Mandatory Spending

View FREE Lessons!

Definition of Mandatory Spending:

Mandatory Spending is government spending determined by eligibility requirements set by Congress. Examples include Social Security, Medicare, and unemployment insurance. 

Detailed Explanation:

Mandatory spending accounts for nearly two-thirds of the Federal government’s expenditures and must be established by an act of Congress. These programs do not need to be re-approved annually because the eligibility requirements have already been set. Some of the programs require a periodic review, where the eligibility requirements can only be changed with a 60 vote majority in the Senate. Eligible recipients are entitled to receive a payment, so these programs are frequently called “entitlements.” The budgeted amount is estimated by the Office of Management and Budget (OMB) based on the eligibility requirements set by Congress, so the actual budgeted amount is not set by Congress. The largest mandatory obligations are Social Security, Medicare, and Medicaid. 

Mandatory Spending Chart

Mandatory spending should be compared with discretionary spending. Unlike mandatory spending, discretionary spending is negotiated annually. Discretionary spending for specific line items is appropriated by Congress following negotiations between the President and Congress. The President presents a budget to Congress annually. Discretionary items, which include everything other than mandatory items and interest on the public debt, are included in the budget. When an agreement is passed, a specific dollar amount is appropriated for each program and purpose. National discretionary spending includes the compensation for almost all federal employees, research grants, and many government services. Defense is by far the largest component of discretionary spending, but has been substantially less than social security for many years. 

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.