Mandatory Spending Since 1962
D. Andrew Austin
Analyst in Economic Policy
Mindy R. Levit
Analyst in Public Finance
March 23, 2012
Congressional Research Service
7-5700
www.crs.gov
RL33074
CRS Report for Congress
Pr
epared for Members and Committees of Congress

Mandatory Spending Since 1962

Summary
Federal spending is divided into three broad categories: discretionary spending, mandatory
spending, and net interest. Mandatory spending is composed of budget outlays controlled by laws
other than appropriation acts, including federal spending on entitlement programs. Entitlement
programs such as Social Security and Medicare make up the bulk of mandatory spending. Other
mandatory spending programs include Temporary Assistance for Needy Families (TANF),
Supplemental Security Income (SSI), unemployment insurance, some veterans’ benefits, federal
employee retirement and disability, and Supplemental Nutrition Assistance Program (SNAP). In
contrast to mandatory spending, discretionary spending is provided and controlled through
appropriations acts. Net interest spending is the government’s interest payments on debt held by
the public, offset by interest income that the government receives.
In FY2011, mandatory spending accounted for over half of total federal spending and over an
eighth of GDP. Social Security accounted for a fifth of federal spending. Medicare and the federal
share of Medicaid, the fastest growing components of mandatory spending, together accounted
for 23% of federal spending. Those three programs, therefore, made up over 43% of federal
spending. The composition of mandatory spending has changed significantly over the past 40
years. In 1962, before the 1965 creation of Medicare and Medicaid, mandatory spending was less
than 30% of all federal spending. At that time, Social Security accounted for about 13% of total
federal spending or about half of all mandatory spending.
Federal spending has outrun federal revenues for the last 10 fiscal years. In the long term,
projections suggest that if current policies remain unchanged, the United States faces a major
fiscal imbalance, largely due to rising health care costs and impending Baby Boomer retirements.
Federal mandatory spending on health care is projected to expand from 5.7% of GDP in FY2011
to 17.2% in FY2085 according to CBO’s extended baseline projection. Social Security is
projected to grow from 4.8% of GDP in FY2011 to 6.4% of GDP by FY2085.
The share of mandatory spending has increased as a portion of total federal spending and as a
percentage of GDP for four reasons. First, discretionary spending has fallen over time relative to
mandatory spending. Second, domestic discretionary spending has been relatively stable as a
share of GDP compared to mandatory spending, which has grown more quickly. Third, the
number of beneficiaries of entitlement programs has grown as the average age of population has
risen. Fourth, health care costs per capita have grown far faster than the overall economy.
In an effort to reform the private insurance market and expand health insurance coverage to the
uninsured as federal spending on health care increases, the Patient Protection and Affordable Care
Act (PPACA; P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010
(HCERA; P.L. 111-152) were signed into law on March 23 and March 30, 2010, respectively. As
a result of this legislation, mandatory federal outlays for health programs are projected by CBO to
increase. Revenue increases are projected by CBO to offset the additional mandatory outlays.
Because discretionary spending is a smaller proportion of total federal outlays compared to
mandatory spending, some budget experts contend that any significant reductions in federal
spending must include cuts in entitlement spending. Other budget and social policy experts
contend that cuts in entitlement spending could compromise their goals: the economic security of
the elderly and the poor. This report will be updated annually.
Congressional Research Service

Mandatory Spending Since 1962

Contents
Overview.......................................................................................................................................... 1
What Does Mandatory Spending Include? ...................................................................................... 2
Mandatory Spending Trends Over Time.......................................................................................... 5
Changes in Mandatory Spending............................................................................................... 9
Mandatory Spending and the Economy................................................................................... 11
Why Has Mandatory Spending Risen Over Time?........................................................................ 13
Mandatory Spending Beyond FY2022 .......................................................................................... 15
Conclusion ..................................................................................................................................... 15

Figures
Figure 1. Mandatory Spending and Offsetting Receipts As a Percentage of Total Outlays
(FY1962-FY2022) ........................................................................................................................ 6
Figure 2. Components of Mandatory Spending As a Percentage of Federal Spending
(FY1970-FY2022) ...................................................................................................................... 10
Figure 3. Mandatory Spending Before Offsetting Receipts As a Percentage of GDP
(FY1970-FY2022) ...................................................................................................................... 11
Figure 4. Income Security Programs As a Percentage of GDP (FY2000-FY2022)....................... 12
Figure 5. Discretionary Spending As a Percentage of GDP (FY1970-FY2011)........................... 14

Tables
Table 1. Mandatory Outlays, FY2011-FY2022 ............................................................................... 3
Table 2. Mandatory Program Spending As a Percentage of Total Mandatory Outlays and
GDP .............................................................................................................................................. 7

Contacts
Author Contact Information........................................................................................................... 16

