Washington spends money in large, predictable categories, and those categories shape regional economies long before any single contract is announced. For Velur Enterprises, a Woodland Hills firm that helps investors identify strategic opportunities near existing or planned grid infrastructure, the federal budget is one of the more useful documents for understanding where demand for land and power in Southern California may come from. Below is a plain guide to the largest spending categories, what has changed, and why some of those lines matter more to the high desert than others.
What are the largest categories of federal spending?
The federal budget is organized into budget functions, broad groupings of spending with similar purposes. According to the Peter G. Peterson Foundation's breakdown of fiscal year 2025 outlays, the largest were:
- Social Security, $1,581 billion
- Medicare, $997 billion
- Health, including Medicaid and public health agencies, $979 billion
- Net interest on the federal debt, $970 billion
- National defense, $916 billion
- Income security, $702 billion
- Veterans benefits and services, $377 billion
- Transportation, $145 billion
- Natural resources and environment, $90 billion
- Administration of justice, $83 billion
Social Security and Medicare together totaled more than $2.5 trillion. Detailed monthly figures are published by the U.S. Treasury through its Fiscal Data portal.
Which of these categories affect land and infrastructure?
Most federal spending moves through households rather than construction sites. Social Security, Medicare and income security are largely transfer payments. They support consumer spending across the country but do not concentrate demand for industrial land in any particular place.
A few categories behave differently. Defense spending turns into contracts for aircraft, satellites, missiles and the facilities where they are designed, built and tested. Transportation spending funds highways, rail and airports. The natural resources and environment function covers water projects and land management. These are the lines where federal dollars become physical assets tied to specific locations.
For Velur Enterprises, defense is the category with the most direct connection to the Antelope Valley. The region has hosted aircraft testing and production for decades, and its large sites and transmission access are the kind of resources defense manufacturers look for when they expand.
How large is defense spending now, and where is it headed?
National defense outlays were $916 billion in fiscal 2025, placing the category fifth, just behind net interest. The administration's proposal for fiscal 2027 is far larger. It seeks a record $1.5 trillion for the military, CalMatters reported.
Seamus Daniels, who studies the defense budget at the Center for Strategic and International Studies, told CalMatters that the request "would surpass the peak of defense spending during World War II." He also noted that the request has been contentious because it pairs large defense increases with proposed cuts to non-defense programs.
The administration has also proposed doubling the budget of the Space Force, according to the same report. Southern California is home to a large share of the country's space and defense technology companies, which positions the region to capture a meaningful part of any increase.
Is the $1.5 trillion figure certain?
No. A budget request is a starting point. Congress writes the appropriations bills, and the final numbers often differ from what the White House proposes. The pairing of defense increases with non-defense cuts is likely to face resistance during appropriations.
Even so, the direction of spending has been consistent. Defense outlays have risen over the past decade, and the administration's stated priorities put space and missile defense near the top of the list. That trend matters more for long-term land planning than the exact figure in any single year.
What about transportation and environmental spending?
Transportation, at $145 billion in fiscal 2025, is a fraction of the defense budget, but its effects on land are concentrated and long-lasting. Federal highway and freight funding determines which corridors can carry the truck traffic that industrial users generate. A site with strong power access but poor road connections is harder to develop, and federal transportation dollars often decide which inland corridors improve first.
The natural resources and environment function, at $90 billion, covers water infrastructure, conservation and the management of federal lands. In the desert Southwest, those programs shape where development can and cannot happen. Federal land holdings and conservation areas limit the supply of buildable private land in parts of the Mojave, which is one reason well-located private parcels near infrastructure draw attention from developers.
Why does net interest matter to anyone outside Washington?
Net interest cost the government $970 billion in fiscal 2025, more than it spent on national defense. That figure reflects both the size of the federal debt and the level of interest rates. Interest costs also compete with every other line in the budget, which is part of why the debate over defense and non-defense priorities has sharpened.
The same rate environment that raises federal borrowing costs also affects mortgage rates, commercial lending and the cost of financing development projects. When rates are high, projects that depend on borrowed money slow down, and investors become more selective about which sites they pursue. Land near existing or planned grid infrastructure tends to stay on that shortlist, because power access shortens the path from purchase to productive use.
Does federal spending reach the high desert directly?
Some of it does. Defense contracts and research funding flow to companies and installations across Los Angeles County, including the aerospace facilities in and around Palmdale and Lancaster. Federal transportation funding supports the highways that connect the Antelope Valley to the ports and to the rest of the state.
Much of the effect is indirect. A defense startup in El Segundo that wins a production contract may need a larger manufacturing or test site within a few years. An energy developer supplying power to that growth may need land for solar or storage. These second-order effects are what Velur Enterprises tracks, because they tend to reach inland regions after they begin on the coast.
How does Velur Enterprises use this information?
The firm treats federal budget trends as one input among several. County general plans, utility transmission planning and the presence of large industrial and energy users in a given area carry more weight in any specific location. But budget priorities help explain which types of users are likely to be looking for space over the next several years.
Velur's customers hold their own parcels. The firm's role is to help them identify opportunities where federal, state and private demand are likely to overlap, with a particular focus on sites near existing or planned grid infrastructure. Defense, energy and data center growth all point toward the same limited supply of large, power-ready land in Southern California.
What should investors watch next?
The fiscal 2027 appropriations process will show how much of the defense request survives. The Space Force budget will indicate how much new money flows toward the space companies concentrated in the South Bay. Interest rates will shape how quickly any of that turns into construction.
None of these numbers dictates the value of a specific parcel. Taken together, they describe where the country is choosing to spend, and a growing share of that spending needs land and electricity in places like the Antelope Valley. Velur Enterprises reads the budget with that in mind.
