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The Disinvestment Budget: Government Investments to Improve Our Economic Future Would be Crushed Under the Recently Passed House Budget

SOURCE: AP/J. Scott Applewhite

House Budget Committee Chairman Paul Ryan (R-WI) goes before the House Rules Committee for final work on his budget to fund the government in fiscal year 2015, at the Capitol in Washington, Monday, April 7, 2014.

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This article contains a correction.

On certain cable channels, it is unusual for even an hour to pass without a passionate discourse on the growth of government. A close examination of the budget, however, shows that this growth is limited to the output of two data-processing networks controlled by only two of the more than a thousand agencies in the federal government. These agencies—the Social Security Administration and the Centers for Medicare & Medicaid Services—account for nearly $1.6 trillion in annual spending, or about 45 percent of the entire federal budget. More importantly, however, these agencies have been responsible for all of the real per-capita growth in the federal budget over the past quarter century.

The problem is not the expansion of those two agencies’ staffs or an increase in the benefits and services they provide. It is simply that the people to whom they provide benefits—the elderly—have become far more numerous. And the service they provide to that population—medical care—has gotten more expensive. Despite all the rhetoric to the contrary, the bureaucracy is not getting fatter. It is entirely a matter of the number of seniors and the level of reimbursement required to pay their medical bills. Pull the plug on the computer systems that mail all of those checks and you instantly have a government that is not only small but shrinking.

Spending by federal agencies on things other than entitlements such as Social Security, military retirement, or Medicare—sometimes called mandatory programs—now accounts for only one-third of all federal outlays. If it is adjusted for inflation and population growth, it is actually smaller today than it was a quarter of a century ago during the last year of the Reagan administration. Often referred to as discretionary spending, it is controlled by the annual appropriations process, and today, a little more than half of it goes to the Pentagon; a little less than half goes to the other 14 departments that make up the federal government. Altogether, this nondefense share of discretionary spending adds up to about one-sixth of all government outlays. We are talking about the core operations of the government, such as our courts, law enforcement activities, and the investments we make to ensure that our country can experience future growth. These include investments in better roads, local schools—to ensure that bright students can go to college, and in the scientific research that leads to new medicines, technologies, and the businesses of the future.

While nondefense discretionary spending is not responsible for government growth, it has been seized upon as the solution. This tiny sliver of the budget will be eviscerated over the next 10 years if the budget plan is implemented, which recently passed the House. Yet few appreciate the true magnitude of those cuts or how devastating they would ultimately be to our society.

The array of services and activities crammed into this small segment of the budget is so vast and touches our lives in so many ways each day that it defies precise description. This is one reason why nondefense discretionary spending is vulnerable in our current political environment—there are no good one-liners to support it. But just because it is difficult to define doesn’t mean it’s not important.

Think about the 300 ports of entry maintained by the U.S. Customs and Border Patrol Service; the hundreds of air traffic control centers spread across the country; our courts, U.S. attorneys, and all of federal law enforcement; the 400 national parks; the repair, maintenance, and upgrading of the 47,000 miles of interstate highways and 3.9 million miles of federal aid highways; and the 68 regional cancer centers operated by the National Cancer Institute, or NCI. Think of the more than 10 million students working toward degrees in higher education because of federal student aid; the operation of the 71 federal correctional facilities housing more than 200,000 prisoners; the inspections to ensure mine safety and food and drug safety; banking regulation; and the National Weather Service. And consider space exploration; the dredging, maintenance, and improvement of the nation’s 149 ports and thousands of miles of commercially navigable waterways; federal assistance to local school districts; agricultural research; and monitoring the spread of infectious diseases and producing vaccines to stop the spread of pandemic disease. Then there is the conduct of our foreign policy, the operation of more than 200 missions overseas, the printing of our currency, and the collecting of taxes.

This year, according to the Ryan budget, we will spend $492 billion on those activities—and a great many more. The cost of providing these services goes up a little each year as prices rise and the population increases. Even if we take the Congressional Budget Office’s projection of very modest growth in inflation over the next decade and the Census Bureau’s estimate of about a 0.076 percent per year growth in population, it will cost around $686 billion, or nearly 40 percent more in nominal dollars, to provide these exact same services in 2024. The budget plan that just passed in the House would provide resources to meet none of these increased costs, instead reducing the amount available for these programs in 2024 by $25 billion below current nominal spending levels and leaving, in effect, nearly one-third less in real per-capita resources for their operation.

If these cuts were distributed evenly across all agencies, the nominal budget of the Federal Bureau of Investigation, or FBI, for fiscal year 2024 would shrink by 5 percent as part of the $25 billion* cut from current nominal levels included in the Ryan budget. This would reduce it from the current level of $8.3 billion to less than $7.9 billion. But to retain quality agents, analysts, and support staff at the bureau over the next decade, we will have to adjust their pay to meet the increased cost of living over that period. As a result, the FBI’s purchasing power would decline by another 23 percent and leave less than $6.1 billion in today’s dollars for the bureau to compensate staff, purchase equipment, and pay for operations. This would result in staff reductions from the current level of nearly 35,000 to about 25,500, or a loss of about 9,500 personnel. During the 10-year period, the nation’s population would have grown from 317 million to 343 million people, meaning that the number of FBI personnel would have declined from about 1 for every 9,000 Americans to 1 for every 13,500. Those ratios would make it very difficult for the bureau to address myriad emerging challenges it now faces, including the rapid growth in securities fraud and the explosion in cybercrime.