Congressional Research Service

Mandatory Spending Since 1962

Overview
Mandatory spending is composed of budget outlays controlled by laws other than appropriation
acts, including federal spending on entitlement programs.1 Entitlement programs such as Social
Security and Medicare make up the bulk of mandatory spending. Other mandatory spending
programs include Temporary Assistance for Needy Families (TANF), Supplemental Security
Income (SSI), unemployment insurance, certain veterans’ benefits, federal employee retirement
and disability, Supplemental Nutrition Assistance Program (SNAP), and the earned income tax
credit (EITC).2 (See list in Table 1.) Mandatory spending also includes many smaller budgetary
items, such as salaries of Members of Congress and the President. Congress sets eligibility
requirements and benefits for entitlement programs. If the eligibility requirements are met for a
specific mandatory program, outlays are made automatically.
In FY2011, mandatory spending—totaling 13.5% of gross domestic product (GDP)—exceeded
discretionary spending’s 9.0% share of GDP.3 In addition, federal net interest payments accounted
for 1.5% of GDP. Together total federal spending represented 24.1% of GDP. Mandatory
spending composed over 56% of all federal spending in FY2011. Social Security, Medicare, and
the federal share of Medicaid alone composed over 43% of all federal spending.
Mandatory spending plays a major role in larger fiscal trends. During economic downturns,
government revenues fall and expenditures rise as more people become eligible for mandatory
programs such as unemployment insurance and Income Security programs, causing deficits to
increase or surpluses to shrink. These effects, known as “automatic stabilizers,” provide a
countercyclical fiscal stimulus in the short run without the need for new legislative action. As a
result of the current economic conditions and federal actions taken in response to the downturn,
mandatory spending has been higher than its historical levels (as a percentage of GDP) over the
last several fiscal years. After falling in FY2010 relative to FY2009 levels, mandatory spending
rose again in FY2011. The Congressional Budget Office (CBO) projects mandatory spending to
remain relatively constant, as a share of GDP, through FY2018 before beginning to rise again.
After FY2018, mandatory spending is projected to account for an ever-increasing share of GDP
throughout the rest of the decade. Mandatory spending, according to CBO current-law
projections, will be about 14.3% of GDP in FY2022. However, CBO baseline projections, which
extend 10 years forward, do not reflect the full force of the pressures the impending retirement of
the large baby boom generation and increasing health care costs will exert on the federal budget.
This report looks at mandatory spending and its growth over time relative to total federal
spending and the size of the U.S. economy. It also analyzes future mandatory spending levels and
how they are projected to impact the federal budget.

1 Mandatory spending is also referred to as direct spending in budgetary legislation.
2 The Food Stamps program has been renamed the Supplemental Nutrition Assistance Program (SNAP).
3 Unless otherwise noted, all data are from Congressional Budget Office, The Budget and Economic Outlook: Fiscal
Years 2012 to 2022
, January 2012.
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What Does Mandatory Spending Include?
Mandatory spending is controlled by laws other than appropriations acts. Such laws generally
take the form of authorizing legislation. Authorizing legislation establishes or continues the
operation of a federal program or agency, either indefinitely or for a specified period. Mandatory
spending typically is provided in permanent or multi-year appropriations contained in the
authorizing law, and therefore, the funding becomes available automatically each year, without
further legislative action by Congress. In most cases, the authorizing law requires payment, based
on a benefit formula, to an individual or entity (e.g., a state) if eligibility criteria are met. In
contrast, discretionary spending is provided and controlled through the annual appropriations
process.4 Net interest payments, which are automatically authorized and reported as a separate
category, are the government’s interest payments on debt held by the public offset by interest
income that the government receives.5
Entitlement spending, such as for Medicaid and certain veterans’ programs, is funded in annual
appropriations acts. Such entitlement spending is referred to as appropriated entitlements. The
level of spending for appropriated entitlements, like other entitlements, is based on the benefit
and eligibility criteria established in law. The amount of budget authority provided in
appropriations acts for these specific programs is based on meeting projected spending levels.
Since the authorizing legislation effectively determines the amount of budget authority required,
the Budget Enforcement Act (BEA) of 1990 (P.L. 101-508) classified appropriated entitlement
spending as mandatory.6
Not all mandatory spending funds entitlement programs. For example, the Forest Service makes
some payments to states that are mandatory, but are not entitlements. Some agencies gained
authority to sign contracts or create obligations in other ways, which GAO has termed
“backdoor” spending authority.7 Those obligations become part of mandatory spending unless
limited by the BEA or other budget legislation. As noted above, salaries of Members of Congress
and the President are also deemed mandatory.
Table 1, below, shows CBO baseline projections for mandatory spending from FY2011 (actual)
to FY2022.

