Direct Spending in the United States

Direct Spending (or Mandatory Spending) in the Federal Budget Process

Meaning of Direct Spending in the congressional and executive budget processes (GAO source): As defined by the Balanced Budget and Emergency Deficit Control Act of 1985, entitlement authority, the Food Stamp Program, and budget authority provided by law other than appropriations acts. Direct spending may be temporary or permanent, definite or indefinite (as to amount) but it is an appropriation or other budget authority made available to agencies in an act other than an appropriation act. Under expired Budget Enforcement Act (BEA) provisions, new direct spending was subject to pay-as-you-go (PAYGO) requirements. (See also Balanced Budget and Emergency Deficit Control Act of 1985; Entitlement Authority; Mandatory; Pay-as-You-Go. For a distinction, see Discretionary spending here.)

Mandatory spending is generally governed by statutory criteria; it is not normally set by annual appropriation acts. Outlays for the nation’s three largest entitlement programs (Social Security, Medicare, and Medicaid) and for many smaller programs (unemployment compensation, retirement programs for federal employees, student loans, and deposit insurance, for example) are mandatory spending. Social Security and some other mandatory spending programs are in effect indefinitely, but some (for example, some agriculture programs) expire at the end of a given period. Roughly 60 percent of federal spending in 2012 (other than for the government’s net interest costs) was mandatory. Legislation that changed direct spending would, by itself, affect the budget deficit because no further legislative action would be required for the change in spending to occur.

Resources

See Also

• Federal Appropriations
• Entries about the United States Budget Process in the Encyclopedia (including Direct Spending)
• Public Debt
• Discretionary Spending

Further Reading

• Legislatures and the budget process: the myth of fiscal control (J Wehner, 2010)
• Reconcilable Differences?: Congress, the Budget Process, and the Deficit (JB Gilmour, 1990)
• Fiscal institutions and fiscal performance (JM Poterba, J von Hagen, 2008)