The federal budget is big and perplexing. Sometimes it seems like nothing more than a sea of random numbers. But it is not; it is a decision-making document that profoundly affects the lives of ordinary people in countless ways every day.
The White House proposal to freeze the budgets of 11 of the 15 departments—and virtually all of the federal government’s independent agencies—may provide the country with a great learning opportunity in terms of important budget decisions, and affecting agencies they may have never even heard of can be vitally important to their daily well-being.
According to recent reports, the White House proposal would not affect the Departments of Defense, Homeland Security, Veterans Affairs, or the Agency for International Development. It would, however, apply to the remaining $447 billion in discretionary spending in the budget that funds the operations of the federal government’s remainder and supports about 77 percent of government activities outside the Defense Department. The White House has made it clear that within affected departments and agencies there will be budget increases for some programs and offsetting cuts for others. But it is safe to say that a very big chunk of the federal government is likely to be frozen in the budget we will see on Monday.
Not only will they be frozen at fiscal year 2010 levels in FY 2011 as well as in FY 2012 and FY 2013, but they will be constrained to no more than inflation increases for the subsequent seven years of the decade, leaving them substantially below current real dollar levels in 2020. What will be the impact of this proposal on programs and services that affect the general public?
Consider, for example, a little operation called the Food Safety Inspection Service, or FSIS. It is an agency within the U.S. Department of Agriculture and it shares with the U.S. Food and Drug Administration responsibility for ensuring the safety of our food supply. In general terms, FSIS is responsible for meat and poultry while FDA monitors all other types of foods, as well as food additives.
Discretionary spending for FSIS totals a little less than $1 billion a year. All but a tiny fraction of that money is used to pay the salaries and employment benefits of the 9,587 people who work for the agency—most of whom are frontline meat inspectors who visit slaughterhouses, meatpacking facilities, and poultry-processing plants day in and day out.
FSIS inspectors are responsible for preventing meat from animals afflicted by various types of diseases from showing up in your butcher shop or supermarket. They also monitor meat to determine the presence of E. coli, Listeria, and other contaminants, and they monitor processing procedures to limit the presence of salmonella. FSIS can block the shipment and sale of any meat product or poultry product considered a threat to consumer health.
In 2008, FSIS was involved in requiring 52 recalls of beef, pork, and poultry products—actions that stopped 243 million pounds of tainted meat from reaching stores. That same year, two firms and seven individuals were prosecuted with FSIS assistance for attempting to circumvent federal law in order to sell tainted meat products.
So what would the freeze do to FSIS over the course of the next decade? It is difficult for anyone to know the exact impact because no one is certain what the rate of inflation will be. This week the Congressional Budget Office recently issued an economic and budget forecast for the coming decade that projected an extremely mild inflation over the period. While inflation is expected by CBO to be 2.4 percent in the current calendar year, they believe it will decline to 1.3 percent in 2011 and 1.2 percent for two years after that. By 2020, prices will be about 19 percent higher than they are today.
That is about one-third less inflation than we experienced in the past decade. But even if inflation proves that mild FSIS under the president’s proposed freeze will have a budget that will be 5.6 percent smaller in real dollars in 2020 than it is today.
Since FSIS—like many agencies responsible for public health and safety—have little in their budget other than their personnel, the only thing that can be cut is people. Based on CBO’s projected rate of inflation, FSIS would be forced over the coming decade to reduce its workforce by 540 positions. But if inflation continues over the next decade at the pace we experienced in the past decade, or 2.5 percent a year, then the impact on the agency would be greater, forcing the elimination of 875 staff.
Even with no reduction in the size of the current inspection force, there would be serious questions as to the agency’s capacity to manage the task it will face in 2020. The Census Bureau projects that the nation’s population by 2020 will have grown by about 28 million, or about 9 percent. It is reasonable to assume that the public will be consuming at least 9 percent more meat in 2020—which is an additional 3 million tons—even if we do not consider that per-capita meat consumption in the United States is increasing by about 1 percent a year. This would add another 3 million tons of meat requiring inspection. There is little question that an inspection force that is 5 percent or perhaps 10 percent smaller than the one we have today would be significantly more likely to allow tainted meat to get to your dining table.
