The main part of federal budget is spent on five major items:
- National defense and security,
- Social Security,
- Medicare, Medicaid and the Children's Health Insurance Program (CHIP),
- Safety net programs,
- Interest on the national debt.
The federal government spends its money in four major ways: direct payments, grants, contracts and insurance.
The ways of spending of state budget differ in different states; each state is free to choose where to spend tax revenue.
The most common ways are:
- education (public K-12 education),
- health care (Medicaid and the Children's Health Insurance Program or CHIP),
- transportation (funding for public transit systems, such as light rail, and infrastructure spending, including building and repairing roads and bridges),
- corrections (state prison costs, juvenile justice programs and parole programs),
- low income assistance (Temporary Assistance to Needy Families program).