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Bad News for Agency Budgets

Spending on nondefense investments is nearing historic lows.

The nonpartisan Congressional Budget Office, as part of its ongoing public education efforts, just published a simplified summary of the outlook for federal spending that does not bode well for most agencies.

The matter-of-fact slide show delivered to the Stanford Institute for Economic Policy Research by CBO Director Douglas Elmendorf May 13 reiterates some familiar grim news. For example, federal debt as percentage of gross domestic product is now at its highest since 1950, while budget deficits, while declining now, are set to rise beginning in 2016.

The reasons for the imbalance include entitlement commitments, the demographic bulge of the baby-boomers and health care costs that are growing more rapidly than the rest of the economy. Interestingly, the average tax burdens in 2013 for most income groups, CBO said, were “well below their averages for the 1979–2010 period.” Yet federal spending and revenues are both projected to rise above their 40-year averages--beginning this year.

Perhaps the most salient point will affect feds who work not on giant slices of the pie chart like Social Security and Medicare but on programs that depend on an annual appropriation. Spending on such nondefense “investments,” which, CBO notes, do the most to help move goods and services in the private sector, taken together by 2023 will be a smaller percentage of GDP than in at least 70 years.

Whatever solution emerges from Congress and the White House, the studiously neutral agency opines, budgeteers “will need to cut benefits from those large [entitlement] programs, raise tax revenue above its historical percentage of GDP to pay for the rising cost of those programs, or adopt a combination of those approaches.”

(Image via larry1235/