RSSThree Categories of Federal Spending
The preceding charts have explored the budget in terms of total dollars spent without regard to the components of that spending. The next few charts focus on how the money gets spent, using the budget for the fiscal year of the federal government that ended September 30, 2007. Congress and the Administration divide spending into three categories:
Mandatory Spending
Interest on the National Debt
Discretionary Spending
Mandatory Spending includes items that, by law, must be paid to individuals who meet certain requirements. Those individuals in the top categories (Social Security, Medicare and Medicaid) are said to be entitled to receive the payments, and these payments have become known as entitlements. Other items included in the mandatory category include retirement programs for military and federal civilian employees, veteran’s benefits, and welfare-related programs.
Interest on the National Debt is the net interest paid out after subtracting interest paid to the “trust funds” mentioned in Chart 6. The interest expense amount shown here is essentially interest paid by the government on debt held by the public (See chart The Growing National Debt Held By Public).
Discretionary Spending includes all other items on which the federal government spends money. The use of the word discretionary seems unusual at first glance because there are certain functions of the federal government that are absolutely necessary for maintaining national security and commerce. The word simply implies that the president and congress have the discretion to increase or decrease spending during the budgetary process each year for any item included in this category.
3 Responses to “Three Categories of Federal Spending”
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June 17th, 2008 at 4:07 pm
Dear Ross:
Here is a letter that i sent to AARP in 1995:
At age 57, I would have joined AARP, except that your policy is to increase the taxes upon the young workers through social security taxes to support the retired persons enhanced lifestyle. Most of the retired persons in my family have benefited more that ten times the dollar amounts that they contributed to social security. Why not limit the benefits to the dollar amount contributed to social security. When the limit is reached, the benefits stop.
Some or most retired people need the social security because they did not save for their retirements. The ones that “need it” lived high on the hog with big houses, new cars, vacations, alcohol, cigarettes, church contributions, and other non-essential luxury expenditures during their productive years. These people did not economize their life style expenditures in order to save for their retirements. Any poor or any wealthy person can reduce their lifestyle and save money for retirement. But why should anyone save for their retirement if the legislature can maintain retirees income to a livable amount with social security payment increases paid for by increasing the social security taxes on the young working people. Legislators that promise to increase social security benefits will be able to get (buy) the votes of the social security beneficiaries at the expense of the working people. I do not buy the theme that these funds should have been invested. I can remember Hubert Humphry, Tip O’Neal, and others talk about social security surpluses. The benefits were raised in order to buy votes instead of being invested for future financial security.
June 17th, 2008 at 4:19 pm
“Mandatory” is an interesting concept. I’d consider the reality of the categories is different than the above.
Interest on the national debt I’d put first — it’s a written contract and
to break it would stop future lending putting a large crimp in future
deficit spending. What fun is being a part of congress if you can’t
spend money (you don’t have)?
Second, some of the items in “Discretionary Spending” are required for current federal government operation and the alternative of shutting things down seems unlikely.
Social Security, Medicare and Medicaid entitlements are soft and subject to being altered at will and the citizen (victim) has little recourse. This has already started as one could consider to have
joined these systems once the first dollar was paid in. In 1983
some retirement ages were change, even applicable to people
who had already joined (following the old rules). Expect more
of this in the future….
June 17th, 2008 at 9:35 pm
100% of the “mandatory” spending you identify comes inthe way of government payments to individuals. Mandatory spending is often refered to as “entitlements.”
However, a great deal of the $1.042 Trillion dollars in “Discretionary” spending also is paid to individuals. Only this money is paid to productive - hopefuly - civil servants, active duty or guard/reserve military personnel, and elected officials. What percent of the $1.042 T goes to government salaries and what is the number of government employees that transition to the “retired” ranks every year, thus joining the “entitilement” crowd?
I would be interested in seeing charts that show the growth in civli service pensioners since 1962 verses the growth of militry pensioners for the same period.
By having a government with ever growing buracracy, we feed an ever growing pool of “government ” pensioners.
Lastly I would like to know the average annual pension payment made to the following three categories of government employee: US Congressman/Senator; US military retired; and retired civil servant.
Thanks for your web site it is really cool.
P.S. I would forward your site to my Senator, but Dr. Tom Coburn already “gets” you message Mr. Perot.