Learn how Congress directs government spending

President Trump's policies that change federal spending must go to Congress first. Here's how that works.

Every dollar that the federal government spends is authorized by a law that starts as a bill in Congress — the Constitution requires that. There are two broad ways that Congress writes those bills:

The first are laws that direct payments to individuals or entities based on a benefit formula, such as entitlements like Social Security and Medicare and the federal portion of Medicaid, TANF, SSI, unemployment insurance, and SNAP. This is called, in jargon, "mandatory spending." Mandatory spending makes up about 60% of federal spending, and these laws typically remain in effect until they are repealed.

President Trump’s signature bill formally named the One Big Beautiful Bill, projected to add $4.1 trillion to the deficit over 10 years, affected this type of spending (and taxes).

The federal government also runs on fiscal years from October 1 to September 30, and about 30% of federal spending is tied to fiscal years. Since this type of funding lapses at the end of a fiscal year, or sometimes sooner, Congress must re-enact the funding or agencies funded this way must stop operating, which is informally called a shutdown.

The recent bill that defunded foreign aid (USAID) and public broadcasting (CPB) was a "rescissions bill" which affected this so-called "discretionary" spending.

Let's go deeper.

Discretionary Spending (Appropriations & Authorizations Bills)

In any given year, you may be hearing about the appropriations and authorizations bills that direct "discretionary" spending for the next fiscal year. It's currently September 2025, so Congress is now working on fiscal year 2026, abbreviated FY26, which starts on October 1.

"Appropriations" are part of how Congress directs discretionary spending. For example, Congress might "appropriate" $50 million to a hypothetical Department of Cats and Dogs's Cuddling Program for FY26.

Appropriations are provisions in law passed by Congress and signed by the President (or, very rarely, by overriding the President's veto) that direct federal dollars to be spent by an agency for a broad purpose. Appropriations are written by the powerful House and Senate Appropriations Committees based on their spending priorities for the whole of the government.

If there are no appropriations bills for a fiscal year, that's when a government shutdown occurs because it is also unlawful for agencies to spend money that they have not been appropriated.

The most recent appropriations law is H.R. 1968: Full-Year Continuing Appropriations and Extensions Act, 2025, signed by President Trump on March 15. This one bill consolidated the discretionary spending for the whole federal government, but often Congress divides the agencies up among 12 separate bills.

An appropriation is not enough for an agency to spend the funds. Funds can only be spent with both an appropriation and an authorization. An authorization is also a provision in law that looks a lot like an appropriation. The difference is that authorizations are made in bills that come out of the committees that have oversight jurisdiction over the parts of the government spending the funds. This ensures that the legislators most familiar with the government programs have a separate say in how those programs are funded.

So, the hypothetical appropriation above might be authorized by hypothetical House and Senate Committees on Pets which has oversight jurisdiction over the Department of Cats and Dogs.

Military authorizations bills are usually called "must pass" because legislators don't want to be seen as opposing funds for national defense and servicemembers.

Continuing Resolutions (Discretionary Spending)

Oops, legislators couldn't agree on an appropriations bill in time to prevent a government shutdown! (A likely hypothetical.) When that happens, the Continuing Resolution (CR) comes in.

CRs — and by the way that is just jargon, they are regular bills not resolutions — allows agencies to continue to operate by extending the end date of the last appropriations bill. A CR can be as simple as a single line that reads something like "strike the date the funds expire and replace it with ____," a date in the future.

CRs are relatively common. In fact, Congress almost never actually gets its work done on time as shown in this Pew Research article from 2023. The last time Congress passed all twelve regular appropriations bills was 1997. It's a little too late to enact all of the regular appropriations bills for FY26 by September 30, so you should expect either a continuing resolution soon or for the government to shut down.

Rescissions (Discretionary Spending)

The President must spend the money that has been appropriated by law — although that hasn't stopped President Trump from "impounding" funds anyway. But the President can ask Congress to undo an appropriation in a rescission request. The Impoundment Control Act of 1974 requires the Senate to give rescissions requests a vote by simple majority, rather than the usual higher 60 percent threshold that applies to appropriations and most other bills. That makes it easier to cut spending than it is to enact spending.

The recent bill that defunded foreign aid (USAID) and public broadcasting (CPB) was a rescissions bill that repealed appropriations that President Trump had signed into law just months earlier, and it passed with just 51 votes in favor.

Reconciliation (Mandatory Spending)

Now we're back to so-called mandatory spending, the larger portion of federal spending based on benefits formulas and that isn't tied to fiscal years.

Reconciliation bills make modifications only to mandatory spending, taxes, or the debt limit, and, per another part of the same 1974 statute, the Senate must give these bills a simple majority vote too. That makes reconciliation bills an attractive process to enact changes that do not have the support to pass through the 60 percent threshold that applies to advancing regular legislation in the Senate. This filibuster-loophole is what makes reconciliation bills attractive for updating mandatory spending.

The Republican signature bill formally named the One Big Beautiful Bill, projected to add $4.1 trillion to the deficit over 10 years (a 14% increase), was a reconciliation bill.

The reconciliation procedure can only be used a limited number of times each year.

One more note

If you're wondering what that remaining 10% of federal spending is (after the 60% for mandatory spending and 30% for discretionary spending), it's interest payments on the national debt.