2024
- Congressional Budget Office — The Federal Budget in Fiscal Year 2024
- Office of Management and Budget — Analytical Perspectives, FY2025
- Treasury Department — Monthly Treasury Statement
This content is for informational purposes only. Budget figures are estimates based on official CBO and OMB projections and USASpending.gov records for FY2024. Totals may differ from final audited figures.
Understanding the Data
The information presented throughout this guide is informed by publicly available public records published by federal and state government agencies. Our database aggregates and standardizes these records to make them more accessible and easier to interpret for general audiences. When we reference specific statistics or trends, they are drawn directly from these authoritative sources unless explicitly noted otherwise.
It is important to understand the limitations of any large-scale data dataset. Records may contain errors from the original data collection process, some fields may be incomplete for older entries, and classification systems may have changed over time. Our analysis accounts for these factors by clearly labeling data vintage, flagging records with missing critical fields, and noting when temporal comparisons span methodology changes in the source data.
For readers who want to conduct their own research, we recommend going directly to the source whenever possible. federal and state government agencies provides detailed documentation on collection methodology, sampling frames, and known data quality issues. Our goal is not to replace primary sources but to make them more approachable and to highlight patterns that may not be immediately obvious when browsing raw records.
How We Analyze Data Records
Our analytical approach involves several steps designed to surface meaningful insights from large datasets. First, we clean and standardize the raw data, handling variations in naming conventions, date formats, and categorical labels. Then we compute summary statistics, distributions, and comparative benchmarks across relevant dimensions such as geography, time period, and category type.
Key metrics we examine include statistical records, geographic distributions, temporal trends. These indicators provide a multi-dimensional view of each entity in our database, allowing users to understand not just individual records but how they compare to peers, regional averages, and national benchmarks. We believe this contextual approach is far more valuable than presenting raw numbers in isolation.
