Where Does the Federal Government Spend Money?
Key Takeaways
- Entitlement (“human resources”) spending, including Social Security, Medicare, health, income security, and veterans programs, accounted for about 67% of FY2025 federal outlays.
- Net interest outlays on the national debt reached a historic $970 billion in FY2025, creating additional budget pressure.
- At $916 billion in FY2025, defense spending remains the largest discretionary budget item, dwarfing other discretionary spending categories.
The federal budget is supposed to reflect our nation's priorities and challenges. In FY2025, total federal spending reached $7.0 trillion, with significant portions allocated to entitlement programs like Social Security and Medicare, defense, and interest payments.
FY2025 Federal Budget Allocation
America's roughly $7 trillion budget reveals stark fiscal priorities. Mandatory spending including, Social Security, Medicare, health, income security, and veterans' benefits, commands the lion's share, while discretionary spending remains perpetually squeezed. Defense spending, at $916 billion, dwarfed other discretionary spending in 2025.
Federal Outlays Over Time
The long-term trajectory of federal spending tells a story of expanding spending, entitlements and mounting interest costs. As mandatory programs, like Social Security and Medicare, swell with an aging and increasingly dependent population, discretionary spending's share of GDP has remained remarkably constant - a testament to fiscal inertia rather than restraint.
Federal Government Outlays
Annual data, 1940–2025 (2025 dollars), with year-over-year category comparison. Shares may total over 100% because undisplayed offsetting receipts reduce total federal outlays.
1940 Summary
2025 Summary
Interest on Federal Debt
The cost of America's borrowing has come due. Due to rising interest rates, interest payments on the national debt have surged, consuming an ever-larger share of tax revenues. On an annual-rate basis, inflation-adjusted federal interest payments were $629 billion in Q4 2000, $578 billion in Q4 2010, $635 billion in Q4 2020, and $1.23 trillion in Q4 2025, all measured in Q4 2025 dollars.
Interest on Federal Debt
Quarterly, 1947 Q1–2025 Q4
Note: The BEA/FRED series reports federal interest payments before budgetary offsets, at seasonally adjusted annual rates by calendar quarter. OMB’s net-interest outlays are fiscal-year figures that subtract interest received by federal trust funds and other federal interest income.
Average Interest Rate on Federal Debt
This chart shows the average interest rate the U.S. Treasury pays on all its interest-bearing debt, based on monthly Treasury data. It reflects the blended cost of borrowing across different securities.
Treasury’s Average Rate on Interest-Bearing Federal Debt
Monthly, 2001–December 2025. Treasury-reported blended rate on marketable and nonmarketable interest-bearing debt; aggregate rate excludes TIPS and floating-rate notes.