The Federal Budget can be divided into two types of spending according to how Congress appropriates the money: discretionary and mandatory. Discretionary spending refers to the portion of the budget which goes through the annual appropriations process each year.
Total Budget: $2.47 trillion
Mandatory: $1.5 trillion
Discretionary: $960 billion
Mid-Session Review, Budget of the U.S. Government, FY2006.

In other words, Congress directly sets the level of spending on programs which are discretionary. Congress can choose to increase or decrease spending on any of those programs in a given year.

The discretionary budget is about one-third of total federal spending. The chart below indicates how discretionary spending was divided up in fiscal year 2005.

About half of the discretionary budget is 'national defense,' a government-defined function area that roughly corresponds in common parlance as 'military.' However, this category does not include foreign military financing, security assistance, and other programs commonly thought of as military. Other types of discretionary spending include the budget for education, many health programs, and housing assistance.



Mandatory spending includes programs, mostly entitlement programs, which are funded by eligibility rules or payment rules. Congress decides to create a program, for example, Food Stamps. It then determines who is eligible for the program and any other criteria it may want to lay out. How much is appropriated for the program each year is then determined by estimations of how many people will be eligible and apply for Food Stamps.

Unlike discretionary spending, the Congress does not decide each year to increase or decrease the Food Stamp budget; instead, it periodically reviews the eligibility rules and may change them in order to exclude or include more people.

Mandatory spending makes up about two-thirds of the total federal budget. By far the largest mandatory program is Social Security which makes up one-third of mandatory spending and continues to grow as the age demographic of the country shifts towards an older population. The chart below shows the breakdown of different types of mandatory spending in fiscal year 2005.

Note: There is a small amount of other mandatory spending across other categories of spending, but they total up to a negative number, -$37 billion. This includes the following categories of spending: national defense; international affairs; general science, space and technology; energy; natural resources and environment; agriculture; commerce and housing credit; transportation; community and regional development; justice; general government; and undistributed offsetting receipts. Negative amounts reflect the inclusion of offsetting collections in those accounts. Other offsetting receipts which are not attributed to a particular account make up 'undistributed offsetting receipts.'

Sources: Office of Management and Budget, Budget of the United States Government, FY2006 [1].

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