(CNN) — The US is $31.4 trillion in debt. This staggering amount is in the spotlight because the federal government has hit its borrowing cap and will not be able to pay all its bills within a few months if Congress doesn’t act. A default would have catastrophic consequences on the nation’s economy, global finances and many Americans.
The debt stems from the federal government spending more than it collects in revenue, which results in an annual deficit. The debt is an accumulation of those deficits. In the last 50 years, the government has only run a surplus five times, most recently in fiscal year 2001, according to the Treasury Department.
The nation’s fiscal imbalance is nothing new. In fact, the US has been in debt since its inception, according to the Treasury Department. Wars, economic downturns and the Covid-19 pandemic have caused the debt to balloon over the centuries.
President Joe Biden and House Republicans are locked in a battle over whether to pair addressing the debt ceiling with cutting spending. Biden has said his budget proposal, which he is expected to unveil on Thursday, will seek to reduce the deficit by $2 trillion over 10 years.
A century of growing debt
The US federal debt in inflation-adjusted dollars has increased from $408 billion in fiscal year 1922 to more than $30 trillion today.
Source: US Treasury Department
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 what’s known as mandatory spending, which means existing laws require the funds to be allocated. Social Security, Medicare, Medicaid, food stamps, veterans benefits and retirement programs for federal civilian and military retirees all fall into this category. Congress does not specify funding levels for these programs annually.
Lawmakers, however, do have control over so-called discretionary spending, which they vote on annually. More than half of this funding goes toward national defense, while the rest supports a wide variety of federal agencies and programs, including education, transportation, housing, environmental protection and federal law enforcement.
And then there’s interest owed on the debt, which has grown rapidly over the past year amid repeated rate hikes by the Federal Reserve. Interest costs are expected to balloon further in coming years, exceeding federal spending on Medicaid and defense within a decade, according to the Peter G. Peterson Foundation.
What the US government spends money on
The government spent $6.27 trillion in fiscal year 2022. Each square below represents roughly $1 billion.
Social Security
$1.22 trillion (19%)
Provides monthly retirement benefits averaging $1,828 in 2023 to nearly 49 million retired workers, as well as benefits to nearly 3 million spouses and children of retired workers, nearly 6 million surviving children and spouses of deceased workers and nearly 9 million disabled workers and their eligible dependents.
= $1 billion
Health
$914 billion (15%)
Includes Medicaid and the Children’s Health Insurance Program that serve more than 91 million Americans, Affordable Care Act tax credits, the National Institutes of Health and Centers for Disease Control and Prevention, among other programs.
= $1 billion
Income security
$865 billion (14%)
Includes unemployment benefits, food stamps, the refundable portion of the earned income and child tax credits, Supplemental Security Income, rental assistance and military and federal civilian employee pensions, among other programs.
= $1 billion
National defense
$767 billion (12%)
Consists mainly of funding for the Defense Department, including operations and maintenance, military personnel, procurement of weapons and research.
= $1 billion
Medicare
$755 billion (12%)
Provides health insurance for more than 65 million people who are age 65 or older or who have disabilities.
= $1 billion
Education, training, employment and social services
$677 billion (11%)
Includes the federal student loan program, Pell grants, federal support for disadvantaged K-12 school districts and special education, Head Start and dislocated worker employment and training initiatives, among other programs.
= $1 billion
Net interest
$475 billion (8%)
Covers interest payments on the money the federal government borrowed to finance past deficits. The federal debt held by the public hit $24.3 trillion at the end of fiscal year 2022.
= $1 billion
Other
$600 billion (10%)
Covers veterans benefits and services, transportation, general government services, the Internal Revenue Service and federal law enforcement, corrections and the judiciary, among other things.
= $1 billion
Sources: US Treasury Department, Center on Budget and Policy Priorities
The federal government collected $4.9 trillion in revenue in fiscal year 2022, about $1.38 trillion less than what it spent, according to the Treasury Department. The shortfall is the budget deficit for that year and adds to the total national debt.
The largest chunk of revenue, by far, comes from individual income taxes — which amounted to more than half of the money collected in the last fiscal year. The next biggest slice comes from Social Security and Medicare payroll taxes of 12.4% and 2.9%, respectively. (These levies are split between employer and employee.)
But the government also raises money in other ways, including charging admission to national parks, levying customs duties on foreign imports and exports and imposing excise taxes on items such as alcohol, tobacco and gasoline.
Where the money comes from
US government revenue, by category, in fiscal year 2022
Source: US Treasury Department
Credit: Curt Merrill, Byron Manley and Matt Stiles, CNN
Source: www.cnn.com