Who controls federal spending?
Government spending falls into two broad categories: mandatory and discretionary. Mandatory spending accounts for nearly two-thirds of annual federal spending. This type of spending does not require an annual vote in Congress. The second largest category is discretionary spending. The distinction between mandatory and discretionary spending has to do with whether spending is determined by a previous legal provision or by a vote in the annual appropriation process. Another type of appropriation expenditure, called a supplemental appropriation, is used to address needs that arise after the start of the fiscal year through the expenditure method.
Mandatory Spending
Mandatory spending, also known as direct spending, is enforced by current law. Such spending includes funding entitlement programs such as Medicare and Social Security, as well as other payments to individuals, businesses, and state and local governments. For example, the Social Security Act requires the Government to pay beneficiaries based on their income and other factors. Last amended in 2019, the Social Security Act will determine future federal spending levels until it is amended again. According to the enabling law, the funds of these projects must be allocated annually to expenditure, hence the term mandatory projects.
Discretionary Spending
Discretionary spending is funds formally approved by Congress and the President during the annual appropriation process. Generally, Congress allocates more than half of the discretionary budget to defense, with the rest funding the management of other agencies and programs. These projects include transportation, education, housing and social services projects, as well as scientific and environmental organizations.
Supplemental Spending
Supplemental appropriations, also known as supplemental expenditures, are allocations made after regular annual allocations when funding needs are too urgent to wait for the next regular allocation. In 2020, Congress passed four supplemental appropriations to help the nation recover from the COVID-19 pandemic. You can explore expenditures related to these supplemental appropriation laws on the COVID-19 Spending Overview page in USAspending.gov.
What is the process for determining discretionary spending? Discretionary spending is determined annually by the President and Congress during the budget and appropriations process. First, the president formulates a budget proposal and submits it to Congress. Both the House and Senate then draft budget resolutions. Congress can change funding levels and increase or eliminate programs, taxes, and other revenue streams. Once the budget resolution is finalized in the House and Senate, Congress will reconcile differences and vote on the final budget. The discretionary spending levels in the budget are allocated by twelve appropriations subcommittees, which then draft bills to fund the departments, bureaus, and agencies within their jurisdiction. After the House and Senate agree on the final funding level for each bill, they will be sent to the president for approval or veto.