The largest block of federal spending — about 60% and $3.9 trillion in FY 2024 — is called “direct spending” because the outlays flow directly from legal obligations of the federal government established in authorizing laws. Direct spending is also referred to as “mandatory spending” because it is mandated by legal obligations written into law (such as Social Security benefits).[1]
Most direct spending is comprised of “entitlement programs” — where eligibility rules, benefit formulas and inflation adjustments enacted in permanent law determine annual outlays. Consequently, entitlements and other direct spending programs are on “auto-pilot” until underlying laws are changed. This has resulted in the rapid increase of direct spending as a share of the budget from about one-third in FY 1970 to nearly half in FY 1990, and 60% at present. If interest on the debt — which is “mandatory” in character — is included, that amount reaches 73% of the budget.[2]
Entitlements legally obligate the United States to make formula-driven payments to eligible individuals or entities; however, funds must still be appropriated to enable disbursements from the Treasury. Some entitlement programs, such as Social Security and Medicare, are managed through trust funds that have permanent budget authority, i.e., the benefit payments are permanently appropriated.[3]
Other entitlements, including Medicaid, Veterans compensation and pensions, and the Supplemental Nutrition Assistance Program (“SNAP,” formerly Food Stamps), are annually appropriated and are referred to as “appropriated entitlements.”[4] The amount of spending for appropriated entitlements is determined by benefit formulas in permanent law, but disbursements from the Treasury are made available annually in appropriation acts.
Permanently appropriated and annually appropriated entitlements share the common characteristic that the cost of the program has been determined outside of the appropriations process through the establishment in law of formula-driven programs.
The three largest entitlement programs, together comprising about 45% of the budget, are:
- Social Security: nearly $1.5 trillion in outlays and 21% of the budget, pays old-age, survivors, and disability benefits from payroll tax receipts and trust fund reserves.
- Medicare: $903 billion and 13% of the budget is the national health insurance program administered by the federal government for seniors and disabled adults, and financed by general tax revenues, payroll taxes, premiums, and copayments.
- Medicaid: $607 billion in outlays and nearly 9% of the budget, is the major health and long-term care program for low-income children, families, and seniors — financed jointly by the federal and state governments and administered by the states.
July 2023: GAO released Government-Wide Inventory of Accounts with Mandatory Spending
The following table provides an overview of major direct (mandatory) spending programs.
|
Major Direct (Mandatory) Spending Programs |
FY 2024 Estimated Outlays $ in billions (rounded) [5] |
| Social Security Old-Age, Survivors, and Disability Insurance: pays benefits from payroll tax revenues to eligible retirees, workers with disabilities, dependents, and survivors. | 1,452 |
| Medicare: national health insurance for people 65 orand older and people with eligible disabilities, funded by hospital insurance payroll taxes, general revenues, premiums, and copayments. | 903 |
| Medicaid: a joint federal-state program, administered by states, providing health coverage to 79 million low-income Americans including children, adults, pregnant women, seniors, and people with disabilities. | 607 |
| Veterans’ benefits: includes disability compensation and pensions, life insurance, vocational rehabilitation, toxic exposure benefits, and housing loans (see discretionary spending for VA healthcare). | 200 |
| Federal Civilian Retirement and Disability: includes the Civil Service Retirement System, the Federal Employee Retirement System, foreign service, Coast Guard, and retiree health benefits. | 127 |
| Earned Income (EITC), Child, American Opportunity and Other Tax Credits (the “refundable portion” that exceeds tax liability shows up as mandatory outlays in the federal budget) | 99 |
| Supplemental Nutrition Assistance Program: (SNAP, formerly Food Stamps) provides benefits to help people in low-income households purchase food. |
105 |
| Affordable Care Act: income-based health insurance subsidies for uninsured Americans and risk adjustment payments to stabilize premiums. |
125 |
| Military Retirement: retiree, disability, and survivor benefits. | 78 |
| Supplemental Security Income (SSI): guaranteed monthly income for low-income individuals who are aged, blind, or disabled (administrative expenses are see also discretionary spending). | 62 |
| Family Support; Foster Care & Adoption Assistance: includes Temporary Assistance for Needy Families, Child Support Enforcement, the Child Care Entitlement to States, and other programs that benefit children. | 45 |
| Unemployment Compensation (federal portion): outlays vary widely depending on current unemployment levels. |
36 |
| Education Stabilization Fund: initiated as a pandemic response. | 45 |
| Child Nutrition: national school lunch, school breakfast, and summer food service. | 33 |
| Student loans and other student financial assistance. | 175 |
| Agriculture programs: federal crop insurance provides subsidized insurance to help farmers manage risks;and various commodity programs provide price and income support. |
31 |
| Advancement of Commerce (including universal service fund, telecomm relay service, and small and minority business assistance. |
24 |
| Children’s Health Insurance Program (CHIP): provides insurance coverage to families whose income, although modest, is too high to qualify for Medicaid. | 19 |
| DoD Medicare-Eligible Retiree Health Care Fund (MERHCF): health benefits under TRICARE for military retirees after becoming eligible for Medicare. |
12 |
| Public Health and Social Services Emergency Fund | 11 |
| Railroad Retirement | 10 |
| Pension Benefit Guaranty Corporation | 12 |
| Rehabilitation Services | 5 |
| Mass Transit and Highway Grants (see discretionary programs for most highway and transit spending) |
5 |
| Crime victims fund | 3 |
| Victims of state-sponsored terrorism | 3 |
| Energy Employees Occupational Illness Compensation Program (atomic energy) | 3 |
| Social Services Block Grant | 2 |
[1] The term “mandatory spending,” although appearing numerous times in statute, scorekeeping rules, and rules of the House and Senate, is not specifically defined statute; however, it is generally interchangeable with “direct spending,” which is defined in the Balanced Budget and Emergency Deficit Control Act of 1985, § 250(c)(8), as amended, 2 U.S.C. § 900(c)(8), as including: “budget authority provided by law other than appropriation Acts;…entitlement authority;…and the Supplemental Nutrition Assistance Programs.” See also footnote 95 in A Compendium of Laws and Rules of the Congressional Budget Process, House Committee on the Budget Print No. CP-1 (Aug. 2015).
[2] For mandatory spending levels as percentages of the budget, see [Off.] of Mgmt. & Budget, Exec. [Off.] of the President, Budget of the United States Government, Fiscal Year 2024, Historical Tables, Table 8.3 (2023). Entitlement authority was first defined in the Balanced Budget and Emergency Deficit Control Act of 1985, Pub. L. No. 99-177, § 201(a)(1), 99 Stat. 1037, 1040 (1985).
[3] Most trust funds have permanent budget authority and all of the funds in the trust fund are available for obligation. For an explanation see Cong. Rsch. Serv., R41328, Federal Trust Funds and the Budget, (Feb. 27, 2014); and [Off.] of Mgmt. & Budget, Exec. [Off.] of the President, Budget of the United States Government, Fiscal Year 2024, Analytical Perspectives, Chapter 22, Trust Funds and Federal Funds (2023). See also the permanent appropriations language for the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund at 42 U.S.C. § 401.
[4] Cong. Rsch. Serv., RS20129, Entitlements and Appropriated Entitlements in the Federal Budget Process, 1 (Nov. 26, 2012). For a list of appropriated entitlements, see A Compendium of Laws and Rules of the Congressional Budget Process, Committee on the Budget, U.S. House of Representatives, 613-39 (Aug. 2015).
[5] Source for projected FY 2023 outlays: Congressional Budget Office baseline (Feb. 2023), https://www.cbo.gov/data/budget-economic-data#9.