When you listen to former Gov. Mitt Romney and other Republicans on the campaign trail, you’d think federal spending is out of control and still growing. And, in a curious bit of jiu-jitsu, some even say that’s holding back the recovery.
Problem is, it’s flat-out wrong.
Largely because of the ugly deal struck by a dysfunctional Congress during last year’s debt-ceiling fiasco, discretionary domestic spending—the kind over which Congress actually has control, unlike entitlement programs Medicare, Medicaid, and Social Security—has been slashed dramatically. I estimate it will be 20% lower in fiscal 2015 than it was in fiscal 2010.
As Seung Min Kim reports in Politico, domestic programs aren’t getting the high-profile lobbying efforts that defense is. (Former Vice President Dick Cheney visited Capitol Hill to support Republicans trying to unwind similar mandatory cuts in defense programs.)
But the damage to programs such as Head Start, AIDs and substance-abuse treatment, and even grants to cutting-edge scientific research could be extensive.
Last year, Congress and the president worked out a deal whereby the debt ceiling would be raised by $2.1 trillion. In exchange, Congress would cut domestic and defense spending by $900 billion through 2021. A congressional “supercommittee” would endeavor to find another $1.5 trillion in cuts.
But because it couldn’t (surprise, surprise), $1.2 trillion in cuts to defense and domestic programs through 2021 would go into effect automatically, across the board, through what’s called a sequester.
That’s part of the Sword of Damocles hanging over the economy, which includes hundreds of billions in tax cuts expiring just as these automatic spending cuts go into effect, and it all hits next January.
And for all the brouhaha on the campaign trail, in fiscal 2010, domestic spending comprised $491 billion, only 14% of a total federal budget of $3.5 trillion.
Yet because of the required cuts, it will shrink to an estimated $410 billion in fiscal 2013 and bottom out at $385 billion in fiscal 2015. That would be more than a 20% decline from fiscal 2010’s levels.
Under the sequester, domestic and military spending will be cut by $54.7 billion each annually for the next nine years. Some of the domestic cuts will even encompass Medicare and other entitlement programs. Discretionary domestic spending will be slashed by as much as $38.6 billion a year and as little as $33 billion. Those are very, very substantial reductions.
The Bipartisan Policy Center concludes:
These sizeable cuts to both defense and domestic discretionary spending will bring each of those levels down to historic lows as a percentage of the U.S. economy… And for all that trouble, policymakers will have accomplished little in the scheme of stabilizing our debt.
Why? Because in fiscal 2010, Medicare, Medicaid, Social Security and other entitlement programs comprised 55% of the total federal budget. By fiscal 2021 they’ll represent nearly 63% of outlays as more and more baby boomers retire and get the benefits they “earned.”
And there you have it: lots of pain with not much to show for it.
Yes, we have to rein in spending, and the 2011 Budget Control Act was a start. But until Republicans and Democrats address entitlement programs, tax reform and revenue increases in a serious, sustained way, they’re just whistling past the graveyard.