Medicare, Medicaid, Children’s Health Insurance Program (CHIP): 21%
The Median family spent $1,230 on Medicare, Medicaid and CHIP, including $779 on Medicare.
The largest chunk of federal spending went to these three health-related programs. But even more of your taxes, in the form of state funds, go to these programs–the federal government only matches what the states pay for Medicaid and CHIP.
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Both Republicans and Democrats would like to shrink Medicare spending, but the sticking point is how. The eligibility age (currently 65) could be raised–an option that 67% of Americans oppose, according to a recent poll. Obama has also expressed support for means-testing Medicare, which would require people with higher incomes to pay more. And Republicans would like to trim benefits.
Defense Spending: 20%
The Median family spent $1,171 last year on defense spending, including $258 on Iraq and Afganistan.
America spends more than 13 other high-spending countries combined on defense. But if no compromise is reached on the fiscal cliff, the Pentagon budget would automatically face $55 billion in cuts next year, and $500 billion over the next decade–a devastating outcome for many industries, towns and people who rely on defense spending.
Even if a deal is reached, most Democrats, Republicans and other policy makers agree that the defense budget will still face some cuts, especially with the wars in Iraq and Afghanistan ending. The base defense budget, which doesn’t include these two wars, has doubled over the last decade–and that includes last year’s defense cuts of $500 billion.
Social Security: 20%
The Median family spent $1,171 last year on Social Security.
We don’t recommend that anyone plan to rely on Social Security for their retirement benefits–$1,171 a year in retirement savings is pretty pitiful. (Learn more about how much you should be saving in our Retiring in Style Bootcamp.)
Still, with Social Security taking up a full 20% of the federal budget, Republicans have proposed cutting its price tag by shrinking cost-of-living hikes. The White House and Democrats, on the other hand, want Social Security cuts taken off the table in the debate. It’s not clear yet who will win in this showdown.
Safety Net: 13%
The Median family spent $761 last year on safety net programs.
According to the White House’s budget breakdown for 2011, these programs include (in order of percentage spent) unemployment insurance; food and nutrition assistance; housing assistance; Earned Income Tax Credit, Making Work Pay credit, and Child Tax Credit; Supplemental Security Income; federal military and civilian employee retirement and disability, child care, foster care and adoption support; and Temporary Assistance for Needy Families (the official name for welfare), railroad retirement and additional income security.
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While most talk has centered around Social Security and Medicare, Republicans have made references to cutting social programs–many will be cut automatically if we fall off the fiscal cliff. One bill would reduce funding for food stamps. Extended unemployment benefits are currently set to expire four days after Christmas. In 2009, Obama expanded the EITC and Child Tax Credits, both of which are set to expire on December 31st.