Fast Facts about Mandatory Spending

pa href=https://www.cato.org/people/romina-boccia hreflang=undRomina Boccia/a and Dominik Lett/p

pspanspanThe federal government will spend $6.3 trillion in 2023, 73 percent is categorized as mandatory and 27 percent as /span/spana href=https://www.cato.org/blog/fast-facts-about-discretionary-spendingspanspandiscretionary/span/span/aspanspan. Mandatory spending /span/spanrefers to federal programs that are funded outside of annual appropriations, including Social Security, Medicare, and food stamps (SNAP). Mandatory spending also includes interest spending on the federal debt. Mandatory spending is typically ongoing and determined by statutory formula, meaning it continues from year to year, unless Congress changes the underlying law. spanspanThis fact sheet lays out key details legislators and the public should know about mandatory spending./span/span/pullipMandatory spending accounts for three quarters of all federal spending, that’s strong$4.6 trillion/strong in 2023 or 17.6 percent of gross domestic product (GDP)./pullipThe federal government will spend strong$35,000/strong in mandatory spending for every U.S. household in 2023./p/liliBetween 1973 and 2023, mandatory spending’s budgetary share grew from strong47 percent to 73 percent/strong of total federal spending./lilipBetween 1973 and 2023 mandatory spending doubled from strong8.5 percent of GDP to 17.6 percent/strong of GDP./p/lilipMandatory spending is a href=https://www.cato.org/blog/cbo-budget-economic-outlook-post-covid-fiscal-eragrowing/a as a share of the overall budget, primarily due to the growth of major entitlement programs like a href=https://www.cato.org/blog/fast-facts-about-medicare-social-securitySocial Security and Medicare/a./p/lilipMandatory spending will reach strong$7.4 trillion/strong or 19 percent of GDP by 2033 according to a href=https://www.cbo.gov/publication/59096projections/a by the Congressional Budget Office (CBO)./p/li/ul/lilipMost mandatory spending is for major entitlements like Social Security, Medicare, and Medicaid./pullipSocial Security spending will grow from strong$1.4 trillion/strong or 5.1 percent of GDP in 2023 to $2.4 trillion or 6 percent of GDP./p/liliMedicare, excluding offsetting receipts such as premium payments, will spend strong$1 trillion/strong in 2023./lilipMedicaid will spend strong$589 billion/strong in 2023./p/lilipMajor health care programs when combined make up the largest category of federal spending, spending strong$1.7 trillion /strongin 2023 or strong6.5 percent/strong of gross domestic product (GDP)./p/lilipspanMajor health care spending will increase to /spanstrong$3 trillion/strongspan or 7.8 percent of GDP by 2033. That’s almost three times what the U.S. government will spend on defense that year./span/p/lilipSpending for income security programs, including food stamps (SNAP) and unemployment compensation, will reach strong$413 billion/strong in 2023./p/lilipNet interest spending and means‐​tested entitlements like food stamps, welfare, and Medicaid, grew the a href=https://www.cato.org/blog/federal-spending-40-2019fastest/a./p/li/ul/lilipInterest spending on the federal debt is categorized as mandatory spending./pullipInterest costs on the federal debt are projected to grow faster than any other category of spending./p/lilipspanIn 2023, net interest spending will reach /spanstrong$663 billion/strongspan or 2.5 percent of GDP./span/p/lilipspanBy 2033, interest costs are projected to double to /spanstrong$1.4 trillion/strongspan or 3.7 percent of GDP. That’s 20 percent of total federal revenues in 2033./span/p/lilipspanBy 2052, net interest costs are projected to rise to /spanstrong7.2 percent of GDP/strongspan. That would be higher than spending on Social Security or all discretionary spending./span/p/lilipIf interest rates were 1 percentage point higher than projected, cumulative interest costs would increase by strong$3 trillion/strong over 10 years./p/li/ul/li/ulp

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/divullipMandatory spending is the primary driver of the U.S. fiscal imbalance./pullipspanNearly /spanstrong60 percent/strongspan of the federal government’s long‐​term structural fiscal imbalance is the /spana href=https://www.mercatus.org/research/research-papers/why-we-have-federal-deficits-updated-analysisresult/aspan of legislation enacted between 1965 and 1972 pertaining to Medicare, Medicaid, and Social Security./span/p/lilipspanTogether, major entitlement programs and interest will be responsible for /spanstrong82 percent/strongspan of /spana href=https://www.cato.org/blog/cbo-budget-economic-outlook-post-covid-fiscal-eraprojected spending/aspan growth over the next 10 years./span/p/lilipOver the next 75 years, Medicare and Social Security are responsible for strong95 percent/strong of the total unfunded obligation (the present value of non‐​interest spending less receipts)./p/lilipFour of the five largest federal budget a href=https://www.pgpf.org/budget-basics/top-10-largest-budget-functionsfunctions/a are mandatory spending; only one of the five largest budget functions is subject to regular review and spending limits: national defense./p/li/ul/li/ulpstrongFurther reading:/strong/pullipa href=https://www.mercatus.org/research/research-papers/why-we-have-federal-deficits-updated-analysis rel=noopener noreferrer nofollow target=_blankstrongWhy We Have Federal Deficits: An Updated Analysis, by Charles Blahous/strong/astrong /strong/pp“Nearly three‐​fifths of the federal government’s long‐​term structural fiscal imbalance derives from legislation enacted between 1965 and 1972, including the enactments of Medicare and Medicaid in 1965, expansions of Medicare and Medicaid in 1971–72, and substantial increases in Social Security benefits in 1972.”/p/lilipa href=https://www.cato.org/blog/designing-brac-fiscal-commission-stabilize-debt rel=noopener noreferrer nofollow target=_blankstrongDesigning a BRAC‐​Like Fiscal Commission To Stabilize the Debt/strong/a/pp“A well‐​designed BRAC‐​like process will be an effective tool for reducing government spending while also respecting Congress’s constitutional authority.”/p/lilipa href=https://www.cato.org/briefing-paper/how-better-budget-control-act-would-limit-spending-control-debt#establish-independent-bipartisan-commission-reform-medicare-social-security rel=noopener noreferrer nofollow target=_blankstrongHow a Better Budget Control Act Would Limit Spending and Control Debt/strong/astrong /strong/pp“An independent, nonpartisan commission can help Congress overcome entitlement reform gridlock by providing politicians with political cover to approve the necessary changes sooner. [That] allows for more gradual changes to old‐​age entitlement programs that preserve benefits for the most vulnerable seniors without economically damaging tax increases on American workers.”/p/li/ulpDownload a printable PDF version of this fact sheet a href=https://www.cato.org/sites/cato.org/files/2023-06/Mandatory_Fast_Facts_PDF.pdfhere/a./ppFor other fact sheets on the U.S. federal budget see:/pullipa href=https://www.cato.org/sites/cato.org/files/2023-03/debt_fast_facts_cato_0323_1.pdf rel=noopener noreferrer nofollow target=_blankFederal Debt/a/p/lilipa href=https://www.cato.org/sites/cato.org/files/2023-05/Discretionary_Fast_Facts_PDF_0.pdf rel=noopener noreferrer nofollow target=_blankDiscretionary Spending/a/p/lilipa href=https://www.cato.org/sites/cato.org/files/2023-04/Medicare%20and%20Social%20Security%20Fast_Facts.pdf rel=noopener noreferrer nofollow target=_blankSocial Security and Medicare/a/p/li/ul