The largest category of federal spending is mandatory spending, which runs on autopilot under permanent law and consumes roughly two-thirds of the annual budget. Within that category, Social Security is the single biggest program, followed by Medicare and other federal health care obligations. In fiscal year 2025, the federal government spent approximately $7 trillion in total, and most of it flowed through programs Congress does not vote on each year.
Why Mandatory Spending Sits at the Top
Mandatory spending is governed by permanent statutes that entitle anyone who qualifies to receive benefits, whether the economy is booming or in recession. Congress does not set the annual amount. The cost rises and falls with the number of eligible people and what the law promises them. This category accounts for roughly 60 percent of all federal outlays.
Discretionary spending, by contrast, requires Congress to pass appropriation bills each fiscal year. Lawmakers can raise or lower those funding levels based on current priorities. Discretionary programs account for about 27 percent of the budget. The rest goes to net interest on the national debt, a category that has been growing quickly.
The balance between the two has shifted dramatically. In 1962, mandatory programs consumed about 26 percent of the budget. By 2022, that figure had risen to 66 percent.1U.S. Treasury Fiscal Data. Federal Spending An aging population means more Social Security and Medicare recipients, health care costs have grown faster than general inflation for decades, and interest compounds on a growing debt.
Social Security: The Single Largest Program
Social Security is the largest line item in the federal budget. It provides monthly payments to retired workers, surviving family members, and people with qualifying disabilities, and it accounts for roughly one-fifth of all federal spending. The program operates under Title 42 of the U.S. Code, which sets eligibility rules, benefit formulas, and the trust fund structure.
How It Is Funded
Revenue comes almost entirely from payroll taxes collected under the Federal Insurance Contributions Act. You and your employer each pay 6.2 percent of wages, for a combined rate of 12.4 percent. The tax only applies to earnings up to $184,500 in 2026; anything above that cap is not subject to Social Security tax.2Social Security Administration. Contribution and Benefit Base Collected funds flow into two trust accounts, one for Old-Age and Survivors Insurance and another for Disability Insurance.3Internal Revenue Service. Topic No 751, Social Security and Medicare Withholding Rates
When Benefits Are Taxed
Social Security benefits can be subject to federal income tax. Whether yours are depends on your “combined income,” meaning adjusted gross income plus nontaxable interest plus half of your Social Security benefits. Single filers with combined income between $25,000 and $34,000 may owe tax on up to 50 percent of their benefits, and those above $34,000 may owe on up to 85 percent. For married couples filing jointly, the thresholds are $32,000 and $44,000.4Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits Those thresholds have not been adjusted for inflation since they were set in the 1980s and 1990s, so more retirees cross them each year.
The 2034 Deadline
Social Security’s combined trust funds are projected to run out of reserves by 2034. At that point, incoming payroll taxes would still cover about 81 percent of scheduled benefits, but without congressional action, checks would be cut automatically. The retirement-only trust fund faces a slightly earlier depletion date of 2033, when it could pay about 77 percent of promised benefits. The Disability Insurance trust fund is not projected to run dry within the next 75 years.5Social Security Administration. Social Security Board of Trustees: Projection for Combined Trust Funds
Depletion does not mean the program disappears. It means Social Security could only pay out what it collects in real time, creating an automatic benefit reduction unless lawmakers change the tax rate, the benefit formula, the retirement age, or some combination.
Medicare, Medicaid, and CHIP
Federal health programs form the second-largest slice of mandatory spending. Medicare serves people aged 65 and older, along with certain younger individuals with disabilities.6Centers for Medicare and Medicaid Services. Original Medicare Part A and B Eligibility and Enrollment Part A covers hospital stays and is funded primarily through payroll taxes; most beneficiaries pay no monthly premium for it if they or a spouse paid Medicare taxes while working. Part B covers outpatient care, doctor visits, and preventive services, with income-adjusted premiums.7Centers for Medicare and Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles Part C, known as Medicare Advantage, lets private insurers bundle Parts A and B along with extra benefits. Part D covers prescription drugs.
Medicaid and the Children’s Health Insurance Program focus on low-income families, children, pregnant women, and people with disabilities. Unlike Medicare, they are jointly funded by the federal government and the states. In fiscal year 2023, total Medicaid spending reached $900.3 billion, with the federal share at $619.9 billion and states covering the remaining $280.4 billion. The federal Medicaid share represented about 10 percent of total federal outlays that year.8Medicaid and CHIP Payment and Access Commission. Spending Eligibility thresholds vary widely, with income limits ranging from below 20 percent of the federal poverty level to above 300 percent depending on the state and population group. Poorer states receive a higher federal match.
Other Mandatory Programs
Social Security and health care dominate mandatory spending, but several other programs add hundreds of billions more each year.
Veterans Benefits
The Department of Veterans Affairs requested $248.1 billion in mandatory benefits funding for fiscal year 2026. That covers disability compensation for over 7 million veterans and survivors, pension payments, education assistance for more than 1.1 million trainees, and a loan guaranty program backing 4.2 million active home loans.9U.S. Department of Veterans Affairs. FY 2026 Budget Submission Budget in Brief A growing portion comes from the Cost of War Toxic Exposures Fund, which was authorized to cover health care and benefits tied to toxic exposures like burn pits.
Nutrition and Income Support
The Supplemental Nutrition Assistance Program is the largest federal nutrition program, costing approximately $101.7 billion in fiscal year 2025. SNAP spending expands during downturns as more households qualify. Other income-support programs funded through mandatory spending include Supplemental Security Income, unemployment insurance, and the Earned Income Tax Credit.
Where Discretionary Spending and Interest Fit
National defense is the largest subcategory of discretionary spending, accounting for close to half of that total. Defense funding covers military operations, equipment procurement, research and development, and pay for active-duty and reserve personnel. Congress authorizes these expenditures through the annual National Defense Authorization Act.10House Armed Services Committee. History of the NDAA The non-defense side pays for federal courts, national parks, scientific research, education grants, transportation infrastructure, and foreign aid, all of which compete for a shrinking share of the budget.
Net interest on the national debt has become one of the fastest-growing lines. In fiscal year 2025, interest costs reached roughly $962 billion, about 14 percent of all federal spending. That figure surpassed total defense spending starting in fiscal year 2024. Congressional Budget Office projections put net interest at $1 trillion in 2026, climbing to $2.1 trillion by 2036 if current policies continue. These payments are mandatory in the sense that the government must honor obligations to bondholders, but they do not fund any public service.
Why the Mix Keeps Tilting
Each year, a larger share of federal dollars is locked in before Congress writes a single appropriation bill. Retirement, health care, and interest all grow on their own terms. Discretionary programs, from infrastructure to scientific research, compete for what remains. Shifting that trajectory would require amending the statutes that govern entitlement eligibility or benefit levels, which is one of the hardest things for Congress to do politically. The 2033 and 2034 trust fund dates give lawmakers a fixed deadline to act on Social Security; the rest of the mandatory pile keeps growing regardless.