Karen Dynan (Harvard), Douglas Elmendorf (Harvard), and Theresa Gullo (Arbroath Associates) have a new NBER working paper, “The Federal Government’s Discretionary Spending” (May 2026). Here is the abstract:

This paper examines federal discretionary spending, including its place in the overall budget, its composition, and the economic and political forces shaping its size. Both defense and nondefense discretionary spending show no trend relative to national output over the past three decades, reflecting underlying factors rather than explicit targets. This stability implies a less favorable fiscal outlook than appears in official projections. Because discretionary spending is generally set annually, it will face continuing pressure from concerns about rising federal debt, a challenge compounded by the erosion of the structured budget process envisioned in the Budget Act fifty years ago.