The Budget divides all spending into two broad categories:
Almost one-third of federal spending is called “discretionary spending,” because the amount of spending flows from annual funding decisions by Congress’ Appropriations Committees (and that is roughly divided between defense and non-defense programs).
Roughly two-thirds of the budget is called “mandatory spending,” because the amount of outlays flow from legal obligations of the federal government established in law.
Most mandatory spending is comprised of “entitlement programs” — where eligibility rules and benefit formulas determine annual outlays.
The largest entitlement programs are:
- Social Security: $984 billion – 24% of the Budget
Old-Age, Survivors, and Disability Insurance.
- Medicare: $583 billion – 14% of the Budget
(Gross Outlays of $707 b minus $124 b from premiums and other offsetting receipts)
Medicare is national health insurance administered by the federal government for people 65 and over and disabled Americans. It is financed by payroll taxes, general tax revenues, premiums and copayments. The above number is total Medicare outlays.
- Medicaid: $383 billion – 9% of the Budget
Medicaid, financed jointly by the federal and state governments, is administered by the states. It is the major health program for low-income Americans. A large portion of Medicaid pays for long-term care for low-income elderly.