discretionary spending

Discretionary spending refers to government expenditures that are not mandatory and are subject to annual approval by Congress. This type of spending is distinct from mandatory spending, which covers entitlement programs like Social Security and Medicare. The largest portion of discretionary spending is typically allocated to national defense.1

Governments use fiscal policy, which includes taxation and spending, to achieve economic goals such as full employment, economic growth, and stable prices. By adjusting tax rates or spending levels, policymakers can influence consumer spending and business investment, thereby stimulating or slowing the economy. The allocation of discretionary funds involves a complex process with input from various government branches and external pressures.12