The Squeeze: How Washington’s “Mandatory” Spending is Making it Harder to Invest in the Future

Congress is gearing up for another fight over the budget, and we’re headed for another government shutdown if they can’t find agreement. Here’s something you might not know: 

These annual budget fights are only focused on about a quarter of what the federal government spends every year. The other spending is essentially on autopilot. 

The reason is that 75% of what Washington spends is classified as “mandatory” spending – encompassing programs like Social Security, Medicare and Medicaid – which direct funding to beneficiaries based on laws that are already on the books. In other words, Congress doesn’t need to vote each year on how much funding to provide for these programs.  

Everything else Washington does – like medical research, agriculture funding, defense, and education – is funded by the “discretionary spending” that is the subject of these annual budget fights.  

As the chart below shows, mandatory spending’s share of the federal budget has been growing rapidly in recent decades, while the share of discretionary spending has been shrinking.  

The other big spending category is interest on the national debt – the payments we make to our lenders. Interest consumed about 11 percent of the budget last year, more than we spent on Medicaid or veterans’ assistance. Combined, interest and mandatory spending account for a staggering 72 percent of federal spending.  

Adjusted for inflation, America is actually spending less on discretionary programs now than we were just 15 years ago.  

This has real consequences because discretionary spending funds the very programs that are most likely to foster long-term innovation and prosperity. 

Historically, discretionary spending has been a key driver of America’s leadership in innovation. Programs funded by discretionary budgets like scientific research, national defense advancements, and infrastructure projects can provide massive returns on investment that spur significant economic growth and job creation. These programs have produced some of the most transformative breakthroughs in U.S. history: 

• The development of the Internet by the Defense Advanced Research Projects Agency (DARPA). 

• The construction of the interstate highway system, which enabled businesses to much more efficiently transport goods around the country.  

• NASA’s Apollo program, which sent mankind to the Moon and led to new inventions like MRI and CT scans, improved dialysis machines, and the memory foam mattress. 

These investments were possible because, in past decades, the federal government had the flexibility to commit significant resources to discretionary spending and a vision for a better tomorrow.  

Without action, the U.S. will find it increasingly difficult to fund the kinds of research and development that lead to medical breakthroughs, clean energy technologies, and national security innovations. And none of this is happening in a vacuum. Other nations like China are investing in their future, while we spend more and more money managing the financial burdens of the present. If we fail to act, we risk falling behind in the global race for technological and scientific dominance. Already, China is leading in 37 out of 44 “critical technologies” likely to shape the future like AI, advanced robotics, and 3D printing.  

There’s an old saying, “A society grows great when its elders plant trees in whose shade they shall never sit.” For decades, America invested in planting those trees through its discretionary budget, funding projects that would bear fruit for generations to come. But today, those trees are withering. As mandatory spending grows unchecked, we are investing less and less in the future, and simply living for today.