Mandatory and Discretionary Spending (2024)

FAQs

What is mandatory spending vs discretionary spending? ›

The difference between mandatory and discretionary spending relates to whether spending is dictated by prior law or voted on in the annual appropriations process.

Mandatory spending includes programs such as Social Security, Medicare, Medicaid, unemployment insurance, and food stamps.

As a result, Congress must make a decision about how much to spend on discretionary activities. For mandatory programs and tax expenditures, in contrast. Congress typically does not have to act. Most of those programs continue from year-to-year without new authorization.

The largest mandatory programs are Social Security and Medicare.

Mandatory spending is the primary driver of the U.S. fiscal imbalance. Nearly 60 percent of the federal government's long‐​term structural fiscal imbalance is the result of legislation enacted between 1965 and 1972 pertaining to Medicare, Medicaid, and Social Security.

What is the difference between mandatory spending and discretionary spending? Mandatory spending is spending that is required by current law and discretionary spending is spending that must be authorized by the government each year.

Some expenses are necessary to keep your business running. These are called non discretionary or fixed expenses. Rent or mortgage payments, utility bills, employee compensation, and taxes are all common examples of non discretionary expenses.

50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).

50/30/20 rule: The 50/30/20 budgeting style allocates 50% of your take-home pay to essential expenses, 30% to discretionary spending and 20% to financial goals.

What is an example of discretionary spending AP Gov? ›

Non-defense discretionary spending includes a wide array of programs such as education, training, science, technology, housing, transportation, and foreign aid.

Discretionary spending requires annual reauthorization by Congress.Discretionary spending is primarily focused on entitlement programs.Discretionary spending is not subject to any form of regulation.Discretionary spending is always larger.

In conclusion, mandatory spending is spending that has been predetermined by existing laws and must be done each year, while discretionary spending is what Congress decides each year how much to spend on different programs.

The largest category of discretionary spending is defense spending, which accounts for about half of all the federal government's discretionary spending. Other examples of discretionary spending are spending on education, scientific research, and law enforcement.

Discretionary spending describes buying goods according to what one wants or needs.

In conclusion, mandatory spending is spending that has been predetermined by existing laws and must be done each year, while discretionary spending is what Congress decides each year how much to spend on different programs.

Discretionary fiscal policy and automatic stabilizers are frequently confused with each other. If a government has to take any action to make it happen, it is discretionary fiscal policy. If it is something that happens on its own, it is an automatic stabilizer.

Mandatory spending refers to necessary expenses that your household or business cannot do without, whereas discretionary spending refers to nonessential costs. One key to managing your personal finances — and keeping your expenses in line with your income — is balancing your mandatory and discretionary costs.