Discretionary Spending

A discretionary spending program requires Congress to explicitly appropriate funds each year before the agency can spend them. It includes defense, infrastructure, education, scientific research, and other programs Congress chooses to fund annually, as opposed to mandatory spending which operates on autopilot.

How discretionary spending works

When Congress wants an agency to operate or a program to exist, it must pass an appropriations bill allocating money. The agency then spends that money for its authorized purposes. The next year, the agency requests funding, Congress debates the amount, and a new appropriation is made.

This process happens every year for discretionary spending programs. If Congress fails to pass appropriations bills, agencies do not have spending authority and must halt operations (triggering a government shutdown).

Major discretionary spending categories

Defense: The largest single discretionary spending category. Funds the military, weapons systems, bases, and personnel.

Transportation: Highways, transit, aviation, rail. Funded through the Transportation appropriations bill.

Education and research: The National Institutes of Health, National Science Foundation, Department of Education, universities.

Veterans benefits (some): Some veterans benefits are discretionary; others are mandatory spending.

Parks and environment: National Parks, EPA, Fish and Wildlife Service.

Intelligence and law enforcement: CIA, FBI, Secret Service, ICE, Border Patrol.

Space exploration: NASA and related space programs.

International affairs: State Department, foreign aid, peacekeeping operations.

Why discretionary spending is easier to control

Discretionary spending is the primary target of deficit-reduction efforts because it is easier to change than mandatory spending. Congress can:

• Reduce funding through lower appropriations.
• Shift funds between programs.
• Eliminate programs by not appropriating funds.
• Impose spending caps through budget rules.

For mandatory spending, Congress must pass new legislation changing eligibility rules or benefit formulas — a much higher bar politically.

Discretionary spending caps and sequestration

To control discretionary spending, Congress sometimes imposes caps:

• The 2011 Budget Control Act set caps on defense and non-defense discretionary spending.
• If Congress exceeds the caps, sequestration (automatic cuts) take effect.
• Congress has frequently raised the caps to avoid sequestration.

Discretionary spending in the budget

Discretionary spending has declined as a share of the budget over time:

• In 1970, discretionary spending was roughly 70% of the budget.
• Today, it is roughly 40%.

This is because mandatory spending (driven by demographic aging and healthcare cost growth) has grown faster than discretionary spending. The result is that discretionary spending is declining in political power — even eliminating all discretionary spending would not balance the budget.

This creates a paradox: deficit-reduction is hard because mandatory spending (which is growing) is politically difficult to cut, while discretionary spending (which is easier to cut) is becoming less important to the overall budget deficit.

See also