The Federal Budget Mostly Benefits Seniors

New data from the Penn Wharton Budget Model shows exactly who the federal government works for

A new analysis from the Penn Wharton Budget Model has done something deceptively simple: it reorganized the entire federal budget not by agency or program category, but by the age of the people who actually receive the money. The results are not new, but they are striking, and they deserve all the attention they are getting.

Here are important numbers highlighted in the report: in fiscal year 2025, Americans 65 and older received $43,700 per person in federal spending. Americans under 26 received $4,300. Workers between 26 and 64, the people currently financing the system through their payroll Taxes, income taxes, and labor received $7,300.

Before anyone jumps to their preferred political explanation, let me say now that the solution isn’t to raise taxes or spend more on younger Americans. The government is way too big and inefficient as it already is. But more on that later.

What the Numbers Actually Show

Of the $7 trillion the federal government spent in fiscal year 2025, about $2.6 trillion went to things that cannot be assigned to any particular age group. That includes defense, interest on the debt, and a few other things. The remaining $4.4 trillion went to identifiable beneficiaries.

Of that $4.4 trillion in direct age-assignable spending:

• Children and young adults under 26 received $449 billion, or 10 percent

• Working-age adults received $1.2 trillion, or 28 percent

• Retirees received $2.7 trillion, or 62 percent

Seniors receive 10 times as much per capita from the federal government as children and young adults, and 6 times as much as working adults. This imbalance is expected to grow.

Two programs drive the retiree dominance almost entirely: Social Security ($1.3 trillion to older adults) and Medicare ($835 billion). Together, they account for 80 percent of all federal spending on people 65 and older.

These programs are the drivers of our current and future spending and debt. The United States government is often described as a military superpower that happens to run a social safety net on the side. That description is now outdated. A more accurate one: the federal government is a retirement home that maintains an army for security, collects taxes from the staff to pay the residents’ bills, and sends the remaining expenses to the residents’ grandchildren on credit.

Penn Wharton’s political economy analysis offers a sobering explanation for why this persists. Old people vote, and middle-aged voters can imagine benefiting from the benefits.

That democratic support doesn’t make it okay, especially since, as designed, it is also an immoral transfer of wealth from the relatively young and poor to the relatively old and wealthy. And older people can’t even really claim that they have paid for the benefits entirely, as they often imply.

Did Seniors Actually Pay for This?

This is the question that generates the most heat and the least light in public debate. The honest answer is: partly, but significantly less than most people assume, and the shortfall grows every year.

It is true that today’s retirees spent careers paying payroll taxes. But the pay-as-you-go structure of Social Security and Medicare Part A means those past contributions were not saved or invested on the contributor’s behalf. They were transferred immediately to whoever was retired at the time. The implicit contract was always: your taxes fund today’s retirees, and tomorrow’s workers will fund you. What that contract depends on and what is now strained is a favorable ratio of workers to retirees.

That ratio has deteriorated sharply. When Social Security was designed, there were many workers per retiree. Today, the ratio is roughly 2.7 to 1 and falling. The math that made the original bargain viable no longer holds.

Medicare compounds the problem. Nearly 45 percent of Medicare( Parts B and D) is funded through general revenues, not payroll taxes at all. Beneficiaries paid no dedicated tax for a large portion of what they now receive. And across both Social Security and Medicare, the Penn Wharton analysis notes that many past and current retirees have received or will receive more in present-value benefits than they contributed through payroll taxes.

Two Wrong Answers

The data is stark enough that it will inevitably be recruited into arguments for solutions that do not actually follow from it. Two in particular deserve pushback.

The first wrong answer is: More taxes

The fiscal arithmetic does not support this as a primary solution. The federal government’s structural imbalance is driven by the growth of age-based entitlement spending, not by an insufficient top marginal tax rate. The Congressional Budget Office projects that Social Security and Medicare alone will account for essentially all deficit spending over the next three decades. Closing that gap through income taxes on high earners would require rate increases of a magnitude that would have significant effects on investment, capital formation, and economic growth, and still would not fully close the structural shortfall, because the problem is not the revenue baseline; it is the spending trajectory. Redistribution from the rich to the poor isn’t a substitute for entitlement reform. And as I have said before, if Congress doesn’t want to reform these programs and borrow instead, then inflation will take care of the adjustment.

The second wrong answer is: the solution is to spend more on children and young adults.

The Penn Wharton data showing that children receive far less federal spending than seniors is sometimes read as an argument for expanding programs aimed at younger Americans. That reading misses the point. The problem is not that child-directed spending is too low in absolute terms (I can point to many programs that shouldn’t exist or that are distortive and counterproductive when directed to children now); it is that age-based entitlement spending is on a trajectory that will crowd out everything else. Adding new spending commitments on top of an already-unsustainable baseline does not solve the structural imbalance; it deepens it.

The Penn Wharton analysis is another clear-eyed accounting of where the federal government’s resources actually go and a demonstration that current trends are not politically stable, demographically sustainable, or fiscally viable.