Four consecutive conversations with GPT-03:

After reading, I felt very emotional and thought it was worth sharing:

A classification of the major categories of the U.S. government's fiscal expenditures.

Browse and classify government expenditures

The user is asking about the major categories of U.S. government fiscal expenditures. I need to provide some expenditure classifications, mainly including mandatory spending (such as Social Security, Medicare, Medicaid, etc.), discretionary spending (such as defense and non-defense spending), and net interest expenditures. To be accurate, I need to check the latest budget information. I will search for data from fiscal year 2024 or 2025 to provide relevant expenditure classification figures and charts.

Classifying U.S. fiscal expenditures

The user wants to understand the classification of U.S. government fiscal expenditures. I need to provide common expenditure classifications, such as mandatory spending (Social Security, Medicare, Medicaid, etc.), discretionary spending (defense and others), and net interest expenditures. To answer accurately, I will look for and use the latest budget data to provide these classifications and related numerical data, and perhaps include some charts.

Classification of expenditures

U.S. expenditures can be divided into mandatory spending, discretionary spending, and net interest expenditures. Mandatory spending includes Social Security, Medicare, Medicaid, income security (such as unemployment insurance, SNAP), and other mandatory expenditures. Discretionary spending is divided into defense and non-defense spending, with the latter involving education, health research, transportation, international affairs, etc. Net interest expenditures account for a portion. Total expenditures in fiscal year 2024 are approximately $6.4 trillion, with percentages calculated for each type of expenditure.

Classification of U.S. fiscal expenditures

U.S. fiscal expenditures can be classified into mandatory spending, discretionary spending, and net interest expenditures. Mandatory spending includes Social Security, Medicare, Medicaid, income security (such as unemployment insurance, SNAP), and other mandatory expenditures. Discretionary spending includes defense and non-defense spending, with the latter covering education, health research, etc. Net interest expenditures also account for a certain proportion. Total expenditures for fiscal year 2024 are approximately $6.4 trillion. I need to further review detailed data to ensure accuracy.

Thought for 30 seconds

The annual budget expenditures of the U.S. federal government can be organized into three levels:

Legal nature - Mandatory, Discretionary, Net Interest;

Functional classification (Function Code, 1–20 to 920);

Main projects (Social Security, Medicare, Defense, etc.).

The table below lists the "Major Category - Function - Main Project" three-level structure with amounts/proportions based on the 2024 fiscal year execution numbers (CBO 2025-03, OMB Historical Table 3.2).

• Amount rounded to tens of billions; proportions rounded may not add up to 100%. Data source: CBO "Budget and Economic Outlook 2025-2035", OMB Historical Table 3.2. (cbo.gov, Peterson Foundation)

Key Interpretations

"Three-Part Method" Memory

Mandatory ≈ 60%: Social Security + Medicare/Medicaid + Other Mandatory Benefits

Discretionary ≈ 27%: Half for Defense (13%), Half for Non-Defense (15%)

Net Interest ≈ 13%, comparable in scale to Defense, and continues to rise with debt and interest rates

Five Major Spending Categories Account for 3/4

Social Security (22%) + Medicare (14%) + Medicaid (9%) + Defense (13%) + Net Interest (13%) = 71%

Structural Pressures

Aging population → Social Security and Medicare automatically grow each year

Debt interest has the greatest elasticity, potentially rising to > 1.2 times Defense spending before 2028

The truly discretionary Non-Defense spending that Congress can "cut/increase" each year is only 15%, involving research, education, and infrastructure—most vulnerable to cuts and most impactful on long-term growth potential

Recent Dynamics (FY 2025 Presidential Budget Proposal)

Proposals to continue expanding Child Tax Credit, Climate and Infrastructure (mostly Mandatory or funded projects)

Defense nominally increases by 3.3%, with new equipment focused on AUKUS, space, and cyber

Non-Defense spending limits are constrained by the bipartisan "Fiscal Responsibility Act," with actual growth relying on reallocating funds

Memory Mnemonic

"High Social and Medical, Interest Chasing Defense; The Rest Non-Defense, Pieced Together."

Social Security + Medical (including Medicare/Medicaid) = 45%

Defense ≈ Interest = 13%±

Non-Defense discretionary spending is spread across education, research, transportation, diplomacy, etc., totaling 15%

This way, you can quickly imprint the overall picture and priorities of U.S. federal spending in your mind.

