The Knowledge
Where Does Federal Money Go? The Biggest Costs Behind the Budget
Where does federal money go? Part two of our National Debt Explained series examines the biggest expenses in the 2025 budget and how spending connects to government borrowing.
Last Updated on October 13, 2026 by Rod Washington
The Knowledge | National Debt Explained, Part 2
When discussing debt, ask: Who borrowed the money? That question helps distinguish a family’s finances from the federal budget. Our first episode explained why your credit card balance is separate from the national debt. Now comes the next question: What does the federal government spend money on?
Much of it pays for retirement benefits, health coverage, national defense, public services, and interest on previous borrowing.
Social Security was the largest individual program in fiscal year 2025, costing approximately $1.6 trillion. But combine the major health care programs—including Medicare, Medicaid, and health insurance subsidies—and their spending reached about $1.8 trillion, exceeding Social Security alone. cbo.gov
The figures below cover October 1, 2024, through September 30, 2025.Major expense FY 2025 spending What it supports Social Security About $1.6 trillion Retirement, survivor, and disability benefits Medicare, net $988 billion Health coverage for older adults and certain people with disabilities Net interest $970 billion Cost of servicing publicly held federal debt, after subtracting interest income Discretionary defense $893 billion Military personnel, operations, equipment, and research Medicaid $668 billion Federal contribution toward health coverage and care for eligible people
These are selected expenses, not the entire budget. Medicare spending is shown after premiums and other offsetting receipts. The combined health care total already includes Medicare and Medicaid, so it should not be added to those rows. cbo.gov
The government also supports veterans’ health care, transportation, education, housing assistance, courts, law enforcement, scientific research, disaster response, and environmental protection. Nondefense discretionary spending totaled approximately $980 billion in 2025, covering many of these services. Some funding for these areas falls elsewhere in the budget. cbo.gov
Federal spending falls into three broad groups:
- Mandatory spending: Payments governed by existing eligibility rules and benefit formulas, including Social Security and major health programs.
- Discretionary spending: Funding lawmakers control through appropriations legislation, including most defense spending and many public services.
- Net interest: The expense of servicing publicly held federal debt, minus government interest income. cbo.gov
Interest deserves attention because it pays for borrowing already undertaken. In 2025, net interest exceeded discretionary defense spending. Congressional Budget Office
A program’s cost does not automatically translate into an equal increase in national debt. Taxes and other receipts finance much of federal spending. Social Security and Medicare’s hospital insurance program receive dedicated payroll taxes, while Medicare also collects premiums.
In 2025, federal spending totaled approximately $7 trillion, compared with $5.2 trillion in revenue. The roughly $1.8 trillion shortfall was the deficit, requiring borrowing. Understanding national debt therefore means examining both what government spends and what it collects. cbo.gov
Explore more explanations behind the headlines at STM Daily News, home of The Knowledge.
Sources for this episode
- CBO: The Federal Budget in Fiscal Year 2025 — Overview of spending, revenue, deficits, and debt interest.
- CBO: Mandatory Spending in Fiscal Year 2025 — Breakdown of Social Security, Medicare, Medicaid, and other benefit programs.
- CBO: Discretionary Spending in Fiscal Year 2025 — Defense spending and services including transportation, education, and veterans’ health care.
- CBO: Overview of the FY 2025 Budget Infographics — Highlights the largest expenses and broader budget trends.
Related reading
- U.S. Treasury: Understanding the National Debt — What federal debt represents and how borrowing works.
- U.S. Treasury: Understanding the National Deficit — Explains the difference between an annual deficit and accumulated debt.
- U.S. Treasury: Federal Spending — Additional context about where federal money goes.
The Long Track Back
LA Metro Approves $71 Million Bus Engine Program and Advances Antelope Valley Line Safety Work
LA Metro will replace engines in as many as 680 natural-gas buses while advancing safety improvements at two Antelope Valley Line crossings in Sylmar.
Two newly confirmed Board actions will keep hundreds of Metro buses in service while moving two Sylmar rail crossings toward construction.
LOS ANGELES — October 28, 2026 — The Los Angeles County Metropolitan Transportation Authority has approved two major investments affecting bus reliability and regional rail safety: a nearly $71 million engine-replacement program for as many as 680 buses and a $27.6 million construction budget for two Antelope Valley Line crossings in Sylmar.
The Metro Board approved both actions on October 22.
