6 Crucial Facts You Need to Know About US Spending

6 Crucial Facts You Need to Know About US Spending

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The Congressional Budget Office provided additional details on federal spending this week to members of the Senate Committee on the Budget, in response to questions submitted by committee members.

The QFRs, or Questions for the Record, follow up on a hearing earlier this year that focused on federal discretionary spending in recent years. At that hearing, Assistant Director for Budget Analysis Theresa Gullo said that discretionary spending has fallen since the Budget Control Act took effect in 2011, dropping nearly 17% from 2011 to 2018. At the same time, discretionary spending has exceeded the levels set by the BCA by about $1.4 trillion, or 17%.

Here are some additional data points on federal spending provided by the CBO in response to specific questions from senators:

1) Excluding defense, discretionary spending has been falling relative to the size of the economy and is expected to continue falling.

“Nondefense discretionary spending has fallen relative to the size of the economy over the past 50 years. In 1969, such spending totaled 3.5 percent of gross domestic product (GDP). CBO projects that in 2019 the total will amount to 3.1 percent of GDP and will equal its lowest level as a share of the economy over that period. In 2020, under CBO’s baseline assumptions (in which the nondefense discretionary cap for 2020 is not increased), such spending would equal 2.9 percent of GDP. In CBO’s baseline projections, which incorporate the assumption that discretionary appropriations grow with inflation when not capped, nondefense discretionary spending continues to decline—to 2.5 percent of GDP in 2029.”

2) Most of the increases in the spending caps since 2011 have been defense-related.

“CBO estimates that since the enactment of the Budget Control Act of 2011 (BCA), which established caps on discretionary spending through 2021, $683 billion (or 69 percent) of the total adjustments to those caps has been provided for defense activities: $652 billion for overseas contingency operations, $13 billion for emergency requirements, and $18 billion for disaster relief.”

3) Congress offset its increases in spending in previous budget deals but did not do so in the current deal covering 2018 and 2019.

“The Bipartisan Budget Act of 2013 and the Bipartisan Budget Act of 2015 raised the caps for 2014, 2015, 2016, and 2017. At the time that the 2013 law was under consideration, CBO estimated that other provisions in the act would reduce deficits over the 2014–2023 period by $85 billion—more than offsetting the $63 billion cumulative increase in the 2014 and 2015 discretionary caps. Similarly, CBO estimated that provisions in the 2015 act would reduce deficits by about $80 billion—fully offsetting the $80 billion cumulative increase in the caps that the 2015 act made for 2016 and 2017.

By contrast, the Bipartisan Budget Act of 2018 only partially offset the cap increases it authorized for 2018 and 2019. CBO estimated that the mandatory spending and revenue provisions would reduce deficits by $38 billion over the 2018–2027 period—$258 billion less than the increase in discretionary spending that would result from raising the caps.”

4) Spending on disaster relief has risen sharply.

“Focusing on the country’s single largest source of federal disaster assistance, the Disaster Relief Fund (DRF, which is administered by FEMA, the Federal Emergency Management Agency), CBO observes that in constant dollars, federal disaster spending has increased significantly over the past three decades, particularly since Hurricane Katrina in 2005. Total federal spending from the DRF totaled about $27 billion in the 1990s and increased dramatically in the past two decades (to $135 billion and $108 billion, respectively).”

5) Mandatory spending is growing much more rapidly than discretionary spending.

“Mandatory spending, which consists primarily of payments for benefit programs, such as Social Security, Medicare, and Medicaid, will account for 60 percent of total federal spending in 2019 and will amount to $2.7 trillion, or 12.7 percent of GDP. Mandatory outlays are projected to increase by 1.9 percentage points—to 14.6 percent of GDP—by 2029. That growth is primarily the result of the aging of the population and rising costs per beneficiary in the major health care programs. The only other time since 1962 that mandatory outlays exceeded 14 percent of GDP was during the recession in 2009, when they totaled 14.5 percent.

All told, in 2019 mandatory spending (excluding interest) will be about twice discretionary spending. By 2029, in CBO’s baseline projections, mandatory spending is about three times discretionary spending.”

6) Even if discretionary spending were frozen, the debt would continue to grow.  

“If discretionary spending … was frozen at 2019 nominal amounts, it would shrink from 6.4 percent of GDP in 2019 to 2.1 percent of GDP in 2048—declining from about a third of all noninterest spending to 11 percent by 2048.

Nevertheless, including the positive economic effects of deficit reduction, debt as a percentage of GDP under that latter scenario would continue to increase throughout the projection period and would peak at about 95 percent of GDP in the mid-2030s before declining to about 90 percent of GDP in 2048—still higher than the current 78 percent. By contrast, in CBO’s extended baseline projections, debt rises steadily to 152 percent of GDP in 2048.”