Mandatory spending

In United States fiscal policy, mandatory spending is spending on certain programs that are required by existing law.[1]

In the United States, mandatory spending refers to budget authority and ensuing outlays provided in laws other than appropriations acts, including annually appropriated entitlements. In fiscal year (FY) 2014, mandatory spending accounted for about 60 percent of the federal budget and over 12 percent of gross domestic product (GDP).[2] The two largest mandatory spending programs are Medicare and Social Security, which together account for nearly 40 percent of the federal budget.[3] However, portions of the budgets for several other departments, including the Department of Agriculture, Department of Defense, Department of Education, and the Department of Veterans Affairs, include some mandatory spending.

History

Prior to the Great Depression, nearly all federal expenditures were discretionary. However, following the passage of the Social Security Act in 1935, an increasing percentage of the federal budget was devoted to mandatory spending.[2] In 1947, Social Security accounted for just under five percent of the federal budget and less than one-half of one percent of GDP.[4] By 1962, 13 percent of the federal budget and half of all mandatory spending was committed to Social Security.[2] In 1965 Congress created Medicare, a government administered health insurance program for senior citizens.[5] In the 10 years following the creation of Medicare, mandatory spending increased from 30 percent to over 50 percent of the federal budget. Though the rate of increase has since slowed, mandatory spending composed about 60 percent of the federal budget in FY 2012.[2]

Present

In FY 2014, Social Security, Medicare, and Medicaid were the largest individual mandatory expenditures, together accounting for about 73 percent of all mandatory spending. Various income security programs, such as SNAP, unemployment compensation, and earned income and child tax credits, accounted for an additional 18 percent of mandatory spending.[2]

Future

According to the Congressional Budget Office (CBO), mandatory spending will increase from $2.2 trillion in 2014 to $3.6 trillion by 2023. Though averaging about 10.2 percent of GDP since 1973, mandatory spending is projected to increase to about 14 percent of GDP by 2023.[6]

See also

References

  1. ↑ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 371. ISBN 0-13-063085-3.
  2. 1 2 3 4 5 Levit, Mindy. "Mandatory Spending Since 1962" (PDF). Congressional Research Service. Retrieved 21 March 2015.
  3. ↑ "Policy Basics: Where Do Our Federal Tax Dollars Go?". Center on Budget and Policy Priorities. Retrieved 6 October 2012.
  4. ↑ Martin, Patricia; David Weaver (2005). "Social Security: A Program and Policy History" (PDF). Social Security Bulletin. 66 (1). Retrieved 9 October 2012.
  5. ↑ Corning, Peter. "The Evolution of Medicare . . . from idea to law". Social Security Administration. Retrieved 9 October 2012.
  6. ↑ "Updated Budget Projections: Fiscal Years 2013 to 2023" (PDF). Congressional Budget Office. Retrieved 21 March 2015.


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