4 For more information on discretionary spending trends, see CRS Report RL34424, Trends in Discretionary Spending,
by D. Andrew Austin and Mindy R. Levit.
5 For more information, see CRS Report RS22354, Interest Payments on the Federal Debt: A Primer, by Thomas L.
Hungerford.
6 For a discussion of procedural issues, see CRS Report RS20129, Entitlements and Appropriated Entitlements in the
Federal Budget Process
, by Bill Heniff Jr.
7 U.S. General Accounting Office, Budget Issues: Inventory of Accounts With Spending Authority and Permanent
Appropriations
, GAO/AIMD-96-79, May 31, 1996.
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Table 1. Mandatory Outlays, FY2011-FY2022
January 2012 CBO Baseline Projections (billions of dollars)

Actual
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Social
Security
725
770 814 857 902 950 1,004
1,063
1,128
1,197
1,269
1,345
Medicarea
560
560 598 629 658 712 739 769 835 890 948 1,041
Medicare offsetting receiptsb
-80
-85 -94 -98 -103 -111 -119 -128 -138 -144 -154 -164
Medicaid
275
262 281 330 370 407 432 456 487 522 564 605
Health insurance subsidies & exchanges
*
*
1
17
36
58
72
81
87
92
98
104
Other
Health
Programs
22
25 27 35 50 48 44 44 48 51 54 57
MERHCFc
9
9 9 10 11 12 12 13 14 15 16 17
Children’s Health Insurance Program
9
9
10
11
12
11
6
6
6
6
6
6
Other
4
7 8 14 27 25 26 25 28 30 32 34
Income
Security
405
345 333 297 293 295 288 286 295 301 308 320
SNAP
77
80 82 80 80 80 78 77 75 74 73 73
Unemployment
compensation
119
82 58 60 54 51 49 50 53 56 59 61
Supplemental
Security
Income
53
47 53 55 56 62 59 55 62 63 65 73
Earned
income
and
child
tax
credits
78
79 81 48 47 46 45 45 46 46 47 49
Family supportd
26
26 25 25 25 25 25 25 25 25 25 25
Child
nutrition
18
19 21 22 22 23 24 25 26 27 28 29
Foster
care
7
7 7 8 8 8 8 9 9 9 10
10
Making Work Pay and Other Tax Credits e
25
6 5 * 0 0 0 0 0 0 0 0
Civilian
and
Military
Retirement
144
144 152 156 160 170 171 172 183 189 196 207
Federal civilianf
83
87 89 92 94 97 100 103 107 110 114
118
Military
55
49 54 56 57 63 60 58 64 66 68 75
Other
6
8 8 8 9 10 10 11 12 13 14
14
Veteransg
71
68 72 73 74 81 78 75 83 85 87 95
Income
security
59
56 59 60 62 68 64 60 67 68 70 77
Other
12
12 13 12 13 14 14 15 16 17 17 18
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Mandatory Spending Since 1962


Actual
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Other
Programs
15
96 60 40 39 43 44 48 57 56 56 59
Troubled Asset Relief Program (TARP)h
-37 23 3 2 2 1 0 0 0 0 0 0
Fannie Mae and Freddie Maci
5
7 3 3 2 2 2 2 3 3 3 3
Deposit Insurancej
-9
3 3 -10 -11 -14 -16 -18 -9 -10 -11 -13
Higher
education
-33
-11 -18 -20 -19 -14 -7 -2 1 1 1 0
Agriculture

15
13 19 16 16 16 16 16 16 16 16 16
Other
73
59 50 49 49 51 49 49 48 46 46 52
Non-Medicare
Offsetting
Receipts
-110
-114 -120 -120 -123 -126 -130 -137 -147 -151 -154 -155
Federal
share
of
federal
employees’
retirement
-63
-65 -65 -67 -69 -72 -75 -79 -82 -86 -89 -92
Other
-47
-49 -55 -53 -54 -54 -55 -58 -65 -65 -65 -63
Total
Mandatory
Outlays
2,025
2,070 2,122 2,215 2,354 2,526 2,624 2,729 2,918 3,090 3,272 3,514
Source: CBO, Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 2012, Table 3-2.
Notes:
* indicates that an outlay level is between zero and $500 million. Totals and subtotals shown in bold. Items may not sum to totals due to rounding.
a. Excludes offsetting receipts.
b. Includes Medicare premiums and amounts paid by states from savings on Medicaid prescription drug costs.
c. MERHCF is the Department of Defense Medicare-Eligible Retiree Health Care Fund, including TRICARE For Life.
d. Includes Temporary Assistance for Needy Families and various programs that involve payments to states for child support enforcement and family support, child care
entitlements, and research to benefit children.
e. Includes outlays for the first-time homebuyer credit, the American Opportunity credit, and other tax credits.
f.
Includes Civil Service, Foreign Service, Coast Guard, and other, smal er retirement programs as wel as annuitants’ health benefits.
g. Income security includes veterans’ compensation, pensions, and life insurance programs. Other benefits are primarily education subsidies.
h. A negative outlay level for TARP in FY2011 is recorded to reflect changes in economic and market conditions that have lowered CBO’s estimates of the cost of the
TARP program over its lifetime. The negative outlays in FY2011 do not reflect TARP spending undertaken in that year.
i.
The amount for FY2011 reflects cash transfers from the Treasury to Fannie Mae and Freddie Mac. The amounts shown for FY2012 through FY2022 reflect CBO’s
estimate of the subsidy cost of new loans and guarantees made by those two entities in each year, adjusted for market risk.
j.
Net costs for deposit insurance are recorded on a cash basis. Positive outlays reflect payments made by the government to cover losses for failing banks. Negative
outlays indicate federal revenue from insurance premiums and asset sales are anticipated to exceed any expenditures related to failing banks.
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Mandatory Spending Since 1962

