This post continues my review of recent federal government financial history, based on this spreadsheet, that began with this background post and continued with this post on federal revenues. The discussion that follows here is on the major categories of federal expenditures, the ones that really matter, the ones that account for the most money. The federal government has been described as a social “insurance company that also has an army.” And Social Security, Medicare, Medicaid, National Defense and Veteran’s Benefits, and interest on the national debt accounted for 71.9% of federal spending in FY 2011 – and 65.4% of federal spending in FY 1979 at the start of this analysis.
In terms of what the federal government actually does, moreover, it is actually an army, a post office, and a bunch of bureaucrats sending money to others who actually do things. Most Medicare and Medicaid-funded services are provided by the private sector or public facilities run by state and local governments. Social Security and interest on the debt are simply cash taken in, and cash sent out. The smaller categories of spending, to be discussed later in a separate post, generally involve payments to state and local governments, which do the actual work. Since money in and money out is the nature of most federal finances, activities by others funded by “spending” is little different than activities by others induced by tax preferences. Those “tax expenditures,” not tabulated in the spreadsheet, cost the federal government an estimated $1.1 trillion in FY 2011, according to the Statistical Abstract of the United States for 2012 (Table 477). Total federal “spending” tabulated as such was an estimated $3.8 trillion that year.