Discretionary spending covers the costs of the routine activities commonly associated with such federal government functions as running executive branch agencies, congressional offices and agencies, and international operations of the government. Mandatory programs and net interest costs are the other components of federal spending. Essentially all spending on federal wages and salaries is discretionary. Discretionary spending also funds grants, purchases of equipment and other assets, and contractor services that support various federal programs and activities. Congress provides and controls discretionary funding through annual appropriations acts, which grant federal agencies the legal authority to obligate the U.S. government to make payments. Budget authority (BA) is the amount that can be legally obligated. Outlays are the payments made by the U.S. Treasury to satisfy those obligations. This report mostly discusses trends in outlays. The distinction between outlays and BA is important to understanding the federal budget and, particularly, discretionary spending. Appropriations legislation controls discretionary funding and provides budget authority to fund specific programs. Congress exercises its constitutional power of the purse by deciding what funds federal agencies can obligate on behalf of the U.S. government, for what purposes and for specified time periods. While budget authority is available for just a single year (such as for most personnel compensation costs), some appropriations (such as for many military construction projects) provide budget authority for multiple years, or indefinitely. Agencies obligate funds by signing contracts or hiring employees or contractors or in other ways. Budget authority has been compared to funds deposited into a checking account, which then can be used for specified federal purposes. Outlays are disbursed federal funds. Outlays are recorded when the U.S. Treasury disburses appropriated funds to purchase goods and services, pay employees, issue benefits, or make interest payments. Agencies typically do not spend all of their budget authority in the year it becomes available, which implies that outlays will lag behind budget authority. Outlay data are used to assess the macroeconomic effects of the federal budget, whereas budget analysis of specific federal programs is often based on budget authority, because that is what Congress controls directly. Limits on discretionary spending set by the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and modified by subsequent acts are defined in terms of BA. Federal spending can be divided into three basic budget categories: discretionary spending ($1.17 trillion in FY2014 outlays), mandatory spending ($2.11 trillion in FY2014 outlays), and net interest costs (about $230 billion in FY2014), for a FY2014 total of $3,504 billion. Mandatory spending, also known as direct spending, funds entitlement programs, such as the Supplemental Nutrition Assistance Program (SNAP; formerly known as the Food Stamps program), and other spending controlled by laws other than appropriation acts. Spending levels for mandatory programs generally depend on eligibility criteria, size of the eligible population, and participation rates. Different types of mandatory programs are set up in diverse ways, reflecting historical influences, technical demands, and specific legislative authorities. While the term "entitlement" can be defined to coincide with the mandatory programs, many would distinguish programs providing benefits to large populations meeting set eligibility requirements from more special payments, such as salaries of judges covered by Article III of the Constitution. In some cases, mandatory and discretionary spending support similar activities. For example, Medicare health care benefits are classified as mandatory spending, while most health care benefits for veterans and military personnel are classified as discretionary spending. Legislative procedures for funding discretionary programs differ from those for mandatory programs. Congress provides discretionary funds (BA) each year through the annual appropriations process. Other types of legislation, such as authorization measures, control mandatory spending. Some mandatory programs, such as Social Security, are financed outside the annual appropriations process. Other mandatory programs, such as Medicaid, are funded through appropriations measures, while the level of spending reflects eligibility requirements and other provisions set in authorizing legislation, as well as the pool of potential beneficiaries and program participation rates. Table 1 provides a simple division of federal spending (i.e., mandatory and discretionary spending) by contrasting the type of budget authority needed for specific purposes. Policy disagreements about fiscal policy challenges continue to influence trends in discretionary spending. Fiscal policy describes how a government chooses to balance spending and revenues, which can be used to influence the level of economic activity. Substantial evidence suggests that fiscal policy can stimulate economic activity when an economy is operating below its potential level of output and when short-term interest rates are near zero. Discretionary spending, which is controlled through an annual budget process, is potentially a more flexible fiscal instrument than mandatory spending. Some features of mandatory programs have often been changed to respond to economic conditions. For example, the period of eligibility for unemployment insurance benefits has often been changed during