3 Surprising Facts About the Budget and Spending

No, spending is not out of control.

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Here, courtesy of my colleagues at the Center on Budget and Policy Priorities, are three facts about the current budget situation that might surprise you:

  • First, policymakers have enacted several deficit-reduction measures since 2010 that will shrink deficits by nearly $4 trillion from 2014 to 2023, if cuts under the so-called sequester remain in place or policymakers replace them with comparable deficit-reduction measures over the decade.
  • Second, contrary to claims that federal spending is exploding, total spending as a share of gross domestic product has already fallen dramatically from its 2009 peak and spending outside of interest payments on the debt will decline in the decade ahead as the economy recovers. 
  • Third, contrary to the rhetoric from proponents of cutting the Supplemental Nutrition Assistance Program (or SNAP, formerly known as food stamps), spending on SNAP and other low-income safety net programs is not out of control or driving the nation's long-term fiscal problem.

[ See a collection of political cartoons on the budget and deficit.]

The following table summarizes the effects of the deficit reduction measures under President Obama and Congress. They include cuts in discretionary (non-entitlement) funding in 2011, caps on discretionary funding under the 2011 Budget Control Act, the tax increases on top-earning Americans and spending cuts in the American Taxpayer Relief Act of early 2013 and sequestration spending cuts that the BCA requires because Congress could not craft an alternative way to secure equivalent budget savings.

If sequestration remains in place, spending cuts will account for the overwhelming majority of those policy savings (79 percent). The sharp increase in government spending in 2008 and 2009 might have been cause for alarm and justified efforts to rein in spending – except that it was a temporary surge due to the Great Recession and the 2009 Recovery Act meant to combat it. 

[ See a collection of political cartoons on sequestration and the fiscal cliff.]

Spending fell sharply as a share of GDP in 2012, and if current policies continue, spending excluding interest on the debt would be 19.5 percent of GDP in 2023. That's lower than the 20.2 percent projected for 2013 and well below 2009's 23.9 percent.

The chart below shows trends in Social Security, Medicare and all other non-interest spending.  As CBPP observes:

"Total non-interest spending outside of Social Security and Medicare – two programs whose costs are driven up by the aging of the population and the rise in health care costs throughout the U.S. health care system – will fall well below its 50-year historical average [of 13.0 percent] in the decade ahead."

[ See a collection of political cartoons on the economy.]

The "Other" category does not include the sequestration cuts described above, which would drive down non-interest spending outside Medicare and Social Security even further. It does include SNAP, Medicaid and other low-income safety net programs.

The third piece of CBPP analysis focuses on those programs. In what should be a familiar theme by now, spending on these programs spiked in the Great Recession – an expected and appropriate response to more hardship and need. And Medicaid spending has grown as a share of GDP because of rising costs throughout the U.S. health care system, which affects private health care and government programs alike. As the chart below shows, however, low-income spending outside health care is set to fall below its average of 2.1 percent over the past 40 years.

Critics of government spending in general and safety net programs in particular were always disingenuous to argue that the sharp spending jump in the Great Recession reflected out-of-control spending. They are even more disingenuous to keep making that argument when non-interest spending apart from health care is heading downward and not contributing to the long-term budget problem.

Chad Stone is chief economist at the Center on Budget and Policy Priorities.