Mandatory spending is partially offset by certain fees and payments, known as offsetting receipts,
which are generally counted as negative budget authority. Market-like charges, such as Medicare
Part A deductibles and Medicare Part B premiums, are considered offsetting receipts. Payments
by Medicare beneficiaries and the federal government’s tax and pension contributions in its role
as an employer comprise the largest component of offsetting receipts.
Most mandatory spending is accounted for in the budget based on the dollar amount spent in each
fiscal year. However, some mandatory programs are recorded differently. For example, federal
student loan programs, like other federal loan and loan guarantee programs, are scored under
terms of the Federal Credit Reform Act of 1990 (FCRA; P.L. 101-508). Rather than being
accounted for on a cash basis, FCRA programs are accounted for on a net subsidy basis. FCRA
required that the reported budgetary cost of a credit or loan program equal the estimated subsidy
costs at the time the credit is provided. In other words, the subsidy cost is the estimated long-term
cost to the government of a direct loan or a loan guarantee, calculated on a net present value
basis, excluding administrative costs. This places the cost of federal credit programs on a
budgetary basis equivalent to other federal outlays.8 Troubled Asset Relief Program (TARP) costs
are also calculated on a similar basis, but unlike other federal loan programs, calculations include
adjustments for market risk.
Mandatory Spending Trends Over Time
Mandatory spending has taken up a larger and larger share of the federal budget over time.
Mandatory spending grew over time with enactment of the Social Security Act of 1935 (P.L. 74-
271) and the Medicare Act of 1965 (P.L. 89-97).9 In FY1962, three years before the creation of
Medicare and Medicaid, less than 30% of all federal spending was mandatory. At that time, Social
Security accounted for about 13% of total federal spending or about half of all mandatory
spending.10 In the mid-1970s, growth of mandatory spending as a share of total federal spending
slowed. During part of the 1980s, mandatory spending declined as a share of total federal
spending. Since then, mandatory spending has increased its share of federal spending at a gradual
pace.
Figure 1 shows historical trends in mandatory spending between FY1962 and FY2011 and
CBO’s baseline projections for these components to FY2022, expressed as a percentage of total
federal spending. The CBO baseline is intended as a neutral starting point for the estimation of
budgetary effects of legislative changes.

8 CRS Report RL30346, Federal Credit Reform: Implementation of the Changed Budgetary Treatment of Direct Loans
and Loan Guarantees
, by James M. Bickley.
9 Officially titled “Social Security Amendments of 1965.”
10 Offsetting receipts are not taken into account for the cost of individual programs in this and subsequent calculations
in order to provide comparability to the figures in Table 2. In 2010, offsetting receipts totaled $184 billion or 9% of
total spending on mandatory programs.
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Mandatory Spending Since 1962

Figure 1. Mandatory Spending and Offsetting Receipts
As a Percentage of Total Outlays (FY1962-FY2022)
80%
70%
60%
Mandatory Spending Before
Offsetting Receipts
50%
Mandatory Spending
tlays
Including Offsetting Receipts
Ou
al
40%
Tot
of
%
30%
20%
10%
0%
6
6
1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 198 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 201 2018 2020 2022
Fiscal Year

Source: Data for FY1962-FY1971 from OMB, Budget for Fiscal Year 2013, Historical Tables, Tables 1.3 and 8.5;
Data for FY1972-FY2022 from CBO, Historical Tables and CBO Budget Projections data. CBO treats some
offsetting receipts, especially regarding Medicare, differently than OMB. CBO baseline projections to the right of
dotted line.
Mandatory spending was about a quarter of total federal spending in FY1962 (nearly a third if
offsetting receipts are excluded). In FY1968, mandatory spending began growing relative to total
federal spending and by FY1975 accounted for about 45% of total spending (about half before
offsetting receipts). From the mid-1980s through 1990, mandatory spending’s share in total
spending remained relatively steady, before starting to grow again after FY1990.
In FY2011, mandatory spending accounted for over 56% of total spending (or nearly 62% before
offsetting receipts). The spike in mandatory spending between FY2008 and FY2009 was largely
due to increased outlays related to federal financial interventions and the economic downturn.
After falling in FY2010 relative to FY2009 levels, mandatory spending rose again in FY2011.
The Congressional Budget Office (CBO) projects mandatory spending to remain relatively
constant, as a share of GDP, through FY2018 before beginning to rise again. After FY2018,
mandatory spending is projected to account for an ever-increasing share of GDP throughout the
rest of the decade. Mandatory spending, according to CBO current-law projections, will be about
14.3% of GDP in FY2022. Table 2 presents components of mandatory spending in FY2011 and
FY2012 (estimated) and CBO baseline projections for mandatory spending in FY2022.
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Mandatory Spending Since 1962

