What Does Economic Background Mean

Mandatory Spending

Mandatory spending covers outlays controlled by laws other than appropriations acts. Almost all such spending is for "entitlements," for which expenditures depend on individual eligibility and participation; they are funded at whatever level needed to cover the resulting costs. Mandatory spending has grown from about 31 percent of the budget in 1962 to 61 per centum in 2019 (figure ii). This is largely because of new entitlements, including Medicare and Medicaid (both of which started in 1965), the earned income tax credit (1975), and the child tax credit (1997). In addition, rapid growth of both the elderly and the disabled populations has contributed to increased Social Security and Medicare spending.

Area chart showing shares of discretionary, mandatory, and net interest spending each year from 1962 to 2019.

Nearly 60 percent of mandatory spending in 2019 was for Social Security and other income support programs (figure three). About of the remainder paid for the ii major government health programs, Medicare and Medicaid.

Discretionary Spending

Discretionary spending covers programs that require appropriations by Congress. Unlike mandatory spending, both the programs and the authorized levels of spending require regular renewal past Congress. The share of the budget going for discretionary spending has fallen from two-thirds in 1962 to virtually 30 percentage now.

More than than half of FY 2019 discretionary spending went for national defence, and near of the remainder went for domestic programs, including transportation, education and training, veterans' benefits, income security, and health care (figure four). About four percent of discretionary spending funded international activities, such every bit foreign aid.

Bar chart showing shares of federal mandatory spending on Social Security (38%), Medicare (23.5%), income security (16.2%), Medicaid (15%), Veteran Benefits/Services (4.2%) and other in fiscal year 2019.

Debt Service

Interest on the national debt has fluctuated over the past one-half century forth with the size of the debt and interest rates. It climbed from six.five per centum of full outlays in 1962 to more 15 percent in the mid-1990s, fell to 6.1 percent in 2015, but climbed dorsum to viii.iv percent by 2019 (effigy 2). Since 2016, historically low interest rates take held down involvement payments despite the national debt reaching a peacetime loftier of nearly 80 percent of GDP in 2019. But involvement payments as a share of outlays are projected to rising considering of projected increases in both the national debt and interest rates.

Bar chart showing shares of federal discretionary spending on national defense (50.6%) and education/training/employment/social services, transportation, veteran benefits, income security, health (each 5-7%) and other (18.5%).

Updated May 2020

Information Sources

Congressional Budget Part. 2020. "Budget and Economical Outlook: Fiscal Years 2020 to 2030," Appendix E: Historical Budget Data. Washington, DC: Congressional Budget Office.

Office of Management and Budget. 2018. Historical Tables. Tabular array 8.1, "Outlays past Budget Enforcement Act Category: 1962–2025," Table eight.5, "Outlays for Mandatory and Related Programs: 1962–2025," and Table eight.vii, "Outlays for Discretionary Programs: 1962–2025."