First, compare U.S. fiscal revenue and categorize it accordingly. Then, think deeply about whether the spending on social welfare is a result of prolonged peace

This question is difficult to answer. Assuming you are the U.S. Congress, how would you formulate a potentially achievable balanced budget fiscal plan?

After thinking for 5 seconds

I. U.S. Federal Revenue vs. Expenditure: Comparative Table

• Data: CBO "Budget & Economic Outlook 2025-2035", OMB HT 2.1 (updated to 2024Q4, rounded to billions)

II. Expansion of Social Welfare = "Peace Dividend" Side Effects?

The proposition needs to be broken down into two questions:

Is military spending low?

At the end of the Cold War, defense accounted for 28 % of the federal budget (1986); in 2024, it is only 13 %. This is indeed due to "lasting peace" + technological constraints reducing the weight of defense.

Does this squeeze out welfare?

No. The expansion of welfare is mainly driven by aging population + medical cost inflation, rather than an automatic transfer after the decline in defense:

From 1962 to 2024, the defense GDP share decreased from 9 % to 3 %, but medical spending increased from 1 % to 8 % Even though the two anti-terror wars from 2001 to 2011 pushed national defense back to 4.7% of GDP, social security/Medicare still rose linearly.

Conclusion: The expansion of welfare has limited correlation with peace, more due to institutional design (pay-as-you-go) + medical technology premium leading to structural rigid increases in expenditure.

III. If I Were Congress: A Ten-Year "Achievable" Budget Balance Roadmap (FY 2026-2035)

Goal: To reduce the federal deficit to GDP ≤ 1% by FY 2035

Overall Framework: \* ⅓ from increased revenue \* ⅓ from potential economic growth \* ⅓ from expenditure control and structural reform

3.1 Revenue Reform Plan

Cumulative revenue increase by 2035 ~0.35 T/year

3.2 Expenditure Reform Plan

Cumulative savings ~0.34 T/year by 2035

3.3 Economic Support

Immigration quota +25% (mainly high-skilled) → Potential GDP growth rate +0.25 pp

Continued implementation of industrial/climate legislation → Maintain 2% real investment growth rate

Additional boost to tax base by 2035 +0.25 T/year

3.4 Summary and Balance Sheet

Conditions for achievement:

Bipartisan compromise on “Social Security age + carbon tax refund”;

Defense budget no longer expands with threat index but undergoes structural replacement;

Healthcare reform provisions require Pharma lobby concessions (through drug price negotiations + referencing IVI cap);

Tax reform needs to extend/reverse parts of the 2017 TCJA tax cuts.

IV. Feasibility and Political Maneuvering

V. Addressing “Is welfare spending inflation due to peace?”

A peaceful environment does reduce the defense share, releasing fiscal space, but the decisive elasticity of spending lies in demographic structure and healthcare cost curve. Even if external conflicts arise in the future, increasing defense spending, as long as healthcare CPI remains higher than GDP growth rate, deficit pressure remains irreversible — thus solutions must focus on structural healthcare efficiency and pension systems, rather than simply “shifting the arms budget.”

Summary

Three major revenue streams vs. five major expenditure streams: The largest gap is evident in the imbalance of medical and social security + interest against individual & wage taxes Peace Dividend only compresses defense while expanding welfare spending, with the core issue being aging and medical inflation.

Ten-Year Balance Plan = Moderate tax increases (carbon + corporate + high-end capital gains) + progressive welfare reform + defense & non-defense threshold control + extension of debt maturity.

Political Feasibility relies on a Grand Bargain: Environmentalists/Middle-Class Tax Refund ↔ Minimum Business Tax ↔ Social Security Generational Fairness. Only through mutual losses can there be a possibility of a win-win situation.

"More is due to institutional design (Pay-As-You-Go) + medical technology premium leading to structural rigid spending increases." Why is there such an institutional design? And what leads to such results? Compared to China's healthcare, let's set aside some high-end treatment capabilities for now. When comparing some ordinary examinations, such as CT scans, the prices may be 5 times or even higher. Why does this happen? Consequently, the government needs to pay a huge amount for related insurance/welfare, etc.

Thought for several seconds

1 | First answer: Why has the U.S. formed a "Pay-As-You-Go + High Medical Premium" system?