Of course, the cuts would not be exacted across the board, as there are numerous agencies that neither party in Congress will cut, making cuts far more severe for other current federal activities. Consider the Department of Veterans Affairs. It recently sent budget justifications to Congress seeking $68.4 billion in discretionary spending for the coming year, a 6.3 percent increase over last year. But the concern coming from members of both parties and from both sides of Capitol Hill is that those funds will not do enough in terms of suicide prevention, drug treatment, homelessness, and speeding up the processing of pension applications. This year, the department accounts for nearly 14 percent of that $492 billion, and even if its budget growth slows to only 5 percent per year over the next decade, it will eat up nearly $50 billion more per year by 2024 than it does now. Assuming that Congress will accommodate that growth, it would leave only about $370 billion for spending in the Ryan budget in 2024 for nonveteran programs. The annual cost of maintaining those programs at current levels, however, would rise to almost $590 billion by 2024. Shrinking $590 billion of government services and investments into a budget capped at $370 billion would result in an average cut of about 38 percent for all nondefense discretionary programs outside the Department of Veterans Affairs.

And caring for our veterans is only one item on a very long list of nondefense discretionary programs that Congress would find extraordinarily difficult to fund at a level below the amount needed to sustain current operating levels. Look, for example, at two programs that Congress exempted last spring from any cuts under sequestration: air traffic control and meat inspection. But would Congress really cut back activity levels at Customs and Border Patrol, the Bureau of Prisons, the FBI, our courts, the U.S. Marshals, and U.S. attorneys? How about the $12 billion in discretionary funds we spend each year at the Social Security Administration to ensure that our seniors get the benefits that they deserve?

Those few programs may not sound like a very big piece of the federal government, and this is certainly not a complete list of programs that Congress would be unlikely to cut. But if you simply allow these few programs to be exempted from real per-capita cuts, you use up $61 billion of the $370 billion left to fund the nonveteran, nondefense discretionary programs. That means that programs ranging from the approval of safe medicines to tracking hurricanes, from running our national parks to improving early childhood education, and programs for finding better treatments for the whole range of dreaded diseases—these will be cut by about 44 percent.

How would we feel the impact of such cuts? In the Head Start program, we would see participation decline from about 1 million children a year to about 560,000. At the National Cancer Institute, you would need to find cuts of more than $2 billion, which probably requires either eliminating funding for 30 of the 68 regional cancer centers or severely slashing the federal budget of all existing centers. NCI’s largest center, MD Anderson Cancer Center in Houston, Texas, would lose about $80 million if the cuts in the Ryan budget were distributed equally across all centers. In addition to cutting support to research centers, NCI would slash grants to support the work of the nation’s leading doctors and scientists.

Similar dilemmas would face the National Park Service, which currently has a $2.6 billion budget but could face a more than 40 percent reduction under the aforementioned scenario in the implementation of the House budget. Certainly one decision that the Park Service would face would be closing and selling a large part of its park inventory. There are currently 401 park units but the 200 least visited parks account for only slightly more than 3 percent of all recreational park visitors. Eliminating some if not all of those parks would be very painful. More noted parks that might be on that list would be the Andersonville National Historic Site south of Macon, Georgia; the Dayton Aviation Heritage National Historical Park in Ohio; the Lincoln Boyhood National Memorial in Indiana; and Fort Laramie in Wyoming. Even with the closing of these park units, significant cuts would be required in campgrounds and hours of operation at the larger parks.

Cuts in nondefense discretionary spending of this magnitude would shrink the National Aeronautics and Space Administration from its current spending level of $17.6 billion to a level closer to $10 billion. That would certainly put an end to further consideration of human space flight as well as a large portion of unmanned missions.

The federal government provides local school districts with about 13 percent of their total annual budget. This percentage varies significantly between districts, however, since federal programs attempt to focus funds on poorer school districts with lower tax bases and less ability to raise the revenues locally that are needed to provide a quality education. In Wolfe County, Kentucky, for instance where 67 percent of students are on food stamps and only 12 percent of the school budget is raised from local revenues, federal school aid accounted for 28 percent of school resources; a 44 percent reduction would cost the district more than $1,200 per student. Around military bases the cuts would be more severe. The Fort Sam Houston schools get 68 percent of their budget from the federal government, leaving 30 percent of their current school budget unfunded under this scenario.

It would take considerably more effort than this piece can devote to analyze specifically how the forecasting capabilities of the National Weather Service would be degraded by such cuts, or what the capacity of the Coast Guard or Drug Enforcement Administration might be in interdicting narcotics after absorbing such cuts. Would basic government services such as processing copyright and patent applications be degraded? Would the National Transportation Safety Board be able to investigate plane crashes or train wrecks with a 44 percent cut in its current budget?

This may seem crazy, but it could become our reality. Some policymakers have a very different view of our future, and they will push to achieve it, using the considerable resources at their disposal, hoping that their opponents don’t take them seriously.

A United States that undergoes the dramatic erosion of regulatory structure, services, and government investments required by this budget would be a United States plagued by anarchy and deprived of the basic infrastructure necessary for growth and prosperity. The 1 percent will do well, but the rest of us will be forced into lives far harsher than those we now have. Let’s hope there are enough people ready to say no.

Scott Lilly is a Senior Fellow at the Center for American Progress.

*Correction, April 16, 2014: This article incorrectly stated the cut in nominal spending in the Ryan budget. The correct number is $25 billion.

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