Understand the Difference Between Discretionary and Mandatory Spending Key Differences Between Discretionary and Mandatory Spending Impact of Discretionary and Mandatory Spending on the Budget Policy Implications
Government spending can be broadly classified into two categories: discretionary and mandatory. Discretionary spending refers to the portion of the budget that is not required by law, while mandatory spending refers to the portion that is required by law.
Discretionary Spending
Discretionary spending is the portion of the federal budget that is not required by law. This includes funding for a wide variety of programs, including:
- Defense
- Education
- Healthcare
- Transportation
- Housing
- Environmental protection
- Law enforcement
- Diplomacy
- Homeland security
The amount of discretionary spending is determined each year by Congress through the appropriations process. Congress can increase or decrease the amount of funding for any discretionary program, as long as it does not exceed the overall spending limit set by the budget resolution.
Mandatory Spending
Mandatory spending is the portion of the federal budget that is required by law. This includes funding for programs such as:
- Social Security
- Medicare
- Medicaid
- Unemployment insurance
- Supplemental Nutrition Assistance Program (SNAP)
- Earned Income Tax Credit (EITC)
The amount of mandatory spending is determined by the formulas set forth in the laws that created these programs. Congress cannot reduce the amount of funding for a mandatory program without changing the underlying law.
The key differences between discretionary and mandatory spending are:
- Legal authority: Discretionary spending is not required by law, while mandatory spending is.
- Appropriations process: Discretionary spending is appropriated by Congress each year, while mandatory spending is not.
- Flexibility: Congress has more flexibility to increase or decrease discretionary spending than it does mandatory spending.
Discretionary and mandatory spending have a significant impact on the federal budget. In fiscal year 2020, discretionary spending accounted for about 30% of the federal budget, while mandatory spending accounted for about 70%.
The amount of discretionary spending has been relatively stable in recent years, while the amount of mandatory spending has been growing. This is due to the fact that mandatory spending programs are indexed to inflation, which means that they automatically increase each year.
The growth of mandatory spending has put a strain on the federal budget. In fiscal year 2020, the federal government ran a budget deficit of $3.1 trillion. This deficit was largely due to the fact that the government’s mandatory spending exceeded its revenue.
The difference between discretionary and mandatory spending has a number of policy implications. For example, it affects the ability of Congress to control the federal budget. Congress has more flexibility to reduce discretionary spending than it does mandatory spending. This means that Congress can more easily balance the budget by cutting discretionary spending than it can by cutting mandatory spending.
The difference between discretionary and mandatory spending also affects the ability of the government to respond to changing needs. Discretionary spending can be more easily increased or decreased to meet new priorities, while mandatory spending is more difficult to change. This means that the government can more easily respond to new challenges by increasing discretionary spending than it can by increasing mandatory spending.
The debate over discretionary and mandatory spending is likely to continue for many years to come. As the government faces new challenges, Congress will need to consider the best way to allocate its resources between these two categories of spending.