Hundreds of natural-gas buses will receive new engines
Metro awarded Cummins Sales and Service a five-year, single-source contract worth up to $70.99 million for 680 near-zero-emission natural-gas engines. The engines will be installed in El Dorado National 40-foot buses and New Flyer 60-foot articulated buses during fiscal years 2027 through 2031.
The engines will operate on renewable compressed natural gas and replace older engines as part of Metro’s midlife bus-refurbishment program. Metro mechanics will perform the installations.
According to the Board report, replacing high-mileage engines should reduce engine-related road calls and improve the reliability of buses that remain in daily service. Metro estimates that the replacements will reduce nitrogen-oxide emissions by 90 percent and greenhouse-gas emissions by 9 percent compared with the engines being removed.
The decision also provides more context for Metro’s transition to electric buses. In September, the agency approved the purchase of 220 battery-electric buses, with deliveries expected to begin in 2028. The new Cummins contract shows that Metro will continue investing in its existing natural-gas fleet while electric buses and the charging infrastructure needed to support them are introduced.
Metro has not changed its zero-emission goal through this action. The engine replacements are intended to keep current buses dependable during the transition and do not obligate the agency to order all 680 engines.
Two Sylmar rail crossings move toward construction
In a separate action, the Board established a $27.62 million life-of-project budget for improvements at the Astoria Street pedestrian crossing and the Polk Street roadway crossing along the Metrolink Antelope Valley Line.
The crossings are part of Segment 4 of Metro’s Brighton-to-Roxford Double Track Project. Although the broader project remains in different stages of design, the Astoria and Polk plans are sufficiently advanced to proceed as separate construction packages.
Planned improvements include coordinated traffic signals, pedestrian gates and additional roadway gates. Polk Street will receive a four-quadrant gate system intended to make it harder for motorists to enter or drive around the crossing when a train approaches. Both locations will also be prepared for possible future quiet-zone operations.
The work supports Metro’s larger effort to improve safety, reliability and capacity on the Antelope Valley Line. Advancing the two crossings now also protects state Transit and Intercity Rail Capital Program funding that must be spent and submitted for reimbursement by June 30, 2027.
Metro will conduct community outreach and execute the construction contracts following the Board’s approval. A specific construction-start date has not yet been announced.
Primary sources
● Metro Board Report 2026-0644: Near-Zero Natural Gas-Fueled Engines
● Metro Board Report 2026-0640: Astoria and Polk Crossing Improvements
This story is part of The Long Track Back, STM Daily News’ continuing coverage of Los Angeles transit projects, service and regional mobility.
Daily News
Major Construction Begins on Metro’s East San Fernando Valley Light Rail Line
LA Metro has moved the East San Fernando Valley Light Rail Transit Project into major construction. The 6.7-mile Van Nuys Boulevard line will add 11 stations, connect with the G Line and regional rail services, and is now targeted for completion in early 2032.
After years of utility relocation and planning, LA Metro is moving into major construction on a new rail line along Van Nuys Boulevard. The milestone also comes with a revised early-2032 completion target.
LA Metro has officially marked the beginning of major construction on the East San Fernando Valley Light Rail Transit Project, moving one of the region’s most important rail projects from preparatory work into full-scale construction.
Metro held a groundbreaking ceremony on October 19, 2026, for the 6.7-mile line, which will run along Van Nuys Boulevard from the G Line busway north to San Fernando Road in Pacoima. The project will add 11 light-rail stations serving Van Nuys, Panorama City, Arleta and Pacoima.
This was not the project’s first groundbreaking. Metro held an earlier ceremony in December 2022 when crews began relocating utility infrastructure. The new milestone is more consequential for riders: the major-construction phase covers the guideway, stations, traction-power substations, rail systems and a maintenance and storage facility.
From utility work to a new rail corridor
The project has spent several years in utility relocation, property acquisition, design and other early work. Metro’s current construction timeline shows major work continuing from 2026 through 2032, with phased traffic changes and K-rail installations expected along Van Nuys Boulevard.
When completed, trains are expected to operate every seven to 10 minutes during peak periods. The line will connect directly with the G Line and provide access to the Van Nuys Metrolink and Amtrak station. It is also expected to become an important transfer point for the future Sepulveda Transit Corridor and a planned Metrolink station in Pacoima.
The corridor already has a substantial transit market. Metro reported that bus Lines 233 and 761, which serve Van Nuys Boulevard, recorded nearly 20,000 boardings in September 2026. The agency also says approximately 19 percent of households in the project area lack access to a car, compared with about 8 percent countywide.
