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Congress is cutting the wrong spending

By Ezra Klein,

Politicians don’t want to cut Medicare. They’re (properly) skittish about cutting Medicaid. They’re terrified of touching Social Security. They worry about tapping defense. But “discretionary spending”? They’re happy to slash away at that. It’s the only spending category that either the Reid or Boehner plans specifically single out for cuts.

Why? Perhaps because it’s called “discretionary spending.” People understand what a cut to Social Security means. But have you ever heard a roomful of activists or a crowd of citizens take up the chant, “when I say ‘discretionary,’ you say ‘spending’! ‘DISCRETIONARY!’ ”?

I thought not.

But what if politicians actually had to propose cuts to the programs grouped under the inelegant rubric of “discretionary spending,” rather than to some nameless, faceless category of funds? Well, then the cuts might get a little harder. Because dig into discretionary funding — and, more to the point, “non-defense discretionary funding,” which tends to be what politicians really want to cut — and you find that you’re slashing three types of programs: public investments, support for the poor and disabled and government operations.

In a recent report for the Economic Policy Institute, Ethan Pollack, a former fiscal commission staffer, took a closer look at both what non-defense discretionary spending is and what the two parties intend to do to it. First, he notes, more than half of the money that we refer to as non-defense discretionary is actually public investment: Education, transportation, health research, energy research, etc. This is the “win the future” portion of the budget, but even the Obama administration is proposing massive cuts to it. In fact, their proposed cuts — much less the cuts envisioned in the Ryan budget, or Cut, Cap and Balance — would bring spending in this category beneath what it was under Ronald Reagan:

You can’t entirely blame politicians and budget nomenclature for this assault. Part of the reason the miscellaneous programs that make up non-defense discretionary are getting squeezed is that costs in giant programs such as Medicare, Medicaid and Social Security are rising quite quickly, and those programs, by virtue of serving more people, have stronger constituencies fighting any attempts to cut them. Children, by contrast, are strikingly inattentive when it comes to following the latest twists and turns in the budget process, and space enthusiasts properly spend more time trying to communicate with extraterrestrials than with Congress.

But the fact that these cuts are relatively easy does not make them wise. “What we’re doing here is transferring financial debt to investment debt,” says Pollack. “Cutting a dollar from the deficit by not repairing a road keeps you from passing one dollar of debt on to a future generation. But you are passing on a crumbling road. If you look at that using an accounting perspective that includes assets and liabilities, then by making a cut in the budget by not repairing a road, you’re not necessarily saving that money.”

Indeed, since it’s cheaper to repair a road now than it is to fix a road later, you might actually be increasing your total deficits down the line. And the same goes for less tangible investments like scientific research. Withdrawing our support for medical breakthroughs and advances in clean energy might save us money now but cost us money — and health, and atmosphere — later. Cutting discretionary spending so deeply might be penny wise, and even politically wise, but it’s pound foolish.

But unless we get health-care costs under control and allow ourselves to consider taxes, it’s also inevitable. If you’ve taken revenues off the table and consider most categories of spending untouchable, cuts are going to have to fall very heavily on the few forms of spending left in the negotiations, no matter how worthwhile that spending is. And so they are.

Related stories:

Everything you need to know about the debt ceiling

Running in the Red (Part 1): How the U.S. detoured to massive debt

Running in the Red (Part 2): How the GOP’s no-tax orthodoxy came to be

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