(CNN) — The US owes $31.4 trillion. This incredible amount is getting attention because the federal government has reached its borrowing limit and won’t be able to pay all the bills within months if Congress doesn’t act. A default would have dire consequences for the national economy, global finances, and many Americans.
The debt stems from the federal government spending more than it earns, resulting in annual deficits. Debt is the accumulation of those deficits. In the past 50 years, the government has run a surplus only five times, most recently in fiscal year 2001, according to the US Treasury Department.
National financial imbalance nothing new. In fact, the US has been in debt since its inception, according to the Treasury Department. War, economic recession and the Covid-19 pandemic have piled up debt over the centuries.
President Joe Biden and Republicans in the House of Representatives are locked in a battle on whether to combine debt ceiling resolution with spending cuts. Biden has said his budget proposal, which he is expected to announce on Thursday, would seek to reduce the deficit by $2 trillion over 10 years.
A century of growing debt
The U.S. federal debt in inflation-adjusted dollars has grown from $408 billion in fiscal year 1922 to more than $30 trillion today.
Source: US Department of Treasury
Credit: Curt Merrill and Matt Stiles, CNN
The federal government spent $6.27 trillion in fiscal year 2022, which ended last September, according to the Treasury Department.
Nearly two-thirds of annual federal spending is referred to as mandatory spending, which means that current law requires the funds to be apportioned. Social Security, Medicare, Medicaid, food stamps, veterans benefits, and federal civilian and military retirees’ retirement programs all fall into this category. Congress does not specify annual funding levels for these programs.
However, lawmakers have control over so-called discretionary spending, which they vote on every year. More than half of this funding goes to defense, while the rest supports a variety of federal agencies and programs, including education, transportation, housing, environmental protection, and law enforcement. federal law.
And then interest on debt, which has grown rapidly over the past year amid continued interest rate hikes by the Federal Reserve. According to the Peter G. Peterson Foundation, interest expenses are expected to rise even higher in the coming years, exceeding federal spending on Medicaid and defense within a decade.
What does the US government spend money on?
The government spent $6.27 trillion in fiscal year 2022. Each square below represents approximately $1 billion.
Social Security
$1.22 trillion (19%)
Provides an average monthly retirement benefit of $1,828 by 2023 to nearly 49 million retired workers, as well as benefits to nearly 3 million spouses and children of retired workers, nearly 6 million children surviving children and spouses of deceased workers and nearly 9 million disabled workers and their eligible dependents.
= 1 billion dollars
Health
$914 billion (15%)
Includes Medicaid and the Children’s Health Insurance Program serving more than 91 million Americans, tax credits under the Affordable Care Act, the National Institutes of Health, and the Centers for Disease Control and Prevention, in number of other programs.
= 1 billion dollars
Income security
$865 billion (14%)
Includes unemployment benefits, food stamps, refundable portion of earned income and child tax credit, Supplemental Security Income, rent assistance and related military and civilian employee pensions state, among other programs.
= 1 billion dollars
naitional defense
$767 billion (12%)
Consists mainly of funding for the Department of Defense, including operations and maintenance, military personnel, weapons procurement, and research.
= 1 billion dollars
Health Insurance
$755 billion (12%)
Provides health insurance to more than 65 million people 65 years of age and older or people with disabilities.
= 1 billion dollars
Education, training, employment and social services
$677 billion (11%)
Includes federal student loan program, Pell grant, federal assistance to disadvantaged K-12 school districts and special education, Head Start, and training and employment initiatives. disturb workers, among other programs.
= 1 billion dollars
net profit
$475 billion (8%)
Includes interest payments on money the federal government has borrowed to finance past deficits. Federal debt held by the public reached $24.3 trillion at the end of fiscal year 2022.
= 1 billion dollars
Other
$600 billion (10%)
Includes veterans benefits and services, transportation, general government services, Internal Revenue Service and federal law enforcement, corrections and justice agencies, along with other problems.
= 1 billion dollars
Source: US Department of Treasury, Center for Budget and Policy Priorities
According to the Treasury Department, the federal government took in $4.9 trillion in revenue in fiscal year 2022, about $1.38 trillion less than it spent. The shortfall is the budget deficit for that year and added to the total national debt.
By far the largest share of revenue has come from personal income taxes – which accounted for more than half of the proceeds in the last financial year. The next biggest part comes from Social Security and Medicare payroll tax is 12.4% and 2.9% respectively. (These taxes are split between the employer and the employee.)
But the government also raises money in other ways, including charging entrance fees to national parks, levying customs duties on foreign imports and exports, and imposing excise taxes on items like alcohol. , cigarettes and gasoline.
Where does the money come from?
US government revenue, by category, for fiscal year 2022
Source: US Department of Treasury
Credit: Curt Merrill, Byron Manley and Matt Stiles, CNN
