Spending FAQ

Why does spending matter?

Spending across all levels of government now totals a whopping 40% of our gross domestic product. If it had merely kept pace with population growth and inflation during the last 50 years, spending would total less than 25% of what it is today.


Unfortunately, little change is emanating from Washington. Rather than coming together to reduce spending, politicians from both parties shake hands under an implicit agreement of, “I’ll vote for your spending if you vote for mine.”


Spending is key to policy debates because it enables every decision government makes — good and bad. With interest on the debt alone set to quadruple over the next decade, economic reports consistently warn of both an eventual fiscal crisis and upcoming insolvency of major programs.


What is the difference between mandatory and discretionary spending?
Mandatory spending is spending required by statutory criteria: it is not authorized annually. Examples of mandatory spending include Social Security, Medicare, and Medicaid.


Discretionary spending is spending that must be authorized annually and appropriated by the House and Senate. Examples of discretionary spending include Defense, Education, and Transportation allocation.


Why is debt bad?

Debt is bad because accruing large deficits creates a large debt that collects interest. Interest on the Federal Debt hovers around 6% currently and is anticipated to rise higher. Having a large federal debt is worrisome because payments for interest will become so large that it will prevent making payments on critical services.


What’s the difference between the national debt and the public debt?

The national debt is how much a government owes to its lenders that are not affiliated with the federal government.  It includes all federal debt held by individuals, corporations, state or local governments, Federal Reserve Banks, foreign governments, and other entities outside the United States Government.


The public debt gets confused with the national debt but the national debt refers specifically to debt held by government agencies versus external investors.


Shouldn’t we focus on pork first?
Pork and wasteful spending are priorities because it is important to reduce unnecessary waste, but it can often lead to counterproductive discussions about cutting spending, in which politically motivated arguments about very small portions of the budget occur. All forms of waste, fraud, and abuse are important to tackle, but it’s also important to remember that those things often do not account for a large portion of the federal budget.


What spending makes up the biggest parts of the budget?

The largest parts of the budget are made up by mandatory spending. Mandatory spending makes up 65% of the entire federal budget.  Discretionary spending makes up 29% of the federal budget and 19% of that figure is only defense spending. The remaining 6% of the budget is interest payments on the debt.


Can’t we just raise taxes to pay down the debt?
The tax debate is best suited to other organizations that are focused on the issue. However, it is important to note that even if the US government were to raise taxes as a solution, current levels of spending are so high that no level of taxation could make up the shortfalls.