Understanding the different types of spending in the US national budget is crucial to understanding the government’s role in the economy. 

 

Learn more about the US national budget, including the difference between discretionary, mandatory and supplemental spending, and arm yourself with the foundational knowledge to form educated opinions on national spending, budget functions and more. 

The US National Budget

The federal government spends money on a variety of goods, programs and services that support the economy and the American public and pay interest incurred from borrowing. Last year, the government spent $6.27 trillion. 

 

Three main types of spending exist: mandatory, discretionary and supplemental. Each type of spending plays a different role in the budget, and understanding their differences can help you better understand the allocation of government resources.

Mandatory Spending

Mandatory spending, also known as direct spending, is required by law and is not subject to annual appropriations from Congress. This type of spending includes programs like Social Security, Medicare and Medicaid, which receive funding from payroll taxes and provide assistance to eligible individuals.

 

Because the law requires this type of spending, it is not subject to annual appropriations from Congress. This means that the laws governing these programs, rather than the annual budgeting process, determine the amount of money they receive. As a result, mandatory spending constitutes a significant part of the US national budget—and it is expected to continue to grow as the population ages and more people become eligible for these programs.

Discretionary Spending

Discretionary spending includes programs like defense, education and infrastructure, and it is determined annually by Congress through the appropriations process. Typically, it’s funded through a combination of taxes and borrowing, utilizing a smaller portion of the US national budget than mandatory spending. The amount of money allocated to these programs can vary from year to year, and Congress has the discretion to increase or decrease funding based on changing priorities and needs. 

 

The line between mandatory and discretionary spending is not always crystal clear or easy to determine. Some programs, like food stamps and unemployment insurance, fall under mandatory spending but can be affected by changes in the economy or by policy decisions made by Congress. Additionally, some programs classified as discretionary spending, like transportation, infrastructure and education, can also be considered necessary investments rather than discretionary spending due to their long-term implications for the economy.

Supplemental Spending 

Supplemental spending, also known as supplemental appropriations, is a type of discretionary spending that occurs outside of the annual appropriations process. It is typically used in response to national emergencies or unexpected circumstances, like natural disasters, wars or global pandemics.  

 

Because supplemental spending is enacted after the regular annual appropriations when the need for funds is too urgent to wait for the next regular appropriations, the funds are often sourced through borrowing, which can add significantly to the federal deficit. 

 

In recent years, supplemental spending has been used to fund the wars in Iraq and Afghanistan, to respond to natural disasters like Hurricane Katrina and Superstorm Sandy and most recently, to aid the nation’s recovery from the COVID-19 pandemic.

Conclusion

The US national budget is a complex document that reflects the priorities and values of the American people, and the debate over government spending is likely to continue for years to come.

 

Learn more about the government’s role in the economy, and discover more data and information relevant to pending and written government policies, laws, regulations and actions that impact Americans and future generations at PolicyvsPolitics.org.