Where does all the money go? It is really quite simple. Governments at all levels, federal, state, and local, spend about $1.0 trillion a year on pensions, including Social Security and government employee pensions. Governments spend about $1.1 trillion a year on health care, principally Medicare and Medicaid. Governments spend about $0.9 trillion a year on education at all levels, principally at the local government level. The federal government spends about $0.9 trillion a year on defense, including the Departments of Defense, State, and Veterans Affairs. Governments spend $0.6 trillion on welfare programs. All other spending amounts to $1.7 trillion, including interest on the national debt. It all adds up to $6.3 trillion.