10 Largest Budget Functions

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 2021 are listed below. Note that the sizes of certain budget functions were unusually large in 2021 because of spending related to COVID relief and economic recovery.

1. Income Security ($1,648 billion). 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 2021, spending on income security programs was boosted by programs to address the COVID-19 pandemic — in particular for additional unemployment compensation, direct payments to individuals, and the refundable portion of the enhanced 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.


2. Social Security ($1,135 billion). 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.


3. Health ($796 billion). 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 Food and Drug Administration.


4. National Defense ($754 billion). The National Defense function covers the military activities of the Department of Defense. In addition, some funding in this function goes toward the defense-related activities of other departments, such as Department of Energy nuclear programs and the Federal Bureau of Investigation.


5. Medicare ($696 billion). 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 toward the provision of medical services and prescription drugs.


6. Net Interest ($352 billion). 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 as well as earnings from the National Railroad Retirement Investment Trust.


7. Commerce and Housing Credit ($308 billion).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 2021, however, the cost of the Paycheck Protection Program and other activities of the Small Business Administration were recorded here; they accounted for $335 billion, which was partially offset by the net income of other programs.


8. Education, Training, Employment, and Social Services ($298 billion). 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.


9. General Government ($274 billion).The General Government function includes spending by the White House, Congress, and other agencies on the activities of the executive and legislative branches of the federal government. In 2021, $243 billion of the total $274 billion in spending was allocated to the Coronavirus Relief Fund for state, local, and tribal governments.


10. Veterans Benefits and Services ($234 billion). 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.