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What is federal discretionary spending?

Author

Ava White

Updated on March 04, 2026

What is federal discretionary spending?

In American public finance, discretionary spending is government spending implemented through an appropriations bill. This spending is an optional part of fiscal policy, in contrast to entitlement programs for which funding is mandatory and determined by the number of eligible recipients.

Subsequently, one may also ask, what are examples of discretionary spending?

Discretionary spending is what the President and Congress must decide to spend for the next fiscal year through annual appropriations bills. Examples include money for such programs as the FBI, the Coast Guard, housing, education, space exploration, highway construction, defense, and foreign aid.

Furthermore, what are 2 examples of discretionary spending? Some examples of areas funded by discretionary spending are national defense, foreign aid, education and transportation.

Additionally, what is discretionary spending in federal budget?

Discretionary spending refers to the portion of the budget that is decided by Congress through the annual appropriations process each year. These spending levels are set each year by Congress.

Is Medicaid discretionary spending?

The discretionary budget and taxes are the two main tools of discretionary fiscal policy. The discretionary budget does not include Social Security, Medicare, or Medicaid. These are part of the mandatory budget. These programs were authorized by previous Acts of Congress.

What are 4 examples of mandatory spending?

Outlays for the nation's three largest entitlement programs (Social Security, Medicare, and Medicaid) and for many smaller programs (unemployment compensation, retirement programs for federal employees, student loans, and deposit insurance, for example) are mandatory spending.

What are 3 examples of discretionary spending?

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

How do you spend discretionary income?

The three ways that discretionary income can be allocated include:
  1. Spending. When individuals and households spend more of their discretionary income on goods and services, vacations, luxury items, and other nonessential items, money is funneled towards businesses that provide those goods and services.
  2. Investing.
  3. Saving.

What does discretionary spending pay for?

Discretionary spending refers to non-essential items, such as recreation and entertainment, that consumers purchase when they have enough income left over after paying the necessary expenses such as the mortgage and utilities.

What can discretionary funds be used for?

Answer: Discretionary funds are used for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Explanation: Discretionary income incorporates cash spent on extravagance things, excursions, and unnecessary merchandise and ventures.

Which program is the largest expense for mandatory spending?

Mandatory spending requires government expenses on programs mandated by law. Social Security and Medicare are the largest mandatory programs the U.S. government has to pay for.

What does discretionary funding mean?

an amount of money that is available to spend on things that are not considered necessary but that may be useful: Governors of some states are given discretionary funds to spend on small-scale projects.

Is military spending discretionary or mandatory?

The United States federal budget consists of mandatory expenditures (which includes Medicare and Social Security), discretionary spending for defense, Cabinet departments (e.g., Justice Department) and agencies (e.g., Securities & Exchange Commission), and interest payments on debt.

What happens when the government wants to spend more money?

When a government spends more than it collects in taxes, it is said to have a budget deficit. When a government collects more in taxes than it spends, it is said to have a budget surplus. If government spending and taxes are equal, it is said to have a balanced budget.

Who prepares the federal budget?

Congress is responsible for creating the federal government's annual budget.

What does discretionary mean?

1 : left to individual choice or judgment : exercised at one's own discretion discretionary powers. 2 : available for discretionary use discretionary income.

How much money does the government have 2020?

In 2020, the federal government spent $6.55 trillion.

Is mandatory spending required by law?

Also known as entitlement spending, in US fiscal policy, mandatory spending is government spending on certain programs that are required by law. Congress established mandatory programs under authorization laws.

What is the budget for the US military?

$934 billion

What is the largest category of federal spending?

The largest category of federal spending is for social programs including Social Security, Medicare, and Medicaid.

Is eating out a discretionary expense?

While rent, mortgage payments, and groceries are necessary, discretionary expenses are those you incur voluntarily such as dining out or cable television. Your discretionary spending budget is only as big as the income you have available to fund it.

What are the two types of government expenditure?

There are two types of spending: Current spending, which is expenditure on wages and raw materials. Current spending is short term and has to be renewed each year. Capital spending, which is spending on physical assets like roads, bridges, hospital buildings and equipment.

Which category of expenses does Medicaid spend the most money on?

Managed care and health plans3 accounted for the largest share of Medicaid spending (49 percent) (with the majority of that share (46 percent) representing payments to comprehensive MCOs), 23 percent of Medicaid spending is for fee-for-service acute care, 21 percent for fee-for-service long-term care, 3 percent for DSH

What are the top 5 expenditures for the federal government in 2020?

Fiscal 2020 spending has been dominated by health care, entitlements and the military, with the Health and Human Services Department ($1.3 trillion), Social Security Administration ($1.2 trillion) and Defense Department ($690 billion) the top-three spending agencies.

What does Medicaid spend the most money on?

Need prescription drugs or dental work? All that counts as acute care spending in Medicaid's budget, and it makes up the second-biggest line item in the program's spending. Medicaid shelled out more than $145 billion in 2016, or about 26 percent of its entire budget, for acute care for enrollees.

What are the 5 largest programs the government spends money on in discretionary funds?

More than half of FY 2019 discretionary spending went for national defense, and most of the rest went for domestic programs, including transportation, education and training, veterans' benefits, income security, and health care (figure 4).

Which state spends the most on Medicaid?

Main Findings
Overall RankStateSpending
1Massachusetts1
2Rhode Island5
3Vermont4
4Pennsylvania6

Where does money for Medicaid come from?

The Medicaid program is jointly funded by the federal government and states. The federal government pays states for a specified percentage of program expenditures, called the Federal Medical Assistance Percentage (FMAP).

How much of our tax dollars go to military?

Of every dollar taxpayers pay in income taxes, 24¢ goes to the military – but only 4.8¢ goes to our troops in the form of pay, housing allowances and other benefits (excluding healthcare). Out of the 24¢ on the dollar that taxpayers contribute to military spending, 12¢ goes to military contractors.

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