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Spending in the federal budget is grouped into categories, which are known as budget functions. Each function includes a group of activities or programs that have a similar public purpose, which is helpful for comparing and analyzing overall spending priorities. The 10 largest budget functions for 2020 are listed below.
|Budget Function||Description||Cost in 2020 ($ billions)|
|Income Security||The Income Security function includes programs that provide cash and other government assistance to individuals in need, such as those who are unemployed or earning a low income.
Examples include unemployment compensation, the Supplemental Nutrition Assistance Program, Supplemental Security Income, Temporary Assistance for Needy Families, certain federal retirement programs (other than Social Security), and housing assistance. In addition, refundable tax credits (payments that exceed taxes owed) fall into this budget function.
In 2020, spending on income security programs was boosted by spending to address the COVID-19 pandemic — in particular for unemployment compensation, direct payments to individuals, and the refundable portion of the child tax credit. In 2019, income security totaled $515 billion, and spending was lower than for the Social Security, Defense, Medicare, and Health budget functions.
|Social Security||The Social Security function includes the two programs administered by the Social Security Administration: Old Age and Survivors Insurance and Disability Insurance. This function includes both benefit payments to retired and disabled workers (and their spouses, survivors and dependent children) as well as the cost of administering the programs.||$1,096|
|Medicare||The Medicare function consists entirely of the Medicare program, which provides health insurance to Americans 65 or over and people with disabilities. Most of the spending goes towards the provision of medical services and prescription drugs.||$776|
|Health||The Health function includes most direct healthcare services funded by the federal government other than Medicare, health benefits for federal employees and certain retirees, and the treatment, assessment, and prevention of health-related issues in the United States.
Examples include Medicaid, the Children’s Health Insurance Program, and activities carried out by agencies such as the National Institutes of Health, Centers for Disease Control and Prevention, and the Food and Drug Administration.
|National Defense||The National Defense function largely covers the military activities of the Department of Defense. The rest of the funding goes towards the defense-related activities of other departments, such as the Department of Energy nuclear programs and the National Security Administration.||$725|
|Commerce and Housing Credit||The Commerce and Housing Credit function includes programs that support commercial activities, including housing credits, the Postal Service, deposit insurance, and several other miscellaneous programs.
Many of the programs in this function are fee-funded and often have no net cost recorded in the budget. For 2020, however, the cost of the Paycheck Protection Program and other activities of the Small Business Administration were recorded here; they accounted for $552 billion of the $569 billion total.
|Net Interest||The Net Interest function includes interest payments on the federal debt paid to private holders of U.S. Treasury securities. It is partially offset by interest income on loans and earnings from the National Railroad Retirement Investment Trust.||$345|
|Education, Training, Employment, and Social Services||This function includes federal funding for the Department of Education and social service programs administered by a variety of agencies to educate and train workers. It also includes the Library of Congress and certain research and cultural institutions, such as the National Endowment for the Arts and the Smithsonian.||$238|
|Veterans Benefits and Services||The Veterans Benefits and Services function includes the spending of the Department of Veterans Affairs and affiliated programs. Most of the spending in this function is for veterans’ compensation, pensions, and health care.||$219|
|Transportation||The Transportation function includes spending on highways, public transit, the Transportation Security Administration, the Federal Aviation Administration, the Federal Railroad Administration, and most programs of the Coast Guard.||$146|
Source: Office of Management and Budget, Historical Tables, Budget of the United States Government: Fiscal Year 2022, May 2021.