Discretionary Spending

View FREE Lessons!

Definition of Discretionary Spending:

Discretionary Spending is the government spending which is appropriated by Congress annually following negotiations between the President and Congress. Defense spending is by far the largest component of discretionary spending.

Detailed Explanation:

Discretionary items, which include everything other than mandatory items and interest on the public debt, are included in the federal budget. The President presents a budget to Congress annually. When an agreement is passed, a specific dollar amount is appropriated for each program and purpose. In addition to defense spending, discretionary spending includes the compensation for almost all federal employees, research grants, and many government services.

Discretionary spending chart

Discretionary spending accounts for approximately 30 percent of the federal budget. Mandatory spending comprises nearly two-thirds of the budget. Unlike discretionary spending, mandatory spending is not negotiated annually. An act of Congress is required to establish mandatory spending items, but instead of a dollar amount, Congress determines who receives these items by establishing eligibility requirements, so these programs are frequently called “entitlements”. Changing the eligibility requirements requires a 60 vote majority in the Senate. The budgeted amount is estimated by the Office of Management and Budget (OMB) based on the eligibility requirements set by Congress. The largest mandatory obligations are Social Security, Medicare, and Medicaid. 

National Debt Chart

Here's a fun video explaining this concept more.


Dig Deeper With These Free Lessons:

The Federal Budget and Managing The National Debt
Fiscal Policy - Managing an Economy by Taxing and Spending
Monetary Policy - The Power of an Interest Rate

Fractional Reserve Banking and The Creation of Money

Search the Glossary


Market Overview:

Market quotes are powered by TradingView.com

Single Quote:

© 2018 Higher Rock Education and Learning, Inc. All rights reserved. No portion of this site may be copied or distributed by any means, including electronic distribution without the express written consent of Higher Rock Education and Learning, Inc.