Imagining the Federal Budget as a Household Budget

Talking in trillions and billions is important, but so is making the budget more accessible to Americans.

$5,660,024,200,000. That’s how much federal, state, and local governments spent in 2015.

$3,740,300,000,000. That’s how much the federal government alone spent in 2015.

$887,700,000,000. That’s how much the federal government spent on Social Security — one of its largest single items.

Dizzy yet? I wouldn’t blame you.

The size and scope of governments can make even policy wonks scratch their heads.

(NOTE: I used the terrific USAFacts.org for most of the statistics I pulled for this article. Please go check them out.)

To most of America’s 138 million voters, the numbers above don’t mean much at all.

That’s not an insult— they don’t mean much to me, either. I’ve never made six figures a year. I’ve never held more than a few hundred dollars at a time. I have no concrete concept of what it means to spend a million dollars on something, or a billion, or a trillion.

But I do know what it means to spend $100 on something, or $1,000, or even $10,000 (over time).

For these reasons, I opened up a Google Sheets page this week and tried to reimagine government spending (just federal spending) as spending by a family with a $50,000-a-year budget.

Here’s what I found. I hope it helps you reimagine how the federal government spends our tax dollars.

$13K a year on retirement (27%)

Are you putting a quarter of your income away to retirement? Most people are not (I put away about 15 percent, though I’d like to do more).

That’s what the federal government spends ever year on Social Security (old-age and disability benefits), and on federal employee retirement.

Here’s how it breaks down:

• $711.6 billion a year on Social Security old-age benefits ($9,512 a year in our pro-rated household budget, or 19.03 percent)
• $161.8 billion a year on federal employee retirement ($2,162 a year in our household, or 4.33 percent)
• $145.1 billion a year on Social Security disability benefits ($1,939 a year in our household, or 3.88 percent)

Social Security is in serious danger of going insolvent; but there are a number of ways to make the program sustainable over the long term (recommendation: try out CRFB’s The Reformer tool).

$10K a year on health care (21%)

Now this comparison’s a bit more imaginable. The federal government (as a household) spends a little over $10,000 a year on health care (not including Medicaid, I’ll get to that below).

Here’s how it breaks down:

• $546.1 billion a year on Medicare, net of premiums ($7,300 a year in our household, or 14.60 percent)
• $157.9 billion a year on veterans support, most of which goes to health care ($2,110 a year in our household, or 4.22 percent)
• $46.3 billion a year on non-Medicare/Medicaid health spending ($618 a year in our household, or 1.24 percent)
• $27.3 billion a year on the environment ($364 a year in our household, or 0.73 percent; think of it as preventive care)

Like Social Security, Medicare Part A is in serious danger of insolvency. Of course, runaway health care spending is hardly a new topic in this country.

$9K a year on your kids (19%)

The federalist in me doesn’t like making states children in this metaphor (with the federal government as parent). But it helped me better visualize the budget.

• $624.4 billion a year goes to grants from the federal government to the states ($8,346 a year in our household, or 16.69 percent)

A majority of that $8,346 a year in grants goes to Medicaid, but a panoply of public priorities makes up the rest.

A few smaller items — education spending, Pell grants, and the child tax credit — each make up less than one percent.

$9K a year on your house and car (19%)

Contrary to the subhead, this category is not just what the federal government spends on housing, nor does it include the famed auto bailout of last decade.

What it does include, though, is America’s defense spending — one of the largest single items in the annual budget.

• $589.7 billion a year on defense ($7,883 a year in our household, or 15.77 percent)
• $56.7 billion a year on transportation ($757 a year in our household, or 1.52 percent; think of this as car payments)
• $37.5 billion a year on crime/disaster spending ($501 a year in our household, or 1.00 percent)
• $13.9 billion a year on immigration and border security ($185 a year in our household, or 0.37 percent; the border security portion could be likened to putting a fence around your yard)

$7K a year on everything else (13%)

Of course, households also spend on items that are not considered ‘core.’ While there’s an argument out there for every line item in the federal budget, items that could not fit under one of the core categories above are included here.

The largest item under “everything else” is interest on the debt — think of this, perhaps, as interest owed on debts from the family credit card(s). That was $223.2 billion in 2015, equal to $2,983 a year in our household, or six percent.

Other items are at two percent ($1,000) or less, including foreign aid, SNAP (known colloquially as food stamps), the earned income tax credit (EITC), Supplemental Security Income (SSI), unemployment, and agriculture.

Fixing the household budget

Understanding the federal budget as a household budget only gets you so far; defense spending is not like a mortgage, and Social Security can’t be adjusted as easily as a 25-year-old adjusts her 401(k) contribution.

But when federal lawmakers have debates about where to raise spending, where to cut spending, and whether or not to raise taxes, Americans may have a better debate about priorities if they can relate a federal budget item to something they spend money on every day, month, or year.

After all, if the federal government budget is a $50,000 household budget, then it’s worth noting the household is bringing in only $44,138 a year. Most families can’t run $6,000 deficits every year, year after year. The federal government shouldn’t be able to, either.