March 15, 2013
Here’s one key takeaway from the Senate Democratic and House Republican budgets released this week: Under each, nondefense spending—funding for things like welfare programs and government operations—will reach a 50-year low, as a share of economic activity, within a few years.
Every year, the government spends money in two broad categories. The first is funding that has to be approved annually by Congress, or discretionary spending. The second is funding that does not, known as mandatory spending. Most of the mandatory spending goes to Social Security and to Medicare and Medicaid, the latter of which are among the key drivers of the country's debt. In other words, the “debt crisis” that many politicians decry—and which is a key motivator of Republican spending cuts—is in large part the result of runaway future health care spending.
Of the money approved annually by Congress—discretionary spending—about half goes to defense. The other half goes toward things like government operations, law enforcement, education, transportation, national parks, research, and welfare programs. Historically, those nondefense discretionary programs have accounted for about one-fifth of all spending. But, as a share of economic activity, that spending is about to dip to its lowest levels since 1962.
That nondefense discretionary spending, as a share of gross domestic product, will reach a historic low by 2017. That’s the case under current law, with or without the automatic spending cuts under sequestration. And now it’s the case under the proposed budgets—Democratic or Republican.
As the economy and population grow over the next decade, spending dedicated to these programs—some of them very popular, some of them aimed at providing low-income assistance—will hold relatively steady. It's a partial philosophical win for Republicans, who have long pushed for shrinking the federal government, to have Democrats preventing one slice of government spending from growing.
Take the budget released by Senate Democrats. Nondefense discretionary spending hovers roughly between $600 billion and $660 billion, while economic output (GDP) is projected to grow from $16 trillion to $26 trillion within a decade, according to the Congressional Budget Office. The House Republican budget proposal holds that spending even lower—between $510 billion and $570 billion.
(Image via isak55/Shutterstock.com)
March 15, 2013