Table 2. Mandatory Program Spending As a Percentage of Total Mandatory Outlays and GDP
FY2022 (CBO Baseline

FY2011 (Actual)
FY2012 (Estimated)
Projections)
% of
% of
% of
% of
% of
% of
Category
Mandatory
Mandatory
Mandatory
a $Billions
GDP $Billions
GDP $Billions
GDP
Spendinga
Spendinga
Spendinga
Social Security
725 32.7% 4.8% 770 33.9%
5.0%
1,345
35.1%
5.5%
Medicare
560 25.3% 3.7% 560 24.7%
3.6%
1,041
27.2%
4.2%
Medicaid
275 12.4% 1.8% 262 11.5% 1.7% 605 15.8% 2.5%
Health Insurance Subsidies &
* 0.0%
0.0%
* 0.0%
0.0%
104
2.7%
0.4%
Exchanges
Other Health Programs
22 1.0% 0.2% 25 1.1% 0.2% 57 1.4% 0.2%
MERHCF 9
0.4%
0.1%
9
0.4%
0.1%
17
0.4%
0.1%
Children’s Health Insurance Program
9
0.4%
0.1%
9
0.4%
0.1%
6
0.1%
0.0%
Other 4
0.2%
0.0%
7
0.3%
0.0%
34
0.9%
0.1%
Income Security
405 18.3% 2.7% 345 15.2% 2.2% 320 8.3% 1.3%
SNAP
77 3.5% 0.5% 80 3.5% 0.5% 73 1.9% 0.3%
Unemployment
compensation
119 5.4% 0.8% 82 3.6% 0.5% 61 1.6% 0.2%
Supplemental Security Income
53
2.4%
0.4%
47
2.1%
0.3%
73
1.9%
0.3%
Earned income and child tax credits
78
3.5%
0.5%
79
3.5%
0.5%
49
1.3%
0.2%
Family
support
26 1.2% 0.2% 26 1.1% 0.2% 25 0.7% 0.1%
Child
nutrition
18 0.8% 0.1% 19 0.8% 0.1% 29 0.8% 0.1%
Foster care
7
0.3%
0.0%
7
0.3%
0.0%
10
0.3%
0.0%
Making Work Pay and Other Tax
25 1.1% 0.2% 6 0.2% 0.0% 0 0.0%
0.0%
Credits
Civilian and Military Retirement
144 6.5% 1.0% 144 6.3% 0.9% 207 5.4% 0.8%
Federal civilian
83
3.7%
0.6%
87
3.8%
0.6%
118
3.1%
0.5%
Military
55 2.5% 0.4% 49 2.2% 0.3% 75 2.0% 0.3%
Other 6
0.3%
0.0%
8
0.4%
0.1%
14
0.4%
0.1%
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Mandatory Spending Since 1962

FY2022 (CBO Baseline

FY2011 (Actual)
FY2012 (Estimated)
Projections)
% of
% of
% of
Mandatory
% of
Mandatory
% of
Mandatory
% of
Categorya $Billions
GDP
GDP
GDP
Spending
$Billions
$Billions
a
Spendinga
Spendinga
Veterans
71 3.2% 0.5% 68 3.0% 0.4% 95 2.5% 0.4%
Income
Security
59 2.7% 0.4% 56 2.5% 0.4% 77 2.0% 0.3%
Other
12 0.5% 0.1% 12 0.5% 0.1% 18 0.5% 0.1%
Other Programs
15 0.7% 0.1% 96 4.2% 0.6% 59 1.5% 0.2%
TARP -37
-1.7%
-0.2%
23
1.0%
0.2%
0
0.0%
0.0%
Fannie Mae and Freddie Mac
5
0.2%
0.0%
7
0.3%
0.0%
3
0.1%
0.0%
Deposit insurance
-9
-0.4%
-0.1%
3
0.1%
0.0%
-13
-0.3%
-0.1%
Higher education
-33
-1.5%
-0.2%
-11
-0.5%
-0.1%
0
0.0%
0.0%
Agriculture

15 0.7% 0.1% 13 0.6% 0.1% 16 0.4% 0.1%
Other
73 3.3% 0.5% 59 2.6% 0.4% 52 1.4% 0.2%
Mandatory Spending Excluding
2,215 100% 14.8%
2,269 100% 14.6%
3,833 100%
15.5%
Offsetting Receipts
Offsetting Receipts
-190

-1.3% -200
-1.3% -319
-1.3%
Medicare -80

-0.5%
-85

-0.5%
-164

-0.7%
Federal share of federal employees’
-63
-0.4% -65
-0.4% -92
-0.4%
retirement
Other
-47
-0.4% -49
-0.4% -63
-0.3%
Total Mandatory Spending
2,025 13.5%
2,070 13.3%
3,833
14.3%
Medicare Spending Net of Offsetting
480
3.2% 475
3.1% 877
3.6%
Receipts
Source: CRS calculations based on CBO, The Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 2012, Table 3-2.
Notes: * indicates that an outlay level is between zero and $500 million. Some items do not sum to totals due to rounding. See Table 1 for other notes.
a. Excludes offsetting receipts.
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Mandatory Spending Since 1962

