How Does Uncle Sam (Tentatively) Plan to Spend
Your Federal Tax Dollar in FY 2002?

How does President Bush propose to spend your federal tax dollar in FY2002? A lot differently than it was spent in FY1992, ’82, ’72 or ’62, according to the Tax Foundation’s annual comparison.

Assuming that Congress makes no dramatic changes in the President’s FY2002 Budget, 59¢ out of every tax dollar spent will go to three areas — Social Security, health and medical, and income security. These program areas are "mandatory," so the federal government automatically spends a legally determined amount of money.

Compared to previous budgets, the biggest changes in the last four decades can be found in how much Uncle Sam spends on health-related programs and on national defense. In FY 1962, Uncle Sam spent only 1¢ out of every tax dollar on health, and even after Medicare and Medicaid had been enacted, that cost only rose to 7¢ on the dollar in 1972 and 10¢ in 1982. Those are small slices of the national pie compared to the 22¢ that is planned for 2002.

On the other hand, the portion of federal spending devoted to national defense has fallen from 49¢ out of every tax dollar in FY 1962, to 25¢ in FY 1982, to a proposed 16¢ in FY 2002.

Net interest payments on the federal debt are projected to fall significantly in FY 2002 compared to ten years ago, from almost 15¢ on a dollar in 1992 to slightly less than 11¢ in the coming fiscal year.

The FY 2002 budget shows that "discretionary" spending — such as defense, education, agriculture, and transportation — now plays a comparatively minor role — only about 31¢ on a dollar. Mandatory spending and net interest now account for 69¢. In contrast, back in FY 1962, the portions were reversed: discretionary spending was roughly 70¢ out of every federal tax dollar while entitlements and net interest payments took up about 30¢.

How the Federal Government Spends the Nation's Tax Dollars

$Billions

Percent

FY
1962

FY
1972

FY
1982

FY
1992

FY
2001

FY
2002

FY
1962

FY
1972

FY
1982

FY
1992

FY
2001

FY
2002
Total

106,821

230,681

745,755

1,381,684

1,856.3

1,959.3

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%
National Defense

52,345

79,174

185,309

298,350

299.1

318.9

49.0%

34.3%

24.8%

21.6%

16.1%

16.3%
Net Interest

6,889

15,478

85,044

199,373

206.5

188.3

6.4%

6.7%

11.4%

14.4%

11.1%

9.6%
Health & Medicare

1,198

16,153

74,012

208,521

394.8

431.1

1.1%

7.0%

9.9%

15.1%

21.3%

22.0%
Income Security

9,207

27,650

107,737

197,022

262.9

275.7

8.6%

12.0%

14.4%

14.3%

14.2%

14.1%
Social Security

14,365

40,157

155,964

287,585

433.6

454.7

13.4%

17.4%

20.9%

20.8%

23.4%

23.2%
Transportation

4,290

8,392

20,625

33,332

51.1

54.7

4.0%

3.6%

2.8%

2.4%

2.8%

2.8%
Veterans Benefits/Services

5,619

10,720

23,938

34,064

45.3

51.1

5.3%

4.6%

3.2%

2.5%

2.4%

2.6%
Education, Training, etc.

1,241

12,529

27,029

45,248

64.7

76.2

1.2%

5.4%

3.6%

3.3%

3.5%

3.9%
Other

11,667

20,428

66,097

78,189

98.3

108.6

10.9%

8.9%

8.9%

5.7%

5.3%

5.5%
Source: FY 2001 Budget of the United States Government Historical Tables, Table 3.1.

Note: "Income Security" includes: General Retirement and Disability, Federal Employee Retirement and Disability, Unemployment Compensation, Food and Nutrition Assistance, Supplemental Security Income, Family and Other Support Assistance, Earned Income Tax Credit, Offsetting Receipts, Housing Assistance and Other.

Note: "Other" includes: Energy, Natural Resources and Environment, Commerce and Housing Credit, Community and Regional Development, International Affairs, General Science, Space and Technology, Agriculture, Administration of Justice, General Government, Allowances and Undistributed Offsetting Receipts.

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©2001 Tax Foundation