Averting Sharp Cuts to Nondefense Programs and Investing in America

Dark clouds move over the Statue of Freedom on top of the U.S. Capitol Dome, May 2019.

The House of Representatives is steadily advancing bills to fund the government for next fiscal year—FY 2020—which begins on October 1. These appropriations bills make important investments in areas such as child care, health care, K-12 education, and housing. But without a budget agreement between Congress and the president, these investments cannot happen. Worse, domestic priorities would be subject to severe and harmful cuts from the so-called budget sequester that was enacted nearly a decade ago. It is essential that policymakers reach a budget deal to avert these deep cuts and enable congressional appropriators to continue addressing recent underinvestment in national priorities such as education, science, infrastructure, housing, and poverty reduction.

Background

Discretionary funding is the part of the federal budget that Congress determines annually, as distinguished from mandatory programs that are permanently funded, including Social Security and Medicare. Discretionary spending is often categorized into defense and nondefense. Nondefense discretionary funding (NDD) is only about 15 percent of the federal budget, but it supports a vast array of critical priorities, including public health; federal aid to K-12 education; higher education; affordable housing; job training; consumer protection; nutrition assistance; science and medical research; as well as community and economic development. NDD also funds basic government functions such as federal courts, national parks, federal highways, and the National Weather Service.

Although discretionary spending is categorized into defense and nondefense components, the nondefense portion of discretionary spending is just as integral to the security of the American people as the defense portion. About one-third of nondefense discretionary funding is for homeland security, law enforcement, diplomatic activities, and veterans’ services. And nondefense discretionary funding supports other agencies vested with the responsibility of protecting Americans’ health and safety, such as the Centers for Disease Control and Prevention; the Food and Drug Administration; the Environmental Protection Agency; the Occupational Safety and Health Administration; the FBI; and other agencies.

Typically, Congress sets aggregate levels for discretionary funding for the next year either through a budget resolution or a similar vehicle. Then, the appropriations committees allocate that funding among their 12 subcommittees. The subcommittees then draft the appropriations bills that determine funding for specific agencies and programs. As discussed below, the Budget Control Act (BCA) of 2011 also imposed certain caps on discretionary spending levels, with separate caps for defense and nondefense programs.

Nondefense and defense discretionary spending caps for FY 2020

Under current law, both nondefense and defense discretionary spending in FY 2020 would face severe cuts. That’s because the BCA set caps on overall discretionary funding levels for each year through FY 2021, with separate limits for defense and for nondefense discretionary programs. The BCA imposed budget caps lowering discretionary spending and also provided that those caps would be lowered further if Congress did not enact additional deficit reduction. Since Congress did not subsequently meet the deficit reduction targets, the BCA budget caps were lowered further to so-called sequestration levels.

In recent years, Congress has reached several agreements to lift the budget caps for certain years. These budget deals have ameliorated but not eliminated the budget cuts resulting from the BCA. Nondefense discretionary programs have borne the brunt of budget cuts. Between 2011 and 2017, nondefense discretionary funding was cut by about $400 billion relative to its FY 2010 level, adjusted for inflation, according to calculations from the Center on Budget and Policy Priorities. Measured as a percentage of gross domestic product (GDP), nondefense discretionary spending has been just 3.2 percent of GDP over the last five years, which is 15 percent lower than its average over the last 50 years.

The most recent budget deal, struck in February 2018 and covering FYs 2018 and 2019, began to reverse the disinvestment in nondefense programs. The 2018 budget deal allowed for critical new investments. For example, Congress provided the largest-ever funding increase for the main federal child care program, the Child Care and Development Block Grant—an incremental step in the direction of universally affordable child care. Congress approved an additional $6 billion in funding to combat the opioid crisis, providing for additional State Opioid Response grants, research into opioid addition, and other efforts—a meaningful investment, though not enough given the severity of the crisis. The budget deal also facilitated some new investments in America’s infrastructure, including increases for highways, transit, and competitive grants for surface transportation.

But no deal has been reached yet for FYs 2020 and 2021—the last two years for which the BCA caps are in effect. As a result, rather than building upon the fiscal year 2018–2019 agreement, Congress and the president are risking turning sharply in the opposite direction. Without an agreement to lift the caps, nondefense discretionary funding would be slashed from the FY 2019 level of $597 billion to the BCA sequester level of $543 billion. $543 billion is only 2.5 percent of GDP, and in real terms, more than $200 billion less than the level from a decade ago. The reduction from $597 billion to $543 billion would represent a year-over-year cut of 9 percent, or 11 percent when adjusting for inflation. The squeeze on nondefense programs would be even tighter considering that, in FY 2020, Congress must provide funding for two additional needs: the 2020 census and the implementation of the VA Mission Act.

President Donald Trump’s FY 2020 budget illustrates the harm that would result from a failure to lift the nondefense budget caps. Trump’s budget proposes to increase defense spending substantially in FY 2020 but to bring the full force of the BCA sequester onto nondefense discretionary programs. The president’s budget proposes to cut the nondefense funding level down to the BCA’s $543 billion by eliminating many nondefense discretionary programs and by cutting many others substantially. (See Table 1) Meanwhile, President Trump’s budget would inflate defense spending to $750 billion. As CAP Senior Fellow Lawrence Korb has explained, this is an excessive amount that is more than the Pentagon can spend in a cost-effective manner. In addition, it is $50 billion more than the level Trump appeared to support just months ago.

Solving the problem

House Democrats are writing appropriation bills to comport with a $631 billion cap on nondefense programs—a 5.7 percent increase above the FY 2019 enacted cap level of $597 billion. These funding levels would be enough to maintain the levels of government services from FY 2019 and further invest in a range of important priorities. Moreover, House appropriators would allow for adjustments to the budget caps for certain unique priorities. Such priorities include providing the $7.5 billion needed in FY 2020 for the 2020 census—a once-in-a-decade constitutional requirement—and up to $400 million in funding for Internal Revenue Service tax enforcement activities, which would more than pay for itself by collecting unpaid taxes. (President Trump’s budget, to its credit, also proposes additional funds for tax enforcement.) But while the House is moving this important legislation forward, none of it can become law unless Congress and the president first reach an agreement to raise the budget caps.

Conclusion

It is imperative that legislation is enacted to substantially raise the FY 2020 nondefense discretionary cap. Budgets are not just abstract numbers. As President Trump’s budget illustrates, the overall cap levels of nondefense discretionary funding affect real programs, determining whether they are adequately funded or substantially cut. Such substantial cuts would have deleterious effects on real people and real activities—and must be avoided. And the new cap must be able to accommodate increases for key investment programs. Such legislation would be a first step toward addressing years of disinvestment in nondefense discretionary programs.

Seth Hanlon and Alan Cohen are senior fellows and Sara Estep is a research assistant at the Center for American Progress. Thanks to Galen Hendricks for additional research assistance.