In FY2009, total mandatory spending increased by 31% in dollar terms over FY2008, primarily
due to the economic downturn and federal financial interventions, including assistance provided
in the Troubled Asset Relief Program (TARP) and aid to the GSEs (Fannie Mae and Freddie
Mac). The majority of the impact of the enacted federal financial intervention programs on
mandatory spending occurred in FY2009 for TARP and between FY2009 and FY2013 for the
GSE assistance.11 Outlays for income security programs, like unemployment compensation and
SNAP, also increased in FY2009 and continued at elevated levels through FY2011. By FY2012,
outlays for the these programs are projected to return to close to their FY2008 levels (as a
percentage of GDP) as the economic recovery continues, lessening the reliance on these
“automatic stabilizers.” However, mandatory spending as a whole is projected to remain on an
upward trajectory primarily due to higher levels of federal health spending.
Changes in Mandatory Spending
The composition of mandatory spending has changed dramatically over the past 40 years and,
according to CBO baseline projections, will continue to change over the decade. Figure 2 shows
how major components of mandatory spending as a percentage of total federal spending have
evolved since 1970.
Persistent increases in health care spending have been a particularly important driver of
mandatory spending trends. Since enactment of the 1965 Medicare Act, the Medicare and
Medicaid programs have composed a growing share of mandatory spending. Medicare and
Medicaid spending grew from 4.9% of total federal outlays in FY1970 to 23.2% in FY2011. CBO
baseline projections show further increases in federal health spending will cause the Medicaid
and Medicare share of total spending to continue to rise. In addition, federal spending on other
health related programs is projected to increase as larger portions of the Affordable Care Act
(Patient Protection and Affordable Care Act, P.L. 111-148, and the health care provisions of the
Health Care and Education Reconciliation Act of 2010, P.L. 111-152) take effect beginning in
2014.12 By FY2022, based on CBO baseline projections, spending on Medicare, Medicaid, and
other federal health care programs is projected to account for 32.8% of total federal spending.
Over the next decade, spending on mandatory programs outside of Medicare, Medicaid, and other
federal health programs is expected to remain flat or decline. Social Security’s share of outlays is
projected to remain essentially flat as a share of federal spending, ranging between 20% and 22%
of total federal spending, throughout the decade. As the economic recovery continues, outlays for
income security programs are projected to fall from 11.3% of total federal spending in FY2011 to
5.8% by FY2022. Spending on other mandatory programs, including federal civilian and military
retirement, veterans benefits, agriculture supports, net cash infusions for the GSEs, and the costs
related to TARP activities, is also projected to decline over the next decade.

11 For more information on federal financial assistance provided by TARP and to the GSEs, see CRS Report R41073,
Government Interventions in Response to Financial Turmoil, by Baird Webel and Marc Labonte.
12 In FY2011, federal health spending was 23.8% of total federal spending.
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Mandatory Spending Since 1962

Figure 2. Components of Mandatory Spending
As a Percentage of Federal Spending (FY1970-FY2022)
80%
Other Health Programs
70%
60%
lays 50%
Other Mandatory
tal Out
To
40%
Other Retirement and Disability
Medicaid
tage of
Income Security
30%
Medicare
ercen
P

20%
Social Security
10%
0%
8
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 200
2010 2012 2014 2016 2018 2020 2022
Fiscal Year

Source: Offsetting receipts are excluded. CRS calculations based on data from CBO, Historical Tables and Budget
Projections
. CBO baseline projections depicted to the right of the vertical line.
Notes: CBO added the category “Other Health Programs” to its Budget Projections data fol owing the enactment
of PPACA and HCERA. This category includes Health Insurance Subsidies, Exchanges, and Related Spending,
MERHCF, CHIP, and Other health spending. Prior to PPACA and HCERA, MERHCF and CHIP were included in
the “Other Mandatory” category.
In an effort to reform the private insurance market and expand health insurance coverage to the
uninsured as federal spending on health care increases, the Patient Protection and Affordable Care
Act (PPACA; P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010
(HCERA; P.L. 111-152) were signed into law on March 23 and March 30, 2010, respectively.13
Among other provisions, this legislation established a mandate for most U.S. residents to obtain
health insurance, set up insurance exchanges, expanded Medicaid, and imposed various tax code
changes. As a result of this legislation, mandatory federal outlays for health programs are
projected by CBO to increase (see the “Other Health Programs” category in Figure 2) relative to
what they were prior to the enactment of this legislation.14 Revenue increases are projected by
CBO to offset the additional mandatory outlays.

