Two Types of Government Spending, Essay Example

In the broadest terms, there are two types of government spending employed by the various branches of the United States government: mandatory spending and discretionary spending.  Strictly speaking, mandatory spending is mandated by law, while discretionary spending is decided by the current governing body.  For the Federal government to incorporate its own agenda firmly into the future of the country, it must seek to create new laws that will be upheld by the Federal budget.  Discretionary spending is also important for current Federal government bodies to deal with one-time emergencies and issues that can be amended without constant future referral to keep them in check (Reischauer, 1997, p.3).

Examples of mandatory spending are food stamps, business and farm insurance, and various personal income support programs.  Many of these were established decades ago due to intense need from American citizens who were mostly employed in the agricultural industry; as the country grew and industrialised employment shifted from farms into the cities and so other welfare programs became necessary.  As both agriculture, business and industry have and will remain very important factors in the national economy, it was viewed necessary to provide workers with the security they needed to continue in their jobs despite frequent dips in product sales (Ibid. P.15).  Mandatory personal, farm and business insurance have been some of the most important decisions of the American government in protecting its own economy and workers.

Discretionary spending, on the other hand, is dealt with on a yearly basis as a part of current government fiscal policy.  Depending on the current economic and political climate, government planners will decide how best to use their available funding to tackle issues like housing crises, debt reduction and environmentally sound spending incentives.  Discretionary spending budgets are most important for dealing with contemporary American issues that are diverse and constantly in flux.

Historically speaking, mandatory spending has been much lower than discretionary spending in terms of the Gross Domestic Product (GDP): welfare, pensions and education consistently amount to less than 20% of the GDP in the last several decades although a general decrease in military spending has allowed social welfare programs an increase in funding (Ibid. p.115).  This has left an exceptional amount of money for each of these progressive Federal governments to invest in anything from foreign business to scientific research.  The consequences of leaving so much of the GDP open to Federal whim and interpretation are that each successive government has the ability to differ greatly from its predecessor and successor; in short, Democratic and Republican administrations run what are often viewed as two different versions of the United States.

A problem with the constant shifting from Democratic to Republican administrations in the U.S. is that discretionary spending is seemingly always used to essentially ‘fix’ what the current ruling Party sees as the faults of its predecessor; on the other hand, heavy discretionary spending gives successive Federal governments the ability to deal with current political and economic issues while leaving the future budget free of redundant legislative remnants.

Reference List

Reischauer, R.D. (ed.), (1997). Setting National Priorities: Budget Choices for the Next Century. Washington, DC: The Brookings Institution.