Uploaded August 2026 | Updated September 2026, 5 days ago
Mandatory vs. Discretionary Spending: How the Federal Government Allocates Its Budget
This video breaks down the three major categories of U.S. federal government spending and explains the difference between spending the government is required to make and spending it decides on each year.
Key terms covered:
- Mandatory spending — The amount the government is required to spend under existing law, without an annual vote. The largest examples are Medicare and Social Security, entitlement programs based on age.
- Discretionary spending — The amount the government chooses to spend each year through the annual budget process. Defense is the largest category within discretionary spending.
- Interest on the national debt — Interest payments the government makes on money it has previously borrowed.
- Total federal government spending — The sum of mandatory spending, discretionary spending, and interest on the debt; in 2025, this totaled $7 trillion.
Teachers: this video is part of our FREE Fiscal Policy unit plan: pages.mru.org/lesson-plans/fiscal-policy-unit
Learners: explore our full Principles of Macroeconomics course: youtube.com/playlist?list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u
Mandatory vs. Discretionary Spending: How the Federal Government Allocates Its Budget
This video breaks down the three major categories of U.S. federal government spending and explains the difference between spending the government is required to make and spending it decides on each year.
Key terms covered:
- Mandatory spending — The amount the government is required to spend under existing law, without an annual vote. The largest examples are Medicare and Social Security, entitlement programs based on age.
- Discretionary spending — The amount the government chooses to spend each year through the annual budget process. Defense is the largest category within discretionary spending.
- Interest on the national debt — Interest payments the government makes on money it has previously borrowed.
- Total federal government spending — The sum of mandatory spending, discretionary spending, and interest on the debt; in 2025, this totaled $7 trillion.
Teachers: this video is part of our FREE Fiscal Policy unit plan: pages.mru.org/lesson-plans/fiscal-policy-unit
Learners: explore our full Principles of Macroeconomics course: youtube.com/playlist?list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u