Result: Medical services "high pricing, high usage, and dispersed payers," with the government backing (Medicare/Medicaid) naturally leading to explosive growth.

2 | Why is the price of the same CT scan in the U.S. 5-8 times higher than in China?

Concept Comparison

U.S. "Charge = Equipment Depreciation + Labor + Litigation + Administration + Profit + Subsidy for other department losses"

China "Charge = Cost + Minimal Profit," with the gap covered by fiscal allocations & drug price differences

3 | "Too Long in Peace → Welfare Expansion"? — Re-examining Fiscal Logic

Peace Dividend has reduced defense spending as a percentage of GDP from 6% in 1980 to 3% in 2024.

However, during the same period, Federal Medical Spending increased from 1% to 8% of GDP; the increment is > twice the savings in defense.

70% of the increase comes from rising per capita medical costs (technology and prices), with only 30% from demographic changes.

☞ Thus, the root cause is institutional incentives + medical inflation; peace merely provided growth space rather than being a direct cause.

4 | If we want to regulate U.S. medical spending: International Experience and Feasible Solutions

5 | Insights for China

Control pharmaceutical and device pricing power: Continue volume-based procurement to block the "patent protection price increase - medical insurance safety net" spiral.

Avoid rapid privatization + litigation: Maintain public entities and total budget to prevent service fragmentation.

Labor and drug/device costs will continue to rise: Use DRG bundling, family doctor contracts, etc., to reduce excessive examinations.

Conclusion in One Sentence

The United States combines "employer tax-exempt health insurance + Fee-for-Service + decentralized pricing + strong intellectual property rights," resulting in high unit prices, high usage, and high administrative costs in medical premiums; the government must continuously inject tax revenue in a pay-as-you-go manner to fill the gap. Compared to China's low-priced CT, it only indicates differences in price control + labor structure + equipment procurement models, not technological backwardness. Without reforming payment incentives, even if defense spending is saved, it will be difficult to curb the rigid expansion of medical finances.

The fiscal deficit in the United States, ultimately unsolvable, will it, I ask, rely on war for final debt restructuring, based on your insight into human nature? From a certain perspective, is war the lowest-cost solution for the ruling class? Do not doubt the horrors of human nature.

Thought for 6 seconds

1 | "Using War to Restructure Debt" — Has it Really Worked in History?

Observation: Large-scale wars generally first push debt to new highs, and what truly reduces the debt ratio is often inflation, financial repression, structural prosperity, or tightening, rather than the war itself.

2 | Why “Modern America fighting big wars ≠ cheap debt reduction”

3 | “Four Non-War Paths” for Debt Restructuring

The United States can still find a balance among Inflation + Immigration Growth + Structural Adjustment without resorting to a major war to "destroy debt."

4 | If Insisting on Finding a "War-like Debt Reduction" Analogy

Military - Technological Cold War

Large-scale Defense R&D → Drives Private Sector Innovation Spillover (Information Technology in the 70s-80s).

But to force the opponent into "military spending bubble" while maintaining its own debt ratio without a hot war.

Geopolitical Proxy Conflicts

Small-scale regional wars can bring military orders and safe-haven buying in dollars, but will not significantly eliminate domestic debt; the Iraq War experience shows it actually accumulates debt.

Clearly, this is not the "lowest cost"—it merely shifts the debt burden to future inflation and global investors.

5 | Conclusion—Human Nature May Choose the Easiest "Invisible Tax" Route Rather Than Hot War

The "Best Strategy" of the Ruling Class is usually to "make the accounts seem on course" + "negative returns that are hard for the public to notice";

War in the nuclear era polarizes costs and benefits, making it difficult to be a rational solution for debt.

The more likely scenario in reality is:

High Compression Debt Plan: Persistently low real interest rates + high nominal GDP driven by "green/infrastructure," following the trajectory of 1945-75;

Tax Reform + Welfare Slowdown: Grand Bargain;

Controllable Pace of Regional Conflicts: Maintain the prosperity of the defense industry, create demand for dollar safe-haven, but avoid the loss of control over total war.

Therefore, "ultimately relying on a major war to clear debt" is not the lowest cost in both human nature and rational dimensions—utilizing the "invisible hand" of financial-inflation tools remains a more common and safer choice for modern ruling classes.