13 For more information on PPACA and HCERA, see http://www.crs.gov/Pages/subissue.aspx?cliid=3746&parentid=
13.
14 CBO, The Budget and Economic Outlook: An Update, Table 1-4, August 2010.
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Mandatory Spending Since 1962

Mandatory Spending and the Economy
Another way to evaluate mandatory spending trends is as a percentage of GDP to show what
share of total economic resources is devoted to these programs. Outlays for mandatory programs
can be affected by increases in costs, programmatic changes, the economy, and variations in the
number of people who meet eligibility criteria for program participation. Figure 3 shows the
evolution of mandatory spending and its components relative to GDP since FY1970.
Figure 3. Mandatory Spending Before Offsetting Receipts
As a Percentage of GDP (FY1970-FY2022)
18%
Other Health Programs
16%
14%
12%
Other Mandatory
GDP 10%
Medicaid
age of
Other Retirement and Disability
Income Security
8%
cent
Per

6%
Medicare
4%
Social Security
2%
0%
8
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 200
2010 2012 2014 2016 2018 2020 2022
Fiscal Year

Source: Offsetting receipts are excluded. CRS calculations based on data from CBO, Historical Tables and Budget
Projections
. CBO baseline projections depicted to the right of the vertical line.
Notes: CBO added the category “Other Health Programs” to its Budget Projections data fol owing the enactment
of PPACA and HCERA. This category includes Health Insurance Subsidies, Exchanges, and Related Spending,
MERHCF, CHIP, and Other health spending. Prior to PPACA and HCERA, MERHCF and CHIP were included in
the “Other Mandatory” category.
Mandatory spending, relative to the size of the economy, grew rapidly in the late 1960s and
1970s. In the 1980s, Medicare, Medicaid, and Social Security continued to grow, while other
components of mandatory spending fluctuated with the business cycle. In the 1990s, mandatory
spending including offsetting receipts (about 1% of GDP) remained around 10% of the economy.
Social Security spending grew relative to the economy from 2.9% of GDP in FY1970 to its peak
of 4.9% of GDP in FY1983. Since then, Social Security has fluctuated between 4.3% and 4.8% of
GDP. CBO projects Social Security spending will increase from 4.8% in FY2011 to 5.5% of GDP
in FY2022. Both Medicare and Medicaid have grown faster than the overall economy, and
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Mandatory Spending Since 1962

continued growth is expected. In FY1970, spending on Medicare and Medicaid totaled 0.9% of
GDP. In FY2011, spending on these two programs reached 5.6% of GDP. According to CBO
current-law projections, they will total 6.7% of GDP in FY2022. Spending on other health
programs is projected to grow from 0.1% of GDP in FY2011 to 0.7% of GDP in FY2022.
During recessions, GDP falls and spending automatically increases on unemployment insurance
and other means-tested programs such as SNAP. Spending on income security programs,
therefore, has been more volatile than Social Security and Medicare spending because income
security spending is more closely tied to economic fluctuations. In the 1960s, income security
programs accounted for about 1% of GDP or less. In the wake of the 1974-1976 recession and the
1974 creation of the Supplemental Security Income (SSI) program, income security spending rose
to over 2% of GDP. In recent years, income security spending has hovered around 1.5% of GDP.
Due to current economic conditions and policy changes, income security spending rose to 3.0%
of GDP in FY2010 before falling slightly to 2.7% of GDP in FY2011. By FY2022, income
security is projected to fall to 1.3% of GDP in FY2022. Figure 4 depicts how outlays for income
security programs have changed in response to economic conditions over the last decade and
where they are projected to be as the economy recovers. Projections of spending on these
programs beyond FY2011, as depicted in this chart, are from the CBO baseline.
Figure 4. Income Security Programs
As a Percentage of GDP (FY2000-FY2022)
3.0%
Making Work Pay and
Other Tax Credits
2.5%
2.0%
P
Family Support
Child Nutrition
Foster Care
GD
1.5%
age of
cent
Per

Unemployment
Compensation
SNAP
1.0%
EITC and Child Tax
0.5%
Supplemental Security Income
0.0%
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022

Source: CRS calculation based on CBO data.
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Mandatory Spending Since 1962

Why Has Mandatory Spending Risen Over Time?
The share of mandatory spending has increased as a portion of total federal spending and as a
percentage of GDP for four reasons.
First, discretionary spending, defined as spending provided and controlled through appropriations
acts, has fallen relative to mandatory spending. Defense discretionary expenditures once
dominated non-defense discretionary spending but now account for a relatively smaller share of
total federal spending. As a share of GDP, defense discretionary expenditures have trended
downwards since the height of the Vietnam War in the late 1960s, despite temporary increases
during the late 1970s and early 1980s. Even with the increases in defense discretionary spending
over the last decade, this spending took up less than half the share of the economy compared to
the late 1960s.
Second, non-defense discretionary spending has been relatively stable as a share of GDP. Non-
defense discretionary spending, about 2.5% of GDP in the early 1960s, rose to about 5% of GDP
in the late 1970s, partly due to expansion of social spending and partly because of the severity of
the 1974-1975 recession. In the 1980s, non-defense discretionary spending as a share of GDP fell,
and budget limits or “caps” helped restrict growth in discretionary spending in the 1990s.15 Due
to slight increases in the last half dozen years, domestic discretionary spending remained between
3.5% and 4.6% of GDP—its approximate share for the late 1960s and early 1970s. These trends
in discretionary spending are shown in Figure 5, below.

