What is mandatory and discretionary spending?

In most cases, but not all, mandatory spending is ongoing; it occurs each year absent a change in an underlying law that provides the funding. Discretionary spending, on the other hand, will not occur unless Congress acts each year to provide the funding through an appropriations bill.

What are some examples of mandatory and discretionary spending?

For example, the administrative expenses associated with running the Social Security Administration generally are funded with discretionary spending, but the benefit checks sent to retirees and disability recipients enrolled in Social Security programs are classified as mandatory spending.

What is mandatory spending example?

Outlays for the nation’s three largest entitlement programs (Social Security, Medicare, and Medicaid) and for many smaller programs (unemployment compensation, retirement programs for federal employees, student loans, and deposit insurance, for example) are mandatory spending.

What is meant by discretionary spending?

Discretionary spending refers to non-essential items, such as recreation and entertainment, that consumers purchase when they have enough income left over after paying the necessary expenses such as the mortgage and utilities.

What are 4 examples of discretionary spending?

But since the amounts can fluctuate hugely from month to month, and because you can choose not to invest in these areas for months or even years at a time, they’re definitely discretionary.
Investments

• Mergers and acquisitions.
• Real estate.
• Stocks.
• Research and development.

Why is mandatory spending important?

Mandatory spending plays a major role in larger fiscal trends. During economic downturns, government revenues fall and expenditures rise as more people become eligible for mandatory programs such as unemployment insurance and income security programs, causing deficits to increase or surpluses to shrink.

How is mandatory spending determined?

Many mandatory spending programs spending levels are determined by eligibility rules. Congress sets criteria for determining who is eligible to receive benefits from the program, and the benefit level for people who are eligible.

What is an example of discretionary spending?

Some examples of areas funded by discretionary spending are national defense, foreign aid, education and transportation.

What is mandatory spending?

Mandatory spending is simply all spending that does not take place through appropriations legislation. Mandatory spending includes entitlement programs, such as Social Security, Medicare, and required interest spending on the federal debt. Mandatory spending accounts for about two-thirds of all federal spending.

What is the difference between discretionary and non discretionary spending?

While non-discretionary expenses are considered mandatory—housing, taxes, debt, and groceries—discretionary expenses are any costs incurred above and beyond what is deemed necessary. These are generally considered wants, while non-discretionary expenses are usually referred to as needs.

Why is discretionary spending important?

Discretionary spending is an important part of a healthy economy. People only spend money on things like travel, movies, and consumer electronics if they have the funds to do so. Some people use credit cards to purchase discretionary goods, but increasing personal debt is not the same as having a discretionary income.

What is non defense discretionary spending?

Nondefense discretionary spending funds an array of federal activities in areas such as education, transportation, income security, veterans’ health care, and homeland security.

Is military spending mandatory or discretionary?

The United States federal budget consists of mandatory expenditures (which includes Medicare and Social Security), discretionary spending for defense, Cabinet departments (e.g., Justice Department) and agencies (e.g., Securities & Exchange Commission), and interest payments on debt.

Is Social Security mandatory spending?

SSA serves millions of Social Security and Supplemental Security Income (SSI) beneficiaries each month. The benefits these programs pay are part of the Federal Government’s mandatory spending because authorizing legislation (Social Security Act) requires us to pay them.