	Overview

Mandatory spending is composed of budget outlays controlled by laws other than appropriation acts, including federal spending on entitlement programs. Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending. Other mandatory spending programs include Supplemental Security Income (SSI), unemployment insurance, certain veterans' benefits, federal employee retirement and disability, Supplemental Nutrition Assistance Program (SNAP), and various tax credits. Mandatory spending composed nearly 60% of all federal spending in FY2014. Social Security, Medicare, and the federal share of Medicaid alone composed nearly 50% of all federal spending. Mandatory spending is controlled by laws other than appropriations acts. In contrast, discretionary spending is provided and controlled through the annual appropriations process. Net interest payments, the final category of federal spending, are automatically authorized and are the government's interest payments on debt held by the public offset by interest income that the government receives. Such entitlement spending is referred to as appropriated entitlements. In FY1962, three years before the creation of Medicare and Medicaid, less than 30% of all federal spending was mandatory. At that time, Social Security accounted for about 13% of total federal spending or about half of all mandatory spending. In FY2014, mandatory spending accounted for nearly 60% of total spending and 12.2% of GDP (or just under 14% of GDP before offsetting receipts). Changes in Mandatory Spending

The composition of mandatory spending has changed dramatically over the past 40 years and, according to CBO baseline projections, will continue to change over the decade. Mandatory spending levels have and will continue to be affected by the automatic spending reduction process enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ). Though the majority of the spending reductions affect the discretionary side of the budget, mandatory spending was reduced (sequestered) by $17 billion in FY2013, $18 billion in FY2014, and $18 billion in FY2015. However, as discussed above, increases in mandatory spending primarily related to rising health care costs are projected to result in a continued upward trend despite these reductions. Trends in Spending Over the Next Decade

While the share of mandatory spending has increased as a portion of total federal spending, discretionary spending has fallen. Mandatory spending now counts for the majority of total federal spending. Discretionary spending is projected to continue to fall further to 5.1% of GDP, its lowest level ever. By FY2022 discretionary spending's share of the economy is projected to be equal to or less than spending in each of the two largest categories of mandatory programs, Social Security and Major Health Programs. In that year, discretionary spending is projected to total 5.4% of GDP, Social Security spending is projected to total 5.4% of GDP and spending on major health programs is projected to total 6.7% of GDP. According to CBO extended baseline projections, federal mandatory spending on health care, in large part due to rising costs, is projected to reach 13.4% of GDP by FY2085. In 1962, before Medicare and Medicaid were created, Social Security accounted for just over half of all mandatory spending. Today, Social Security accounts for roughly 40% of mandatory spending.
Federal spending is divided into three broad categories: discretionary spending, mandatory spending, and net interest. Mandatory spending is composed of budget outlays controlled by laws other than appropriation acts, including federal spending on entitlement programs. Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending. Other mandatory spending programs include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), unemployment insurance, some veterans' benefits, federal employee retirement and disability, and Supplemental Nutrition Assistance Program (SNAP). In contrast to mandatory spending, discretionary spending is provided and controlled through appropriations acts. Net interest spending is the government's interest payments on debt held by the public, offset by interest income that the government receives.
In FY2014, mandatory spending accounted for nearly 60% of total federal spending and over 12% of GDP. Social Security alone accounted for 24% of federal spending. Medicare and the federal share of Medicaid, the fastest growing components of mandatory spending, together accounted for 26% of federal spending. Therefore, spending on Social Security, Medicare, and Medicaid made up nearly 50% of total federal spending. The composition of mandatory spending has changed significantly over the past 40 years. In 1962, before the creation of Medicare and Medicaid, mandatory spending was less than 30% of all federal spending. At that time, Social Security accounted for about 13% of total federal spending or about half of all mandatory spending.
Mandatory spending levels have and will continue to be affected by the automatic spending reduction process enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25), as amended. Though the majority of the spending reductions affect the discretionary side of the budget, mandatory spending was reduced by $17 billion in FY2013, $18 billion in FY2014, and $18 billion in FY2015. Under current law, reductions to mandatory spending will continue through FY2024. However, increases in mandatory spending primarily related to rising health care costs are projected to result in a continued upward trend despite these reductions.
Over the next decade, mandatory spending is projected to reach 14% of GDP. Discretionary spending is projected to continue to fall further to 5% of GDP, its lowest level ever. By FY2022 discretionary spending's share of the economy is projected to be equal to or less than spending in each of the two largest categories of mandatory programs, Social Security and Major Health Programs.
Over the long term, projections suggest that if current policies remain unchanged, the United States could face a major fiscal imbalance, largely due to rising health care costs and impending baby boomer retirements. Federal mandatory spending on health care is projected to expand from 5% of GDP in FY2014 to 14% in FY2089 according to CBO's extended baseline projection. Social Security is projected to grow from 5% of GDP in FY2014 to 7% of GDP by FY2089. The share of mandatory spending continues to increase as a portion of total federal spending.
Because discretionary spending is a smaller proportion of total federal outlays compared to mandatory spending, some budget experts contend that any significant reductions in federal spending must include cuts in entitlement spending. Other budget and social policy experts contend that cuts in entitlement spending could compromise their goals: the economic security of the elderly and the poor. This report will be updated annually.