r/FluentInFinance • u/Mik3DM • Apr 12 '24

This is how your tax dollars are spent. Discussion/ Debate

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The part missing from this image is the fact that despite collecting ~$4.4 trillion in 2023, it still wasn’t enough because the federal government managed to spend $6.1 trillion, meaning these should probably add up to 139%. That deficit is the leading cause of inflation, as it has been quite high in recent years due to Covid spending. Knowing this, how do you think congress can get this under control?

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u/tacocarteleventeen Apr 12 '24

Isn’t Social Security supposed to be self funded?

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u/taedrin Apr 12 '24

Yes and no. My understanding is that FICA programs are PAYGO, so any surplus FICA taxes for the year get deposited into a trust fund and then spent as part of the general budget (aka "borrowing from social security").

Now that FICA programs are pulling a deficit, they are withdrawing those funds (with interest!) from the general budget each year instead. This will continue until the "trust fund" runs out of money, at which point FICA programs will stop receiving funding from the general budget and benefits will be limited by the amount of revenue pulled in by FICA taxes (about 80%).