Mandatory spending
Discretionary spending on the other hand will not occur unless Congress acts each year to provide the funding through an appropriations bill.
[3] In fiscal year (FY) 1965, mandatory spending accounted for 5.7 percent of gross domestic product (GDP).
The amount of money spent on each program each year is determined by how many people are eligible and apply for benefits.
[6] Congress does not decide each year to increase or decrease the budget for Social Security or other earned benefit programs.
Besides entitlement programs, mandatory spending also includes, for example, the salaries of federal judges,[7] Members of Congress, and the President, as well as certain payments from the Forest Service to states.
This percentage continued to increase when Congress amended the Social Security Act to create Medicare in 1965.
Though the rate of increase has since slowed, mandatory spending composed about 60 percent of the federal budget since FY 2012.
[3] Other attempts such as the Balanced Budget Act of 1997 have only been temporarily or partially successful in slowing down the rate of increased health care spending.
Mandatory programs act as automatic stabilizers and provide a fiscal stimulus in the short run without the need for new legislative action.
[3] During the recession in 2008 and 2009, mandatory spending increased by 31% due to federal financial interventions and the economic downturn.
Much of the money went to the Troubled Asset Relief Program and aid to Government Sponsored Enterprises such as Fannie Mae and Freddie Mac.
Various income security programs, such as Supplemental Nutrition Assistance Program, Unemployment Insurance, Earned income tax credit and Child tax credit, account for an additional 18 percent of mandatory spending.
[11] Increases in mandatory spending related to rising health care costs are projected to result in a continued upward trend despite these reductions.
Some budget and social policy experts are worried that cuts in entitlement spending may compromise their goals: the economic security of the elderly and the poor.
Under the long term, projections suggest that if current policies remain unchanged, the US could face a major fiscal imbalance.
[12] Mandatory spending under the BCA is projected to continue to grow in nominal terms and relative to GDP over the next 10 years.
This growth is primarily due to elderly entitlement spending, such as Medicare and Social Security, that is projected to grow more quickly than GDP over the next ten years.
The Medicare Act of 1965 extended health benefits for most retirees and greatly expanded mandatory spending.
Federal spending on other health related programs is also projected to increase as larger portions of the Affordable Care Act take effect.
Other programs such as Social Security Insurance and the Earned Income Tax Credit introduced in the 1970s, also increased the number of beneficiaries and thus mandatory spending.
