Fiscal Cliff Breakdown: How the Government Spends Your Precious Tax Dollars

Alden Wicker

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.

(Find out where Obama stood on such election issues as Social Security and Medicare.)

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 CreditSupplemental 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.

  • Libsta4

    I am a firm believer that your spending should, and usually does, match your values.  Although I am happy to see that the government values healthcare and support for retirees, it saddens me that as a country we value war so much higher than education.  It’s not even close. 

    I think that there is no doubt that we need to restructure the health care system to make it more efficient and cheaper.  I also think we absolutely need to raise the age for collecting Social Security benefits.  I do believe that in my lifetime SS will disappear. 

    • Mbaker

      Yeah, I’m sure that the difference in spending has absolutely nothing to do with the fact that airplanes, tanks, etc. cost more than textbooks.

    • Michael

      You shouldn’t see it as putting value on war but rather safety.  We value health more than we value safety and we value safety more than we value education.

  • Tallywg

    This article is absolutely misleading! Social Security and Medicare are not a tax! The working class pays into both these, as I did for 40+ years. Articles like these, and our stupid congress, misrepresents each of these as entitlements, which they are not. And both would be well funded had not our congress borrowed funds for stupid decisions as paying for wars like the Vietnam war! I (and most others) paid in much more than I’ll ever realize from either, and will receive much less return on either than I would have had, had I invested the same amount in a good index fund! Shame on Learnvest for being another source for mis-information!

  • Zamzow

    I would have liked to have seen how much of this spending is borrowed….even though the Medians make $52k or so..the spending vastly outstrips the income. 
    That is the real tragedy of where the government allocates its money – it doesn’t live within its means, a practice Learnvest does not advocate!!

  • CrankyFranky

    wow – ten times as much on defense spending as on education !

    There’s a plan – why bother educating people to build a better future when you can just build more efficient ways to kill people …