Money at the federal level is basically a series of numbers so large they stop feeling real. When you ask how much does the us spend a year, you aren't just looking for a single figure. You're looking at the pulse of the global economy.
In fiscal year 2025, the U.S. government spent exactly $7.01 trillion.
Think about that. Seven trillion dollars. If you spent a dollar every single second, it would take you over 220,000 years to go through that much cash. Honestly, it's a bit hard to wrap your head around, but that money represents roughly 23% of the entire U.S. Gross Domestic Product (GDP).
Where is all that money actually going?
Most people think the government spends its time debating how much to give to NASA or foreign aid. Kinda. But not really. Those things are a drop in the bucket. The real heavy hitters—the ones that eat up the vast majority of that $7 trillion—are programs that run on autopilot.
The Big Three: Social Security, Health, and Interest
Social Security is the undisputed heavyweight champion of the budget. In 2025, it accounted for about 22% of all federal spending, totaling over $1.4 trillion. It’s followed closely by Medicare and other health programs. When you combine Social Security, Medicare, and Medicaid, you’ve already accounted for nearly half of everything the U.S. spends.
Then there’s the "new" problem: Net Interest.
Interest on the national debt is the fastest-growing part of the budget. In the first quarter of fiscal year 2026, the U.S. spent $270 billion just on interest payments. To put that in perspective, that’s more than the $267 billion spent on national defense in the same three-month window. It’s the first time in modern history we're paying more to bankers and bondholders than to our own military.
Mandatory vs. Discretionary: The Trap of the "Budget Debate"
You've probably heard politicians arguing on the news about "cutting the budget." What they're usually talking about is discretionary spending. This is the stuff Congress actually has to vote on every year. It includes everything from the FBI and the National Park Service to the Department of Defense.
- Defense Discretionary: This is about half of the discretionary pie, roughly $874 billion in 2025.
- Non-Defense Discretionary: This covers basically everything else the government does—education, transportation, science, and environmental protection.
The catch? Discretionary spending is only about 26% of the total budget. The rest is mandatory spending. These are programs like Social Security and Medicare where the law says, "If you qualify, we must pay you." Congress doesn't vote on the total amount each year; the checks just go out.
The 2026 Shift
As we move into 2026, things are getting even tighter. The CBO (Congressional Budget Office) and the Treasury Department have already flagged that Q1 of FY 2026 saw a deficit of $602 billion. That’s a massive number for just 90 days of operation.
Why the jump? A few reasons:
- Cost of Living: A 2.8% cost-of-living adjustment (COLA) kicked in for Social Security in January 2026, instantly raising the baseline cost.
- Rising Interest Rates: Even though the Fed has toyed with rates, the long-term yield on Treasury notes has stayed stubborn. That makes the $38.4 trillion national debt incredibly expensive to maintain.
- The Shutdown Hangover: The late 2025 government shutdown—one of the longest in history—created a massive backlog of administrative costs and late payments that hit the books all at once.
What most people get wrong about "foreign aid"
If you ask a random person on the street how much does the us spend a year on foreign aid, they’ll often guess 20% or 25%. In reality? It’s less than 1%.
While the 2026 budget request included about $175 billion for border security and homeland initiatives, the actual "aid" sent to other countries is a rounding error compared to the $1.4 trillion spent on Social Security. We spend more on "Income Security" (unemployment, food stamps, and housing assistance) in a few months than we do on foreign aid in a year.
The Revenue Reality Gap
The U.S. doesn't actually have $7 trillion. In 2025, it only collected about $5.23 trillion in revenue.
- Individual Income Taxes: 49% of the revenue.
- Payroll Taxes: 35% (this is what funds Social Security/Medicare).
- Corporate Taxes: Only about 11%.
- Customs and Tariffs: A growing slice, especially with the 2025-2026 tariff hikes on imported goods.
The difference between the $7.01 trillion spent and the $5.23 trillion collected is the deficit. In 2025, that gap was $1.78 trillion. To cover it, the government borrows money by selling Treasury bonds. This is why the debt grows and why the interest payments are becoming such a monster.
Why this matters to you
You might think federal spending is just a bunch of zeros on a spreadsheet in D.C., but it dictates your life. When the government spends $7 trillion, it creates demand in the economy. If that spending isn't matched by productivity, it can fuel inflation.
In 2026, we’re seeing inflation stay slightly above the Fed's 2% target. Part of that is driven by the sheer volume of money flowing through these programs. If you're a homeowner, a business owner, or just someone trying to buy groceries, the federal budget is the "invisible hand" moving the prices on the shelf.
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What Happens Next?
Lawmakers are currently staring down a January 30, 2026, deadline to keep the government funded. There’s a lot of talk about a "3% Deficit Target Resolution," which would force the government to bring the deficit down to 3% of GDP. Right now, it's sitting closer to 5.5% or 6%.
To hit that target, they’d have to cut over $600 billion in spending or find a way to hike taxes significantly. Neither is popular.
Actionable Insights: Tracking the Money
If you want to keep an eye on where your tax dollars are actually landing, don't wait for the evening news. The data is public and surprisingly accessible if you know where to look.
- Check the Monthly Treasury Statement (MTS): The Treasury Department releases this every month. It shows exactly how much came in and how much went out.
- Monitor the CBO Projections: The Congressional Budget Office is non-partisan. Their "Budget and Economic Outlook" reports are the gold standard for seeing where the debt is headed over the next 10 years.
- Watch the Interest-to-Revenue Ratio: This is the most important "health" metric for the U.S. economy. When interest starts eating 15% or 20% of all tax revenue, it leaves very little room for things like roads, schools, or tax cuts.
Stay informed by checking the USAspending.gov portal, which allows you to search for federal contracts and grants in your own zip code. It's one thing to hear about $7 trillion; it's another to see the $50,000 grant that went to the bridge down the street from your house.