No, the Problem Isn't Just Discretionary Spending
I'm Not a Smart Man, But I Know How to Read the Budget Act
Comments from one of the conservative House members who tried to stop Speaker Kevin McCarthy (R-CA) from getting the gavel caught my eye. During a recent town hall, as reported by The Washington Post, this conservative member said, “All we got to do is cut the discretionary spending to stay within our provisions.” He added that Congress should cut funding for “diversity, equity and inclusion stuff, CRT stuff, transgender stuff” while maintaining a strong defense.
Looking at the Congressional Budget Office’s (CBO) projections for FY 2023 that were released back in May 2022, Congress will take in $4.890 trillion in revenues this year and spend $5.874 trillion. That means we’ll have a budget deficit of $984 billion. Now, this may not reflect reality. The CBO hasn’t put out a new ten-year budget projection based on recent congressional activity.
Before we jump into this, let’s start at the top. There are a lot of misconceptions about federal spending. When Congress debates a budget and/or appropriations, what they’re doing is haggling over only part of federal spending. In FY 2019, discretionary spending was 30.1 percent of all federal spending.
Obviously, I chose FY 2019 because it excludes spending related to COVID-19. I’ve also included FY 2023 and FY 2032 below. As you can see, discretionary spending as a share of total outlays has declined. This is in large part due to the rapid growth of outlays for mandatory programs (Medicare, Medicaid, Social Security, veterans programs, etc.) and interest on the national debt.
Based on the estimate provided, cutting nondefense spending by, say, 5 percent, would save $39.75 billion. That brings the budget deficit down to $945 billion. A 10 percent cut brings it down to $905 billion. Even if Congress decides to cut nondefense discretionary spending by half, there would still be a $587 billion budget deficit.
Granted, a $587 billion budget deficit is much more manageable than $945 billion, but when you’re looking at the end of the budget window, in FY 2032, when the budget deficit is projected to be $2.253 trillion, a 50 percent cut to nondefense discretionary spending means the budget deficit comes down to $1.622 trillion. In the fictional world in which all nondefense discretionary spending is eliminated, the budget deficit in FY 2032 is still $991 billion.
I’m not saying that discretionary spending doesn’t need to be reduced. It does. However, the elephants in the room are mandatory spending and interest on the national debt. Entitlement programs absolutely have to be reformed. Unfortunately, there’s little political will to address those programs, especially with this strain of populism that has deeply infected the Republican Party.
When it comes to the complaints about “diversity, equity and inclusion stuff, CRT stuff, transgender stuff,” funding for these items could be expressly prohibited through riders in appropriations bills, but that doesn’t mean that there’s a spending cut.
When Congress passes a budget resolution, the topline numbers for security (defense) and nonsecurity (nondefense) discretionary spending are allocated to the House and Senate Appropriations committees. These are known as the 302(a) allocations, in reference to Sec. 302(a) of the Budget Act of 1974, which is found in 2 U.S.C. §633(a). From there, the committees divided the topline figures between the 12 subcommittees for purposes of the 12 appropriations bills. These are the 302(b) suballocations, in reference to Sec. 302(b) of the Budget Act of 1974, which is found in 2 U.S.C. §633(b).
When he was in Congress, Rep. Tom Graves (R-GA), who chaired the House Appropriations Subcommittee on Financial Services and General Government, tried to create the “Fund for America’s Kids and Grandkids.” This was a way to slide money into a new fund that couldn’t be touched until Congress erased the budget deficit or ran a budget surplus. It was a hokey idea because a) it was a messaging exercise and wasn’t going to become law and b) even if it had become law, the money set aside would’ve undoubtedly been raided by appropriators in a future Congress.
Still, Graves had a point in that his subcommittee “had to find a way to spend money, in order to protect it from being spent.” That’s how the appropriations process works. Appropriators may decide to increase funding, decrease funding, zero out funding, or prohibit funding for certain things. However, decreasing, zeroing out, or prohibiting funding doesn’t mean we’ll see a spending cut. Those dollars will just be reallocated elsewhere. That’s how appropriating works. If you want to cut spending, you’ve got to fight for it in the budget.