These risks are further compounded by the fact that globalization of the nation’s food supply is making the challenges faced by FSIS larger and more expensive to meet. Some experts have questioned the adequacy of the existing FSIS inspection force and why more inspectors are not being placed overseas in slaughterhouses and processing plants that are now exporting to the U.S. market and in some instances believed to pose a substantially greater risk to public health.
So how similar is the situation in other agencies to that in FSIS? That depends on the agency. There are agencies that certainly could absorb the proposed cuts, and the public would suffer little if anything as a consequence. But there are lots of other agencies where small cuts could have big implications for the public.
I am curious how the administration will deal with an agency such as the Federal Aviation Administration, or FAA, where the growth of the workload over the next decade is certain to be large. The Department of Transportation has projected that the number of takeoffs and landings at airports in the United States will grow by about 1.4 million a year over the course of the next decade, reaching 81 million by 2020.
If the three-year freeze is applied to the FAA and the unit within it that manages air traffic control it would force a reduction of about 880 air traffic controllers from the current staffing level of 15,600, despite an expect increase in workload of more than 20 percent. Those are numbers you don’t want to be thinking about as your pilot directs the stewards and stewardesses to prepare for landing.
It is also not clear what the administration expects to do about federal law enforcement activities outside the Departments of Defense and Homeland Security. While they have said that they would protect inflation increases at those departments, they have not indicated that they would do so for other law enforcement agencies such as The Federal Bureau of Investigation. The FBI has a budget this year of about $7.9 billion. That pays the salaries of more than 32,000 agents, analysts, and support staff. A freeze would force a cutback in that workforce over the course of the next decade by about 1,700 people, despite the fact that the nation will have 28 million more people.
A similar impact would be seen on U.S. Marshals, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco and Firearms, and a number of other federal law enforcement activities that seem to have responsibilities with respect to terrorism and other threats that are just as heavy as those law enforcement officers who work at departments protected by the freeze such as customs agents.
It also is unclear how the administration will deal with agencies whose mission is to monitor federal spending and collect revenues. The freeze will be highly counterproductive in terms of deficit reduction if it is applied to agencies such as the Centers for Medicare and Medicaid Services, the Social Security Administration, and the Internal Revenue Service.
Based on extensive analysis, the IRS Oversight Board has concluded that for each dollar spent at the IRS, four dollars in taxes owed to the Treasury are collected. Studies by the Social Security Administration and Centers for Medicare and Medicaid Services show similar ratios between staffing resources and savings to the U.S. Treasury from identification of fraudulent claims, overpayments, and incorrect billings. These three agencies have a combined annual budget of $27 billion over the next 10 years. The federal government will spend approximately $337 billion on salaries, contracts, and other expenses if we maintain the same level of effort as we have today.
A three-year freeze as described in reports of the president’s plan would cut that outlay to $322 billion, which on paper is a $15 billion saving. It is quite likely, however, that the savings will not only be illusory but will result in a $60 billion loss in unpaid taxes and overpayments to Social Security recipients and Medicare providers.
These examples are not intended as arguments against reducing federal spending, but they do demonstrate the dangers in a formulaic approach to budget decisions that reports of the administration proposal seem to imply. Budgets need to be built from the bottom up. Decision makers should look for savings after a careful examination of what resource level is needed to fulfill a specific function and the risk to the public of failing to fulfill that function.
I am afraid that such a process will demonstrate that the portion of the federal budget that can be safely frozen is significantly smaller than the $447 billion proposed by the White House, and that much of the $250 billion in budget savings that is being projected will not materialize. Congress needs to weigh the risks as well as the benefits of this proposal carefully before moving forward.
Scott Lilly is a Senior Fellow at the Center for American Progress
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