February 16, 2006

February 16, 2006 | Commentary on Federal Budget

The Myth of Spending Cuts

News reports about the president's budget overflow with dismay over "deep cuts" and "slashed" spending. Images of schools and anti-poverty programs chafing under the fiscal knife abound. Which proves one thing: Hardly anybody actually reads the federal budget. If they did, they'd realize just how much of a myth this tale of "slashed" spending really is.

Alleged "deep cuts" over the last few years to education, anti-poverty and discretionary spending can be disproven easily by examining the federal government's budget historical tables (www.whitehouse.gov/omb/budget/fy2007/hist.html, particularly tables 3.2 and 8.1). The gulf between the facts and what's widely reported and blogged is astounding.

Myth 1: Massive education cuts. From 2001 through 2006, nominal education spending will more than double -- from $35 billion to $84 billion. That is not a misprint. K-12 education spending increased from $23 billion to $40 billion, and college student financial aid skyrocketed from $10 billion to $40 billion. The remaining money was spent on research and general education aids.

Yet when the president's budget called for shaving $2 billion off the large discretionary education programs, Sen. Arlen Specter, R-Pa., called the request "scandalous," and various news articles questioned whether schools could carry out their missions without another funding increase. Apparently a 137 percent budget increase isn't enough.

Myth 2: Anti-poverty spending cuts. From 2001 through 2005, nominal anti-poverty spending rose 39 percent, and is set to increase another 5 percent in 2006. In those four years, Medicaid caseloads increased by 10 million and Food Stamps caseloads by 8 million as their budgets expanded by 40 percent and 71 percent, respectively. Combined payments from the refundable Child Tax Credit and the Earned Income Tax Credit (EITC) surged from $27 billion to $48 billion. All four categories of anti-poverty spending -- health care, food, housing, and cash aid -- grew by more than double the inflation rate, and significantly faster than under President Clinton.

Overall, anti-poverty spending reached 16 percent of the federal budget for the first time ever in 2002 and has remained above that level since. And the new budget reconciliation law won't change that; the only significant anti-poverty program reform merely lowered Medicaid's projected five-year growth rate from 41 percent to 40 percent. Still, a recent New Republic staff editorial, bizarrely and without supporting data, asserted that recent budgets "single out the poor for punishment" and therefore "the poor consistently lose out." This increase in government dependency among Food Stamps and Medicaid is nothing to celebrate, and it cannot be addressed by those denying what the numbers clearly show.

Myth 3: Slashed non-security discretionary spending. Reports panicking about a proposed freeze in 2007 fail to provide any context. Even after a 2007 freeze, these programs will have expanded 42 percent in President Bush's first six years in the White House, versus 20 percent in President Clinton's first six years.

There could be several reasons why this information is not reported and blogged.

One is that education and discretionary budget analyses misleadingly focus on single-year trends without placing them in the proper context of their large growth since 2001.

Another reason is that anti-poverty spending increases are not typically covered by reporters and bloggers. That could be because these entitlement programs' budgets grow automatically without any congressional votes. For years, Medicaid's large, automatic increases went largely ignored by the press. Yet when Congress recently enacted legislation to scale future automatic increases from 7.1 percent down to 7.0 percent annually, this "cut" received disproportionate media scrutiny because it required a separate vote.

Plus, coverage of most spending issues is also influenced by media-savvy activists, who blast any spending level as insufficient in hopes of securing additional increases.

Finally, there is the lazy, false stereotype that Republicans always cut spending. The plain facts refute this. Unfortunately, Congress and President Bush have expanded education and social spending much faster than President Clinton did, yet Bush been attacked for stinginess in ways the Democrat never was.

The result: America faces substantial long-term spending challenges. The impending retirement of 77 million baby boomers threatens to push up Social Security, Medicare and Medicaid enough to crowd out all other federal spending -- or risk European-size tax increases. But America cannot debate future spending priorities until reporters and bloggers do their homework.

Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Federal Budget

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