Overview of Recent Fiscal Spending
Projections
March 26, 2025
This brief summarizes projections for major components of the federal budget from the January 2025
Congressional Budget Office (CBO) budget outlook and the Biden Administration FY2025 budget
submission issued in March 2024. The FY2026 budget submission is expected sometime this spring.
Scoring of legislative proposals will start from these CBO baseline projections, which indicate the
trajectory of federal spending under current law.
Federal spending can be divided between discretionary and mandatory categories, which reflects how
Congress funds that spending. Discretionary spending is provided and controlled by annual appropriations
laws. Mandatory spending is funded by other types of laws. Net interest is technically a form of
mandatory spending, but is typically reported separately. In FY2025, discretionary budget authority (BA)
is estimated at 6% of GDP. BA allows agencies to make financial obligations, such as contracts, grants,
and salaries. FY2025 mandatory outlays are an estimated 14% of GDP, and net interest accounts for 3%
of GDP. Outlays are generally a better measure of the scale of mandatory programs.
Discretionary Spending Trends
Defense discretionary spending is typically defined by the National Defense (050) budget function, which
mostly covers Department of Defense (DOD) military activities, but also includes Department of Energy
(DOE) nuclear weapons programs, as well as counterintelligence activities of the Federal Bureau of
Investigation (FBI) and the Cybersecurity and Infrastructure Security Agency (CISA). Mandatory
spending is a small fraction of defense spending.
Nondefense discretionary spending, in general, covers costs of running government operations outside of
the National Defense budget function. This includes the Department of Veterans Affairs (VA), the
Department of Homeland Security (DHS), the Department of Health and Human Services (DHHS), the
Department of Transportation (DOT), the Department of Education (ED), and other agencies and offices.
Some agencies, such as DHHS, oversee large amounts of mandatory spending.
Figure 1 shows defense discretionary budget authority (BA) as a share of gross domestic product (GDP)
since 1980. Defense spending increased sharply after the Soviet Union’s 1979 invasion of Afghanistan,
but declined in the mid-1980s as concerns rose about cost overruns and rising deficits.
