What is mandatory and discretionary spending?
Lawmakers can control all spending except the interest due on government debts. However, discretionary spending often gets more scrutiny than mandatory spending or tax breaks that function much like spending programs. One reason for this imbalance is that discretionary spending must be re-approved each year. In contrast, most mandatory spending and tax expenditures continue from year-to-year without new approval.
The federal budget divides government spending into three categories: discretionary spending, mandatory or direct spending, and net interest.
Discretionary spending, set in annual appropriations acts, includes most defense programs as well as spending for education, transportation, environmental protection, law enforcement and border security, international assistance, and a host of other programs.
Mandatory spending, controlled by laws other than appropriations acts, includes spending on entitlement programs. This includes the big three—Social Security, Medicare, and Medicaid—and many smaller programs such as supplemental nutrition assistance, federal civilian and military retirement benefits, and unemployment insurance. Spending is also mandatory for items the government cannot avoid, such as plaintiff awards from lawsuits.
Many tax breaks function similarly to spending programs. These tax expenditures provide subsidies for health insurance, housing, saving, and a broad range of other activities.
In principle, lawmakers looking for budget savings could limit any combination of discretionary, mandatory, and tax expenditure spending. In practice, discretionary programs often receive particular scrutiny. One reason is that Congress must approve discretionary spending each year. As a result, Congress must make a decision about how much to spend on discretionary activities. For mandatory programs and tax expenditures, in contrast. Congress typically does not have to act. Most of those programs continue from year-to-year without new authorization. To find budget savings in those programs, Congress has to actively change the law, but that is sometimes politically perilous.
This difference should not be exaggerated: cuts in appropriations from year to year can also be highly unpopular and politically difficult. Still, the natural inertia behind most mandatory spending and tax expenditures makes them somewhat harder to limit.