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Federal Expenditures: Definition and Examples

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

The U.S. government spends a lot of money. But the spending actually goes toward some very useful programs that benefit all of us individually. Read this lesson to see how the money is spent and where the money comes from.

Definition

In this lesson, we will look at how the U.S. government spends its money. What the government spends its money on is called federal expenditures. If you know someone who went to college with the help of federal student aid, then you are seeing federal expenditures in action. But what else does the government spend its money on?

The federal government splits its spending into three groups: mandatory spending, discretionary spending, and interest on debt. We'll take a closer look at the first two groups in this lesson.

Mandatory Spending

Mandatory spending is spending that Congress has already approved, and does not need to be approved on an annual basis. Spending in this group either requires a one-time approval or periodic review. For example, Social Security is an example of mandatory spending. Congress has already approved it, so it doesn't need to be re-approved by Congress each year. It's the same with Medicare, the government's health program for those ages 65 and older. Actually, Medicare and Social Security are two of government's biggest expenditures in this group. Social Security actually pays both retired people as well as disabled individuals. All of this is federally funded.

Here is a list of some other things that are part of the government's mandatory spending:

  • Unemployment assistance -- financial assistance for those who are unemployed
  • Food assistance -- food stamps
  • Education -- Department of Education, student loans and other federal aid programs
  • Transportation -- new road construction and maintenance of current roads
  • Veterans' benefits -- benefits to veterans and their families
  • Food and agriculture -- Department of Agriculture

In 2015, the federal government spent about $1.2 trillion on Social Security and $985 billion on Medicare.

Discretionary Spending

Discretionary spending is spending that Congress needs to approve on an annual basis. Here is a list of some things that are part of discretionary spending:

  • Defense -- military
  • Health care and health research -- medical care for veterans, Indian Health Service, CDC, FDA, Medicare administrative costs
  • Transportation and economic development -- National Highway System, aviation safety, the Coast Guard, disaster relief
  • Education and training -- Pell Grants, K-12 education for low-income students and those with disabilities, Head Start, veterans' employment and training
  • Economic security -- housing vouchers, rental assistance, homeless aid, WIC, Low Income Home Energy Assistance Program, Social Security administrative costs
  • Science, environment, and energy -- national parks, Environmental Protection Agency, space exploration, National Science Foundation, Department of Energy
  • Law enforcement and governance -- law enforcement, criminal justice, the FBI, Border Patrol, the IRS, prevention and prosecution help for domestic violence and drug trafficking
  • Diplomacy and international affairs -- international development, humanitarian assistance, the Peace Corps, contributions to World Health Organization, peacekeeping operations

The largest expenditure in this group is that for military spending. In 2015, the government spent $598 billion on military spending.

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