A federal budget pie chart splits into two views: where the money goes and where it comes from. On the spending side, the government spent $7.01 trillion in fiscal year 2025, divided into three unequal slices — mandatory programs like Social Security and Medicare (roughly two-thirds), discretionary programs Congress funds each year (a bit under a third), and net interest on the national debt (about 14 percent).1U.S. Treasury Fiscal Data. Federal Spending On the revenue side, the government collected about $5.2 trillion, mostly from individual income taxes and payroll taxes. The two sides don’t balance: a roughly $1.8 trillion deficit was covered by borrowing.
The Mandatory Slice Is Nearly Two-Thirds of the Pie
Mandatory spending accounts for nearly two-thirds of all federal outlays.2U.S. Treasury Fiscal Data. Federal Spending – Section: The Difference Between Mandatory, Discretionary, and Supplemental Spending These programs run on permanent law. Anyone who qualifies gets paid, no annual vote required. That’s why this slice keeps growing regardless of who controls Congress.
Social Security
Social Security is the single largest line item in the federal budget. The program paid out approximately $1.55 trillion in fiscal year 2025 for retirement, survivors, and disability benefits. A 2.8 percent cost-of-living adjustment took effect in January 2026.3Social Security Administration. How Much Will the COLA Amount Be for 2026 and When Will I Receive It The governing statute is the Social Security Act of 1935, amended many times but still the foundation.
Medicare and Medicaid
Federal healthcare programs together rival Social Security in size. Medicare, authorized under Title XVIII of the Social Security Act, covers people 65 and older and certain people with disabilities.4Social Security Administration. Social Security Act Title XVIII – Health Insurance for the Aged and Disabled The Centers for Medicare and Medicaid Services reported roughly $1.69 trillion in net outlays for fiscal year 2025 across hospital, physician, and drug coverage. Medicaid, authorized under Title XIX, covers low-income individuals and families through a federal-state partnership where Washington pays a share of each state’s costs.5Social Security Administration. Social Security Act Title XIX – Grants to States for Medical Assistance Programs Both keep expanding as the population ages and medical costs rise, which is why healthcare is the fastest-expanding part of the mandatory slice.
Other Mandatory Programs
The rest of the mandatory slice is a mix: federal employee retirement, the Supplemental Nutrition Assistance Program, the earned income tax credit, unemployment compensation, and most veterans’ benefits. That last category is worth flagging because people often assume veterans’ spending is discretionary. It isn’t, mostly. The VA’s fiscal year 2026 budget request included $301.2 billion in mandatory funding for benefit programs against $125 billion in discretionary funding for healthcare and other services.6U.S. Department of Veterans Affairs. Budget Disability compensation and pensions are locked in by law.
The Discretionary Slice: Defense Dominates
Discretionary spending is the portion Congress actively votes on each year through twelve appropriation bills. The Fiscal Responsibility Act of 2023 set enforceable caps for FY 2024 and FY 2025, with the security category (mostly defense) at about $895 billion and the nonsecurity category at about $711 billion for FY 2025. Those caps expired at the start of FY 2026, and the Act’s combined discretionary limit of roughly $1.62 trillion for that year was not split into separate defense and nondefense pieces.
Defense
Defense pays for military personnel, weapons systems, operations and maintenance, and research, and it consistently takes more than half of all discretionary dollars. The FY 2025 security cap of about $895 billion gives the scale, though actual defense spending can run higher through emergency and overseas contingency designations that sit outside the caps.
Nondefense
Everything else Congress funds annually falls in this piece: education grants, transportation infrastructure, scientific research, law enforcement, environmental protection, diplomacy, and VA medical care. It draws the loudest fights during shutdown standoffs even though it’s a small share of the whole pie.
Interest on the Debt Is Now Bigger Than Defense
The fastest-growing slice buys nothing new. Net interest payments on the federal debt exceeded $1 trillion for the first time in fiscal year 2025, taking about 14 percent of all federal outlays. The government now spends more on interest than on defense.
When spending exceeds revenue, Treasury borrows by selling bills, notes, and bonds.7U.S. Treasury Fiscal Data. Understanding the National Debt Total gross national debt stood at $38.86 trillion as of March 2026. CBO projects the 10-year Treasury rate at about 4.1 percent for 2026, and because much of the debt issued at near-zero rates in 2020 and 2021 is now rolling into today’s higher rates, interest costs keep climbing even without new rate hikes. Missing an interest payment would be a default, so this is one slice of the pie that can’t be cut directly. It shrinks only if the government borrows less or rates fall.
The Revenue Side: Where the Money Comes From
The revenue pie is simpler but just as uneven. The government collected roughly $5.2 trillion in fiscal year 2025, with individual income taxes making up more than half. Income tax rates are progressive, rising in steps across seven brackets.
Payroll Taxes
Payroll taxes are the second-largest revenue source, earmarked for Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, for combined rates of 12.4 percent and 2.9 percent.8Internal Revenue Service. Topic no. 751, Social Security and Medicare Withholding Rates Self-employed workers pay both halves. These flow into dedicated trust funds rather than general revenue, though the trust funds hold Treasury securities, which blurs the practical distinction.
Corporate Income Taxes
Corporations pay a flat 21 percent federal rate on profits. This slice is smaller than most people assume, generating far less than either individual income taxes or payroll taxes. Effective rates for large companies often run well below 21 percent after deductions, credits, and international tax planning.
Excise Taxes, Customs Duties, and Other Sources
Excise taxes on fuel, tobacco, and alcohol are a thin sliver. Customs duties on imported goods generated $194.9 billion in fiscal year 2025, a notable jump driven by tariff policy changes.9U.S. Treasury Fiscal Data. Government Revenue The rest is miscellaneous receipts — fees, fines, and leases on federal land.
Tax Expenditures: The Slice That Isn’t on the Chart
A standard pie chart misses one enormous category. Tax expenditures — deductions, credits, and exclusions written into the tax code — reduce revenue collected and function much like direct spending, but they never appear on any appropriation bill. The Joint Committee on Taxation projected these provisions would cost $2.3 trillion in foregone revenue for fiscal year 2026. The five largest: the exclusion for retirement savings contributions ($355 billion), preferential rates on dividends and long-term capital gains ($252 billion), the exclusion for employer-sponsored health insurance ($240 billion), the child tax credit ($128 billion), and Affordable Care Act insurance subsidies ($105 billion).
Those numbers rival the entire discretionary budget. When policymakers talk about cutting spending, they rarely touch this $2.3 trillion category, though eliminating a few of its largest items would move the fiscal needle more than zeroing out most federal agencies.
Why the Two Sides Don’t Match
The most important thing the pie chart shows is that the spending side is substantially larger than the revenue side. In FY 2025, the roughly $1.8 trillion gap between $7 trillion in spending and $5.2 trillion in revenue was covered by borrowing. CBO projects the deficit will grow to $1.9 trillion in FY 2026, about 5.8 percent of GDP. That gap is not a one-time surge. It reflects a structural pattern where mandatory spending and interest grow faster than the economy.
The math compounds. Larger deficits mean more borrowing, which means higher interest costs, which means larger deficits. Aging demographics keep pushing Social Security and Medicare higher, interest rates sit well above the near-zero levels of the 2010s, and revenue hasn’t kept pace. That’s why the mandatory slice of the pie has grown steadily over decades while the discretionary slice has shrunk as a share of the total. Roughly two-thirds of federal spending isn’t really up for debate in any given year.