What does "discretionary spending" mean?
Discretionary spending is money formally approved by Congress and the President each year through the annual appropriations process. Unlike mandatory spending, which existing laws require, discretionary amounts are decided year by year, with over half generally going to national defense.
When people talk about the United States federal budget, they usually split spending into two broad buckets: mandatory and discretionary. The distinction comes down to who decides and when. Mandatory spending is dictated by prior law, while discretionary spending is dictated by the annual appropriations process. That single difference explains most of the confusion people run into when reading budget figures.
[1]The definition in plain terms
According to the US Treasury's Fiscal Data guide, discretionary spending is money formally approved by Congress and the President during the appropriations process each year. The Constitution puts Congress in charge of the budget, and each year Congress decides both the amount and the type of discretionary spending, alongside resources for mandatory programs. Treasury's TFX budgeting guide describes it simply as the amount Congress sets annually for all other programs and agencies, once legally required spending and interest on the debt are accounted for.
[1][2]Treasury notes that Congress generally allocates over half of the discretionary budget towards national defense, with the remainder funding the administration of other agencies and programs. Those programs span transportation, education, housing, social service programs, and science and environmental organizations.
[1]How it differs from the other categories
| Category | How it is set | Examples given by Treasury |
|---|---|---|
| Mandatory spending | Required by existing laws; no annual vote needed | Social Security, Medicare and other payments to people, businesses and state and local governments |
| Discretionary spending | Approved each year by Congress and the President in appropriations | National defense, transportation, education, housing, social service programs, science and environmental organizations |
| Supplemental spending | Enacted after the regular annual appropriations when needs are too urgent to wait | In 2020, four supplemental appropriations aided COVID-19 recovery |
Mandatory spending represents nearly two-thirds of annual federal spending, so discretionary programs compete for a minority share of the budget each cycle. A concrete comparison helps: a Social Security payment flows automatically because the Social Security Act requires it, and continues at levels that law sets until it is amended. A federal agency's budget for highway maintenance or scientific research, by contrast, has to be argued over and approved again every fiscal year, which runs from October 1 of one year to September 30 of the next.
[1][2]A hypothetical example
Imagine an agency wants to fund a new education training program. Nothing in existing law obligates that money. The agency works with the Office of Management and Budget, which starts the process by sending planning guidance to executive branch agencies in the spring. The President's budget goes to Congress on the first Monday in February, as specified in law, though occasionally Presidents have sent it later. Congress considers the proposals and passes appropriations acts, and once those bills are signed into law the funding exists. If Congress simply declined to appropriate the money, the program would receive nothing. That year-by-year vulnerability is what makes the spending discretionary.
[2]Obligations versus outlays
One more distinction matters when reading figures. Treasury uses outlays to represent spending, meaning money actually paid out. An obligation is a binding promise to pay, created when an agency signs a contract, awards a grant or purchases a service, and obligations do not always result in payments. Contract records in the FY2025 USAspending contracts archive published on this site are stated as net obligations, so they measure commitments of funds rather than payments. Keeping those two measures separate is essential before comparing any agency or recipient numbers.
[1][3]If you want to see discretionary spending in action, pick an agency in the agency explorer, compare its contract obligations with another agency's, and then follow the figures back to USAspending.gov to confirm the fiscal year and scope before drawing any conclusions.
[3]Sources and dates
- https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ · accessed 2026-10-18
- https://tfx.treasury.gov/budgeting · accessed 2026-10-18
- https://uspublicmoney.com/ · accessed 2026-10-18