15 For more information, see CRS Report R41901, Statutory Budget Controls in Effect Between 1985 and 2002, by
Megan Suzanne Lynch.
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Figure 5. Discretionary Spending
As a Percentage of GDP (FY1970-FY2011)
14%
12%
Non-Defense Discretionary
Defense Discretionary
10%
8%
GDP
age of
cent
6%
Per
4%
2%
0%
70
74
76
78
2
84
86
92
00
08
10
19
1972
19
19
19
1980
198
19
19
1988
1990
19
1994
1996
1998
20
2002
2004
2006
20
20
Fiscal Year

Source: CBO, Historical Tables.
Third, the number of beneficiaries of entitlement programs has grown as the average age of
population has risen. The Medicare Act of 1965 extended health benefits for most retirees and
greatly expanded federal financial support for indigent health care through the Medicaid program.
Other programs, such as SSI and the earned income tax credit (EITC) introduced in the 1970s,
also increased the number of beneficiaries. Moreover, as life expectancy has increased, the
proportion of the population older than 85 has also increased, which has helped increase Social
Security and Medicare spending.
Fourth, health care costs per capita have grown far faster than the overall economy. New medical
technologies transformed health care in the past generation, leading to increased costs and a more
intensive style of medical practice. Third-party reimbursement of health care costs by public and
private insurance programs provided consumers and medical providers with few incentives to
control costs until the 1980s. Health care cost growth was slowed by the introduction of
Medicare’s prospective payment system for hospitals in 1983 and the expanding market share of
Health Maintenance Organizations (HMOs) in the mid-1980s. Attempts to control costs after the
1980s, such as the Balanced Budget Act of 1997 (P.L. 105-33), have been only temporarily or
partially successful in slowing the rate of increase in health care spending.
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Mandatory Spending Since 1962

Mandatory Spending Beyond FY2022
CBO baseline projections, which extend 10 years forward, do not reflect the full force of the
pressures the impending retirement of the large baby boom generation will exert on the federal
budget. The first baby boomers reached age 65 in 2011, and most will not reach age 65 until after
2015. Extended baseline projections suggest that Social Security spending could amount to 6.4%
of GDP by FY2085—an increase of 1.6 percentage points of GDP from its FY2011 level.
According to CBO extended baseline projections, federal mandatory spending on health care, in
large part due to rising costs, is projected to reach 17.2% of GDP by FY2085. However, under an
alternative scenario in which health care cost growth does not slow down, spending on these
programs could reach 19.4% of GDP by FY2085.16 By contrast, total federal spending on these
health programs in FY2011 was 5.7% of GDP.
Most fiscal experts assert that avoiding the accumulation of large, unsustainable debts will require
cuts in entitlement benefits, large increases in federal revenues, a significant reduction in
discretionary spending, or some mix of those policies. Because federal deficits and debts have
adverse economic consequences, including lower economic growth, the longer such adjustments
are delayed, the more difficult it will be to make adjustments.
Conclusion
Mandatory spending has taken up an increasingly large share of federal spending over the past
half century. By the end of the decade, according to CBO baseline projections, mandatory
spending will account for more than three out of every five dollars of federal spending.
Mandatory spending has grown relative to the economy, even as the size of total federal spending
relative to the overall economy has remained roughly constant.
Major entitlement programs play a larger and larger part within the category of mandatory
spending. In 1962, before Medicare and Medicaid were created, Social Security accounted for
just over half of all mandatory spending. Today, Social Security accounts for roughly one-third of
mandatory spending. Medicare and Medicaid, since their inception, have taken up an increasingly
large share of mandatory spending. Together, outlays for these two programs now exceed Social
Security spending. CBO current-law projections indicate that federal health spending, including
Medicare, Medicaid, and outlays for new health care exchanges and subsidies, could make up
nearly 50% of mandatory spending in FY2022.
Reducing the federal deficit significantly by cutting spending without reducing mandatory
spending, and in particular entitlements, would be difficult. Focusing budget cuts on mandatory
spending, particularly Social Security, Medicare, and Medicaid, however, could adversely affect
the elderly or the poor. Limiting budget reductions to smaller mandatory programs, like
Temporary Assistance for Needy Families (TANF), SSI, and SNAP, would not reduce the federal
deficit by as much because most of the increases in federal spending have been occurring in
Medicare and Medicaid. Further reform of the health programs may be needed to eliminate long-
term fiscal strains while preserving the goals of these programs.

16 CBO, The Long-Term Budget Outlook, Data Underlying Scenarios and Figures, June 2011.
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Mandatory Spending Since 1962


Author Contact Information

D. Andrew Austin
Mindy R. Levit
Analyst in Economic Policy
Analyst in Public Finance
aaustin@crs.loc.gov, 7-6552
mlevit@crs.loc.gov, 7-7792



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