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In “Money Blues,” singer/songwriter Bob Dylan sings, “Sittin’ here thinkin’ Where does the money go?” The song narrates a story of a man down on his luck and down to his last dime, but it could easily apply to the convoluted federal budget process and its price tag for fiscal year 2003.

The fiscal year 2003 $2.16 trillion ($2,160,000,000,000!) budget breaks down to about $7,000 for every man, woman and child in the country. That figure translates into approximately $6 billion per day and a little more than $4 million per minute (and you thought long-distance rates were outrageous). Now, the important questions–Where does the money come from and, even more relevant, where does it go?

The federal budget covers funding for everything from large programs such as Social Security and Pell grants, to smaller-ticket items such as small business loans and even repairs to the panda enclosure at the National Zoo (National Zoo’s panda cam).

The federal budget consists of “revenues” and “outlays.”  For a given year, the budget makes spending recommendations based on anticipated income from federal taxes.  While taxes are not the government’s only source of income, they make up the lion’s share (97 percent).

The Federal Government Dollar:  Where Does the Money Come From?



Because education is primarily a State and local responsibility in the United States, the federal government pays only 9 percent of education funding for grades K-12. Funding for education accounts for less than 2.5 percent of all federal spending and is targeted for specific purposes. The bulk of education spending comes from state and local tax revenues.

Social Security payments make up the largest percentage of the federal budget (22 percent) and provide monthly payments to more than 50 million retired and disabled workers, their dependents and survivors. Other federal spending pays for Medicare and Medicaid (18 percent) and defense (17 percent). Programs including interest on the federal debt, housing, transportation and foreign aid make up 40 percent of the budget.

After receiving the President’s budget proposal in early February, Congress begins work on its own budget resolution in an attempt to agree to a plan before the appropriations committees begin the actual allocation of funds on May 15. Key players in negotiating the Congressional budget resolution are President Bush, Sens. Kent Conrad (D-ND) and Pete Domenici (R- NM), the Chairman and Ranking Member, respectively, of the Senate Budget Committee and Reps. Jim Nussle (R- IA) and John Spratt, Jr. (D- SC), the Chairman and Ranking Member of the House Budget Committee.

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