recessions. Tax policy changes have also been used to respond to macroeconomic conditions. In addition, as incomes fall during recessions, tax revenues fall and more families become eligible for means-tested mandatory programs; deficits rise, which helps dampen economic shocks. When economic growth resumes, those changes run in the opposite direction. Those changes are therefore known as automatic stabilizers. Addressing short-term and long-term challenges simultaneously is difficult because additional government outlays, according to most economic research, would boost economic recovery, while reducing spending could help enhance fiscal sustainability—as would increases in federal revenues. Some have called for linking a package of policies to provide short-term fiscal stimulus with longer-term measures aimed at fiscal sustainability, although designing such packages to ensure credibility and effectiveness could be challenging. The financial crisis that began in 2007 and subsequent recession that ended in June 2009 continue to color current fiscal policy debates. Recessions are said to end when the economy resumes growing. The federal government took several measures to stimulate the economy, in addition to an extraordinary set of measures aimed at housing and credit markets. Some policy makers have called for expansion or continuation of programs intended to alleviate economic vulnerabilities of households and businesses, while other policy makers have argued that discretionary spending should revert to pre-crisis levels. Whether the federal government should take immediate steps to close the gap between spending and receipts or wait until the economy is more fully recovered has been subject to debate among economists. While much of the funds made available by measures responding to the financial crisis or the subsequent recession were classified as mandatory or revenue reductions, discretionary spending also rose sharply. Most notably, Congress in early 2009 responded to weak economic conditions and dramatic job losses that sharply increased unemployment rates by passing a major fiscal stimulus package. The resulting measure, the American Recovery and Reinvestment Act of 2009 (ARRA; H.R. 1 , P.L. 111-5 ), enacted on February 17, 2009, included stimulus spending and tax cuts estimated at the time to total $787.2 billion, including about $300 billion in discretionary spending. ARRA included funds for discretionary spending on education initiatives, support for state governments, public housing, infrastructure, and health care. In 2012, CBO estimated the total budgetary effect of ARRA at $831 billion between 2009 and 2019. The recovery that followed the 2007-2009 financial crisis and recession has been relatively slow. Economic growth in the United States, however, has been faster in recent years than in many other advanced economies. Economic recoveries following major financial crises can be much less robust than recoveries following more cyclical downturns. Some continue to call for a more expansionary fiscal policy to respond to high unemployment levels, which would entail larger budget deficits in the short run. Other economists are skeptical that such fiscal policies would ameliorate deeper problems caused by high personal and federal debt levels, and therefore call for fiscal restraint as a first step towards addressing longer-term fiscal challenges, or at least a transition to a less expansionary fiscal policy. A 2012 International Monetary Fund (IMF) survey found that the experience of advanced countries during the recent recession suggests that active fiscal policy can stimulate economic growth when economic resources are not being fully used and when the effectiveness of standard monetary policy tools is constrained by very low interest rates. The U.S. economy in 2014, according to available data and projections for the 4 th quarter, will have grown slightly faster than the 2.2% growth achieved in 2013. Somewhat faster growth is expected in 2015. Recovery from the 2007-2009 recession continues to be slower than most previous downturns. Serious risks to economic recovery persist, such as those linked to the Eurozone and signs of decelerating growth in other countries such as China. Recent trends in discretionary spending have been controlled by statutory limits reestablished in the Budget Control Act of 2011 (BCA; P.L. 112-25 ), enacted on August 2, 2011. Those limits, which originally extended until FY2021, are expected to shape future trends in discretionary spending. Subsequent legislation has modified those limits in ways discussed below. Provisions of the BCA are projected to bring discretionary spending as a share of GDP to levels well below that seen in recent decades. In terms of real dollars (i.e., adjusting for inflation but not for growth in population or the economy), discretionary base defense spending was slated to revert to a level slightly above its FY2007 level, while non-defense discretionary spending was slated to revert to a level near its 2002 level. The BCA set limits on discretionary spending that were initially estimated to save about $900 billion over the next decade relative to a pre-BCA baseline. The BCA also established a Joint Select Committee on Deficit Reduction (JSC), known as the "Super Committee," to develop and present a plan to Congress and the President that would achieve an additional $1.2 trillion or more in savings. The BCA, in return, allowed a set of increases to the debt limit, subject to congressional disapproval, enabling the government to borrow through February 2013.