Budget crisis calls for focus on entitlements and revenue
By David Kamin,
David Kamin, an assistant professor at New York University School of Law, was special assistant to the president for economic policy, focusing on budget and tax policy, from August 2010 to March 2012. He was an adviser to the director of the Office of Management and Budget from January 2009 to August 2010.
Last year I was among those sitting in the back of federal budget negotiations and generating the reams of paper and tables that are the fuel for talks. So I know that it can seem easy on a spreadsheet: Adjust a few formulas for some technical category called “discretionary spending” and, voila, hundreds of billions of dollars get knocked off the deficit. Policymakers can declare victory for having reduced this type of spending to historic lows, and a budget deal now on the ropes can be revived.
That was at the core of the deal reached in August 2011 that averted a default on the country’s debt. But if we want to maintain minimal investments in education, research and development, and basic government services such as the FBI and air traffic control, policymakers must not go back to this well. The current negotiations should focus on areas that were left untouched in last year’s deal: fast-growing entitlements and revenue.
Last year, caps were imposed on discretionary spending that cut it by $1.5 trillion over the next decade relative to the 2010 level adjusted only for inflation — a reduction of more than 10 percent. These caps apply to the annual funding for all government agencies, from the defense to the education departments.
Despite having been cut once, and despite representing less than 40 percent of federal programs, discretionary spending — especially outside of the Pentagon — is likely to be in budget cutters’ sights again. The House budget resolution has proposed sharp additional reductions in non-defense discretionary spending, and this can be easy pickings because cutting it is as simple as changing numbers on a spreadsheet. That may sound wonky, but in budget negotiations these things matter.
I, and my fellow budget geeks, can generate discretionary savings for negotiators in a jiffy. Just tell me how many hundreds of billions you want cut, and in a minute I can give you back a new set of annual discretionary limits for the decade.
Sure, policymakers will eventually have to make specific cuts to hit those limits. But that pain can often be deferred, because specific decisions on discretionary spending are made annually. Discretionary spending five or 10 years from now looks like a piggy bank to negotiators. Take money out, and let some future policymaker actually ax the programs.
It’s not the same for other areas of the budget. If policymakers want savings from entitlement programs such as Medicare or Social Security, or if they want additional revenue, they must, in relatively short order, come up with the specific ways to reduce those programs or raise that revenue. The lines on the spreadsheet must be filled with painful decisions about premiums and co-pays, benefit levels and tax rates.
So when push comes to shove and there’s a hole in a deficit deal, discretionary spending can be an easy place to turn. Discretionary spending outside of defense is particularly vulnerable. The Pentagon has many defenders on both side of the aisle and a small army of lobbyists deployed by defense contractors. The same can’t be said for, say, the Consumer Product Safety Commission.
House Republican leaders have laid down their marker. In the House budget resolution, they proposed slashing non-defense discretionary spending by 22 percent below the already-reduced levels. Yet the resolution shed little light on how those cuts would be broadly distributed across budget categories — instead, it stuck most of the cut in an “allowance” function (which is the budget wonk’s way of saying “I’ll get back to you”).
The current caps on non-defense funding are already aggressive. Non-defense discretionary spending is slated to fall to its lowest level as a share of the economy in some 50 years.
That means the lowest ever share of our national income going to Head Start, which gives low-income kids a chance to get ahead; or grants for basic science in areas as varied as energy and health; or weather satellites, which are essential to predicting where storms will go; or disaster relief after the storms get there. The list goes on. And, if you want to protect those things, it means less funding for everything else, including Pell Grants and prosecutors and border security. The math is inescapable.
Of course, the current budget negotiations are an exercise in sacrifice. If they do not cut discretionary spending further, negotiators will need to agree to larger cuts to entitlements and larger increases in taxes than they would otherwise to put the budget on a sustainable course. But that is exactly where this year’s deficit deal should focus — rather than cutting discretionary spending yet again and driving it to ever-lower levels.
The problem is that cutting discretionary spending can look easy to negotiators, especially relative to the alternatives. But, while number-crunchers can generate savings with a few clicks, no one should forget that there will be deep consequences for America’s future — and that real programs with real effects for this country are on the line.
Read more on this issue from Opinions: The Post’s View: Obama’s door to tax compromise E.J. Dionne Jr.: Obama shouldn’t back down Thomas F. “Mack” McLarty and Nelson W. Cunningham: A bipartisan solution to the ‘fiscal cliff’ Erskine Bowles: Make a deficit deal now David Ignatius: A time for Obama to be bold