The Budget Deal

By Dr Bob Stern, VP, Democratic Club of Long Beach Island

Have looked at a summary of the recent Budget Control Act  and compared the amounts to be cut with what was projected to be spent over the next 10 years in the budget categories affected. Putting aside for a moment the reasons for doing this at all now and the inequities involved, and just looking at the percentage cuts, I’d say they are pretty modest. Also Social Security, Medicare, and Medicaid are protected unless the special house/senate committee–and the House and Senate-agrees on entitlement changes and revenue increases -which is unlikely.

 The first round of cuts is from “discretionary spending”. Discretionary spending is expenditures that are set on a yearly basis.  Examples of discretionary spending include the defense budget, and non defense programs from the Departments of Education, Health and Human Services, the Environmental Protection Agency, Housing and Urban Development, Transportation, and the Department of Veterans affairs. These cuts are about $920 billion over 10 years or about $92 billion a year. For comparison the amount of discretionary spending in the middle of the 10 year period is $1,339 billion, so this amounts to about a 7% cut. Not sure how this cut will be allocated between defense and non defense.

 If the select committee set up in the law doesn’t agree on entitlement and tax changes a second cut of $1,200 billion occurs over 10 years. This is split 50/50 between defense spending and non defense spending. The nondefense cuts can come from the discretionary programs above, or from “other mandatory programs” (excludes Social Security, Medicare, and Medicaid).

Mandatory (or direct) spending is that which is automatically obligated due to previously-enacted laws. This would include Social Security, Medicare and Medicaid, but it also includes lesser publicized programs such as student loans, child health care and nutrition, food stamps, housing assistance and retirement and disability payments to military personnel and civil servants. The $600 billion cut to defense, or $60 billion a year, amounts to about 7% of the defense budget. The $600 billion to non defense programs amounts to about 6% of those budgets.

All told, the spending cuts are about 210 billion a year. Deficits are projected to average about $1,000 billion a year over the next 10 years assuming no dramatic improvements to the economy or major revenue increases. So this represents about a 20% cut in the deficit. Tea partiers had been screaming to balance the budget entirely, i.e. remove the entire deficit. This would have required cutting all programs, including Social Security, Medicare, etc by 33%, so in a way I’m surprised the Republicans agreed to this. It also shows you can’t preserve the safety net and solve the deficit problem without getting the economy back on track and getting the wealthy and large corporations to pay more tax. But I guess this is what the 2012 election will be about.

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                                                           A Reality Check

 

 Current 2011 deficit spending from general revenues

 (excluding Social Security) ,                                          $1,200 billion a year

 

Major federal government expenses;

 

1. Defense,                                                                          $850 billion

2. Other Department  programs;                                      544

HUD, EPA, Health and Human Services,

Dept. of Education, etc

 3. Medicare                                                                         489

 4. Medicaid                                                                          263

 5. Other Mandatory programs,                                        605

student loans, child nutrition and

health care, food stamps, unemployment

compensation, housing assistance,

retirement benefits for military and civil

servants, etc.                                                               

 The House Republicans passed the “cut, cap, and balance” bill to eliminate the deficit and balance the budget. As always with them, catchy words that sound appealing, but to cut $1200 billion a year from the budget without significant defense cuts and with no new tax revenues –as they propose-would require dismantling about two thirds of all the programs in items 2 through 5. Of course no discussion of that by them or in the media.

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Good chart showing the causes of our current debt.

http://www.whitehouse.gov/infographics/us-national-debt

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