Discretionary spending

Definition

Discretionary spending refers to the portion of the federal budget that is decided by Congress through the annual appropriations process. This type of spending is not mandated by existing laws and includes various programs and services such as education, defense, and infrastructure. Unlike mandatory spending, which is dictated by previous commitments like Social Security and Medicare, discretionary spending is subject to annual review and can be increased or decreased based on congressional priorities.

5 Must Know Facts For Your Next Test

1. Discretionary spending typically makes up about one-third of the federal budget, with the rest being mandatory spending.
2. The two largest components of discretionary spending are defense and non-defense programs, which include education, transportation, and housing.
3. Each year, Congress must pass 12 appropriations bills to fund discretionary programs, and failure to do so can lead to government shutdowns.
4. Discretionary spending can be adjusted yearly based on political priorities, economic conditions, or changes in public demand for services.
5. In recent years, discretionary spending has faced significant scrutiny as lawmakers debate the balance between funding essential services and addressing the growing national debt.

Review Questions

• How does discretionary spending differ from mandatory spending in the context of the federal budget?
  • Discretionary spending differs from mandatory spending in that it is determined annually by Congress through the appropriations process. Mandatory spending is dictated by existing laws and includes programs like Social Security and Medicare that require funding regardless of annual budget decisions. This means that while discretionary spending can be modified based on current political priorities or economic needs, mandatory spending remains constant unless legislative changes are made.
• Discuss the implications of fluctuating discretionary spending on federal programs such as education and defense.
  • Fluctuating discretionary spending directly impacts federal programs like education and defense by determining how much funding these sectors receive each year. For example, increased funding for education might enhance school resources or teacher salaries, while cuts could lead to program reductions or increased class sizes. In defense, changes in discretionary funding can affect military readiness and modernization efforts. Thus, the decisions made during the appropriations process have significant consequences for both national security and social welfare.
• Evaluate the potential long-term effects of sustained reductions in discretionary spending on U.S. economic growth and social welfare.
  • Sustained reductions in discretionary spending could have severe long-term effects on U.S. economic growth and social welfare. A decline in investment in infrastructure projects could hinder economic development, leading to inefficiencies in transportation and logistics that affect businesses. Additionally, cuts to social programs could exacerbate issues like poverty and inequality, impacting education and health services for vulnerable populations. As these programs often serve as safety nets, diminished funding could lead to increased reliance on mandatory spending programs in times of need, putting further strain on the federal budget.

Related terms

mandatory spending: Mandatory spending is the portion of the federal budget that is required by law and cannot be changed without legislative action, including programs like Social Security, Medicare, and Medicaid.

federal budget: The federal budget is a financial plan that outlines projected government revenues and expenditures over a specific period, typically a fiscal year, and reflects national priorities.

appropriations process: The appropriations process is the method by which Congress allocates funds to various government agencies and programs, determining how much discretionary spending will be authorized each year.