Federal spending can be divided into three areas: mandatory spending, discretionary spending, and spending to pay the interest on the national debt. Mandatory and discretionary spending account for 90% of all federal spending, which most recently totaled almost 4 trillion dollars. This type of spending pays for federal services and programs, such as social security and Medicare, on which the public depends.

Mandatory spending is the money that Congress has agreed to pay every year, generally without very many changes. This type of spending happens apart from new programs or expenditures that get debated and ultimately approved by Congress. Mandatory spending constitutes over two-thirds of the federal budget, and the biggest line item in mandatory spending is social security, which makes retirement possible for millions of people. Social security accounts for about one-third of the entire mandatory spending budget and about 23% of the total federal budget. It amounted to 1.2 trillion dollars in 2015. Veterans' benefits and Medicare bills are also covered by mandatory spending.

Discretionary spending must be expressly approved by Congress each year. The programs included in discretionary spending are funded "at the discretion" of Congress above and beyond mandatory programs like social security. This category includes the nation's military budget, which accounts for 53% of spending, or $598 billion. (To understand the proportion of discretionary spending the military consumes, consider that the next item, the work of government, is allotted only $72 billion.) Other categories within discretionary spending include transportation, health and science, and education.

In 2015, tax revenue equaled $2.05 trillion. Individual income taxes were $1.48 trillion; corporate taxes were $342 billion. Other taxes equaled $156 billion. Customs equaled $35 billion, and excise taxes equaled $38 billion. Trust fund tax revenue equaled $1.13 trillion. Social security and Medicare taxes equaled $1.06 billion, and other revenue equaled $2 billion.

The federal government has been running budget deficits for quite some time and has accumulated, as of 2017, $19 trillion in debt. A deficit occurs when total income does not equal or exceeds total expenditures. When the government runs a deficit, it has to borrow to pay for spending not covered by tax revenues. And each year, the government must also pay interest on the debt that it owes.

The impact of government spending on the economy is enormous. If the government stopped making social security or Medicare payments, millions of people would fall into poverty immediately. Research and development projects funded by the government would cease, and the level of scientific knowledge would plummet. Massive public transportation projects, such as subways and light rail systems, would have to be shelved, and the building of new federal interstate highways would stop. Borders and airports would go unguarded; securities markets and banks would be unregulated. While some may object to the extent to which the federal government is involved in the national economy, no one denies the impact that the federal government has on that economy.