President Obama’s Blueprint for Historic Spending Cuts

COMMENTARY Budget and Spending

President Obama’s Blueprint for Historic Spending Cuts

Oct 5th, 2010 3 min read

Senior Fellow, Manhattan Institute

Does Congress support President Obama’s plan to slash the Office of Elementary and Secondary Education by 69 percent? What about his proposal to shrink the EPA by one-third? Or his 12 percent cut in housing assistance for AIDS patients?

For that matter, does the president himself support these proposals, which have been published by his own White House?

Let’s step back.

The president inherited a dire fiscal situation. Merely extending today’s spending and tax policies would expand the budget deficit to an unsustainable $1.9 trillion by 2020, mostly due to rising entitlement and net interest costs.

The White House budget, released this past February, offered a two-part strategy for deficit reduction. It consisted of $2 trillion in tax increases (plus a cap-and-trade tax), and a cut in discretionary spending from today’s 9.6 percent of the economy, to 6.2 percent by 2020. This would match the lowest discretionary spending level since the 1940s.

While the tax-increase proposals have received enormous attention, the discretionary spending reductions have been largely ignored. This may be because the cuts wouldn’t occur for a few years. Or possibly because past presidential budgets listed true discretionary proposals for only the following year, and then used generic placeholder figures (such as all programs growing by inflation) for the subsequent years.

Yet the Obama White House has indicated that these cuts are, in fact, the president’s official policy.

For starters, some discretionary program’s budgets would grow and others fall, all at varying rates over the next decade. This suggests that individual decisions, rather than a generic inflation formula, determined the yearly spending figures.

More importantly, the White House continues to trumpet these cuts. The president has emphasized that his budget proposal reduces the ten-year deficit to below 4 percent of the economy. New York Times columnist David Brooks has written that the White House sent him a chart showing this ten-year discretionary spending decline and invited him to “hang this chart on my wall and judge them by how well they meet these targets.”

And that’s a good thing. Coupled with serious entitlement reform, these types of admittedly-painful reforms are necessary to rein in our trillion-dollar budget deficits and avoid an eventual economic catastrophe.

Certainly, President Obama will face challenges reconciling this pledge with past promises to substantially hike funding for education, transportation, energy, health, veterans and science – programs that Congress rarely passes up an opportunity to expand.

Fortunately, as part of the president’s budget, the White House website includes a 528-page titled “Federal Programs by Agency and Account.” It details the president’s blueprint for bringing discretionary spending down to 6.2 percent of the economy by 2020.

As mentioned above, the president’s budget slashes elementary and secondary education outlays by 69 percent between 2010 and 2020 (I have adjusted all figures for inflation, at a 1.9 percent annual rate). Even setting aside the current education stimulus buildup, President Obama would still keep this 2020 spending below pre-recession levels. The budget also trims special education outlays by 24 percent and vocational/adult education by 18 percent.

The National Institutes of Health (NIH) budget – which has doubled over the past 15 years – would fall 11 percent through 2020. Proposed anti-poverty spending reductions include: child care block grants (22 percent), low-income home energy assistance (36 percent), homeless aid (8 percent) and housing for the elderly and disabled (70 percent).

Non-discretionary anti-poverty programs – such as child support enforcement, social service block grants, and Temporary Assistance to Needy Families – also face significant cuts.

Defense outlays, which comprise half of all discretionary spending, would drop by 11 percent. In addition to bringing the troops home, the president proposes slashing research and development as well as weapons procurement.

There’s more. Energy research – a major presidential priority – is targeted for a 45 percent cut between 2010 and 2020. The budget axe would strike the Departments of Homeland Security (13 percent), Interior (17 percent), and Justice (7 percent), as well as spending on highways (23 percent) and mass transit (35 percent). Community-Oriented Policing Services (COPS) outlays would plummet 82 percent. The National Endowments for the Arts (27 percent) and Humanities (12 percent) are not spared either.

It’s not just a matter of today’s stimulus spending expiring, either. For many programs, President Obama proposed 2020 spending levels fall below even their pre-stimulus 2008 levels.

Not all discretionary programs would be trimmed. President Obama proposes a 20 percent hike for veterans’ health care, and a 264 percent increase for the agency that runs AmeriCorps. International assistance outlays would soar 213 percent above their 2008 levels.

The White House should explain whether these proposals truly reflect President Obama’s policies. And if they do not, why is the administration claiming them as part of its deficit reduction strategy? Perhaps President Obama could show his seriousness by calling on Congress to enact a law capping total discretionary spending at the levels proposed in his budget.

The president has proposed a bold discretionary spending blueprint that can begin to rein in the deficit. The question is whether he plans to follow through on it.

Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs at The Heritage Foundation.

First appeared in The Washington Times