Those figures help explain why this project matters beyond its construction footprint. It is intended to give residents in some of the Valley’s most transit-dependent communities more reliable access to jobs, schools, healthcare and the wider regional transit network.
The opening target has moved to 2032
Metro’s current project page lists an estimated completion date of early 2032. That is later than the 2031 opening forecast the agency publicized when it celebrated an $893-million federal grant in September 2024. Earlier plans were more optimistic still: when utility work began in 2022, Metro said the first segment could open between 2028 and 2030.
The project’s financial scale has also grown clearer. In May 2026, the Metro Board established a life-of-project budget of approximately $3.999 billion and authorized the next phase of its progressive design-build contract with San Fernando Transit Constructors, a joint venture of Skanska and Stacy and Witbeck.
That authorization increased the construction contract’s value to roughly $2.431 billion. Funding for the larger project combines federal, state and local sources, including revenue from Los Angeles County’s Measure M transportation sales tax.
Rail returns to Van Nuys Boulevard
The East San Fernando Valley line will restore passenger rail to Van Nuys Boulevard for the first time since Pacific Electric ended streetcar service there in 1952. It will also become the first major new Metro rail project in the San Fernando Valley since the subway reached North Hollywood in 2000.
The historical parallel is significant. Van Nuys Boulevard once developed around electric railway service before the region shifted heavily toward automobiles and buses. Metro is now rebuilding rail in the same broad corridor, but as part of a modern network designed to connect local riders with bus rapid transit, regional rail and future high-capacity projects.
The current project ends in Pacoima. Metro continues to study a separate 2.5-mile northern extension that would reach the Sylmar/San Fernando Metrolink station. That extension is not included in the segment now entering major construction.
For riders, the October groundbreaking does not mean trains are imminent. Several years of disruptive and technically complex work remain, and the schedule has already moved beyond earlier forecasts. Still, it represents a tangible transition: the East San Fernando Valley line is no longer primarily a planning exercise or utility-relocation program. Metro has begun building the infrastructure that will carry trains.
That makes this a major step in Los Angeles County’s long effort to restore frequent rail transit to communities that lost it generations ago—and another chapter in The Long Track Back.
Primary sources
- LA Metro: Major construction will soon be underway
- LA Metro project page: East San Fernando Valley Light Rail Transit
- LA Metro Board meeting, May 28, 2026 — project budget and contract authorization
- LA Metro: $893 million federal grant announcement, September 6, 2024
- LA Metro: Advanced utility-work groundbreaking, December 2, 2022
This article is part of The Long Track Back, STM Daily News’ continuing coverage of how Los Angeles is rebuilding and expanding a passenger-rail network after decades of automobile-centered grow
For generations, the Santa Monica Pier sign has marked the start of a day at the beach. Now, the familiar blue neon landmark is preparing for a journey of its own.
Santa Monica scheduled removal of the 1941 sign for October 20–22, with shipment to Las Vegas anticipated October 26. The timetable is subject to change, according to the city’s October 19 announcement.
The temporary removal accompanies replacement of the aging bridge connecting Ocean Avenue to the pier. It also creates an opportunity to preserve the historic sign.
YESCO will restore it at its Las Vegas facility. The company’s experience includes work on the “Welcome to Fabulous Las Vegas” sign.
Crews will repair neon tubing, treat rust, repaint components and address structural needs while retaining historic features. The sign will remain in secure storage during bridge construction.
Once the project is finished, it will return above the new bridge at a slightly greater height for visibility and vehicle clearance. The city’s latest announcement targets project completion by 2028, ahead of the Los Angeles Olympics and Paralympics.
Meanwhile, visitors can photograph a lighted, half-scale replica near Pier Burger.
For anyone who associates that glowing arch with Southern California memories, its absence will be noticeable. The restoration is intended to ensure future generations can make memories beneath it, too.
Source: City of Santa Monica — October 19, 2026 announcement
Related Links
- City of Santa Monica: Official sign restoration announcement — October 19, 2026. Primary source for removal dates, shipment to Las Vegas, YESCO’s restoration work and the sign’s planned return.
- Santa Monica Daily Press: Sign restoration during bridge rebuild — October 20, 2026. Additional local reporting on the project and visitor access.
- LAist: Sign removal and how to watch — Reporting on the removal schedule and public viewing opportunities.
Follow more Southern California stories at STM Daily News.
