Question

What is mandatory spending also known as discretionary spending by the federal government? Define and give examples.

Answer 1

There are two types of expenditure in the federal budget process: discretionary and mandatory. Discretionary spending is the spending that is subject to the appropriations process, whereby the Congress sets a new amount of funding per fiscal year for the programs covered by the appropriations bill. Approximately one-third, or about $1 trillion, of the federal government 's activities are financed through legislation on appropriations. Most of the federal government 's direct activities, such as those of the Federal Bureau of Investigation and the Department of Defense, are financed through the annual appropriations process.

Mandatory spending is simply all expenditure that is not covered by legislation on appropriations. Mandatory spending includes entitlement programs, such as Social Security , Medicare, and the required federal debt interest. Mandatory spending accounts for about two-thirds of all federal spending. In most cases, but not all, compulsory expenditure is ongoing; there is no change in the underlying legislation that provides funding every year. Discretionary spending, on the other hand, will not occur unless the Congress acts annually to provide funding through an appropriation bill. Tax legislation is treated as compulsory expenditure in many areas of the Congressional budget process.