Social Security

Social Security (including retirement and disability benefits) is the single largest program funded by the federal government. In 2024, Social Security will provide benefits to nearly 68 million people and cost $1.5 trillion. The program will account for 23 percent of total federal spending. By contrast, net Medicare spending is anticipated to reach $851 billion, or 13 percent of the budget; national defense will total $822 billion and account for 13 percent of total spending.

Learn more about how Social Security works.

Major healthcare programs

By 2054, the Congressional Budget Office (CBO) projects that 85 million Americans will be age 65 and over — approximately one-fifth of the U.S. population. The aging of the population, combined with rising healthcare costs and increasing life expectancies, will cause spending on major healthcare programs to grow to 30 percent of the budget over the next 30 years, or to 8.5 percent of gross domestic product (GDP).

Learn more about what America spends on healthcare.

Learn more about the Peterson Center on Healthcare.

Note: Welfare programs and unemployment compensation are both components of “Other Spending.”

Interest Costs

Over the past four years, interest payments have grown at a higher rate than all other major categories of spending. Interest costs have grown by 76 percent, nearly 30 percentage points faster than the next largest category. That growth in interest costs will continue in subsequent years; CBO projects that in 2051, interest costs will exceed spending on Social Security, thereby making it the largest component of the federal budget.

Learn more about what the national debt is costing us.

2033 — when someone who is currently age 58 turns 67

Over the next 10 years, the Old-Age and Survivors Insurance Trust Fund is projected to become insolvent. When the balance currently in the fund is depleted, full benefits will no longer be able to be paid, which could result in an immediate 23 percent cut in benefits affecting 70 million beneficiaries. Without action, many of the United States’ most vulnerable citizens could face reductions in income that they can ill afford. Policymakers should act soon to make Social Security sustainable so that reforms can be phased in gradually.

See how old you will be when the Social Security Trust Fund expires or learn more about the trust funds.

More than the next 10 highest-spending countries combined

The United States spent $877 billion on national defense in 2022, exceeding the defense spending of China, Russia, India, Saudi Arabia, the United Kingdom, Germany, France, South Korea, Japan, and Ukraine combined.

Learn more about the link between America’s long-term fiscal health and our national security.

Approximately 1 percent of the budget

The United States spent $69 billion on foreign aid in 2023 — just 1.1 percent of total spending. That spending supports four primary activities: development assistance, security assistance, humanitarian aid, and economic support.

Explore which countries receive foreign aid from the United States, and learn more about the federal budget for international relations.

All of the above

The U.S. spends more on tax expenditures than on Social Security, Medicare, and discretionary defense funding. In 2024, tax breaks are expected to total 7.4 percent of GDP, while all corporate income, individual income, and payroll tax revenues will reach 16.7 percent of GDP.

Learn more about how our tax system works.

6.3 percent of GDP — nearly three times what the federal government has historically spent on research and development, infrastructure, and education combined.

As the debt increases, the government will spend more of its budget on interest costs, increasingly crowding out public investments that are crucial to economic growth. Net interest costs are projected to increase significantly from 3.1 percent of GDP in 2024 to 6.3 percent in 2054.

Federal Insurance Contributions Act, which funds Social Security and Medicare

The FICA line on your paycheck is used to finance Social Security and Medicare’s Hospital Insurance program. FICA taxes are payroll taxes that are imposed equally on the employee and the employer — each pay 6.2 percent of the employee’s annual income (up to a cap of $168,600 in 2024) for Social Security and 1.45 percent of the employee’s income for Medicare (no cap). Self-employed individuals pay both parts.

Learn more about payroll taxes or watch a short video about the different types of taxes that the government collects.

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There are many options available to lawmakers to chart a better course for America, with less debt, faster economic growth, broader prosperity, and enhanced economic opportunity and mobility. In 2019, the Peter G. Peterson Foundation asked experts from seven politically diverse organizations to develop policy proposals to set the federal budget on a long-term path for prosperity and economic growth. All of them achieved that goal. Learn more about each think tank’s blueprint for stabilizing or reducing the federal debt by 2049.

Play the Fiscal Ship game to come up with your own solutions to our nation’s fiscal challenges.