Few things defy gravity more than federal spending. In the nation’s capital, what goes up does not come down. It goes up more.
When President Barack Obama was elected, there was a temporary $535 billion increase in spending during the Great Recession. Yet as the recession faded and that spending ended, total spending eased just a fraction and just temporarily, never returning anywhere near the pre-recession total of $2.9 trillion.
Now, Obama is proposing a budget that would hit $4 trillion in spending next year when rounded. And it would grow from there if he succeeded in getting Congress to abandon bipartisan budget caps adopted in 2011.
Overall, he wants to boost spending from $3.7 trillion this year to $6.2 trillion in 2024, also increasing as a share of a growing economy from 20.9 percent to 22.2 percent, higher than post-World War II averages.
Obama entered office amid financial crisis and the deepest downturn since the Great Depression. He also inherited two costly wars in Iraq and Afghanistan, and he pushed for stimulus spending on top of his predecessor’s emergency spending.
Those wars ended. The pressures to increase spending did not.
One is the tens of millions of Americans who receive checks from the government.
Spending is mandatory for programs such as Social Security and Medicare and for interest on the debt. These three, with each passing year of inaction by lawmakers, account for more and more of federal spending.
Those three items alone account for 30 percent of all spending. Mandatory spending more broadly, including Medicaid, pensions and other required spending, accounts for about 63 percent of all spending in Obama’s plan.
“They’ve done too much of the easy things, and almost nothing of the harder stuff,” said Shai Akabas, a budget expert with the Bipartisan Policy Center, a fiscal think tank.
A 2011 budget deal imposed caps on spending for discretionary programs, both defense and non-defense. Obama proposes ending these caps and replacing them with new spending, paid for with tax hikes on the wealthiest Americans.
His plan calls for a 7 percent increased in discretionary spending in the fiscal year that begins Oct. 1, or five times the administration’s expected rate of inflation. That doesn’t count the larger mandatory spending.
“About half our spending these days is going to Social Security and various health programs, and most of those are extraordinarily popular politically,” said Rudolph Penner, a former director of the nonpartisan Congressional Budget Office. “To the extent that we have shown spending restraint in recent years, it’s been discretionary programs.”
Therein rests the problem with federal spending. It’s hard to cut programs that have a constituency with a vested interest.
Want to reduce benefits or make significant changes to Medicare, the health program for those 65 and over? In 2014, there were 53.8 million Americans enrolled in Medicare, about 9 million of them disabled, according to the Centers for Medicare and Medicaid Services.
Want to change the way cost-of-living-adjustments are calculated for Social Security recipients to slow rising costs? There were 62 million of them as of December, according to the Office of the Chief Actuary. About 48 million of them are Social Security beneficiaries or a surviving spouse. Another 11 million are disabled and receiving Social Security benefits and another 3 million are minor children receiving the benefits of deceased recipients.
Here’s how that translates into federal spending. Programmed spending, which includes mandatory programs such as Social Security, Medicare and federal pensions, topped $1 trillion in 2000 for the first time, $2 trillion in 2009 and topped $2.37 trillion in the 2014 fiscal year that ended last Sept. 30. Social Security, Medicare and net interest on the debt accounted for more than $1.6 trillion of that.
“If you really wanted to focus your effort on reducing spending growth, that’s where you would have focused on,” said Penner, now a fellow at the centrist think tank Urban Institute.
Discretionary spending, which is appropriated by Congress each year, topped $1 trillion in 2006, peaked at $1.347 trillion in 2010 and 2011, and then dropped to $1.18 billion in 2014. That’s still 3.8 percent above the 2008 level of $1.13 trillion, the last year before Obama took office. And it would jump another 7 percent under Obama’s new budget plan.
Since people with a stake in the mandatory spending programs aren’t going to take the changes without exerting a political price, lawmakers instead fight over a considerably smaller slice of federal spending, the discretionary programs.
“It is literally squeezing down the rest of government, whether you talk about infrastructure, children’s programs, education,” Penner said.
Some economists think this focus on discretionary spending actually hurts the economy. Government spending, especially on defense, is a good part of the nation’s overall economic activity.
“I think the emphasis on deficit reduction held back growth in 2012 and 2013,” said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. “I think the emphasis on near-term deficit reduction is missing the bigger question.”
By focusing on discretionary spending, lawmakers are not making changes to Medicare and Social Security to put them on a more sustainable path, he said. And that’s the part of spending that’s really driving deficits, which take new borrowing to pay bills already incurred.
Federal debt held by the public has gone from $3.5 trillion in 2002 to $5 trillion in 2007 to a staggering $10 trillion in 2011 and just under $13 trillion last year. The Congressional Budget Office last month estimated that absent changes to current law, debt will top $21 trillion in 2025.
That same year, deficits will be back over $1 trillion, the CBO said, almost twice where they are today.