Arguments for Draconian Program Cuts Don’t Survive Scrutiny

Newly revised CBPP reports show that two main Republican arguments for deep cuts to programs for low-income Americans — that program growth across the federal budget is driving the nation’s fiscal problems and that programs for people of low or modest incomes are mushrooming in cost — don’t survive scrutiny.

President Trump and House Republicans have both proposed 2019 budgets that would deeply cut key domestic investments, including programs that help millions of families pay the rent, put food on the table, and get health care. Those budgets, by the way, came in the aftermath of December’s tax law, whose tax cuts were disproportionately tilted to the wealthy. Programs cuts that disproportionately target programs on which low-income families rely have been a consistent feature of Republican budgets in recent years.

But consider the findings of our revised reports:

• The first report finds that federal program spending outside Social Security and Medicare is below its 40-year average as a percent of the economy and is projected to keep falling. Total federal program spending (not counting interest payments on the debt) outside Social Security and Medicare will be 11.3 percent of gross domestic product (GDP) in 2018, below the 40-year average of 11.9 percent. And it’s projected to fall to 10.0 percent in 2028. Combined Social Security and Medicare spending is projected to keep rising as a percent of GDP, from 7.9 percent in 2018 to 10.0 percent in 2028, well above the 40-year average of 6.4 percent. But this reflects the aging of the population and rising costs across the U.S. health care system (both public programs and private insurance), not more generous benefits. 
• The second report finds that federal spending for low-income programs outside health care has fallen to its historical average as a percent of GDP and is projected to decline further.  After rising during the Great Recession, spending on these programs has returned to its 40-year average of 2.0 percent of GDP and is projected to fall to 1.5 percent by 2028 — the lowest level since 1970. (See chart.) Spending on low-income health programs is projected to rise as a percent of GDP over the decade, largely due to the aging of the population and rising costs throughout the U.S. health care system. But the projected decline in spending on low-income programs outside health will fully offset this increase. Total spending on low-income programs — health and non-health — is expected to fall slightly between 2018 and 2028, from 4.4 percent of GDP to 4.3 percent.

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To be sure, the nation faces long-term fiscal challenges, as we’ve documented. Federal spending and revenues will need to rise as a share of the economy due to an aging population and rising health and interest costs. Unfortunately, the 2017 tax law moved in precisely the wrong direction, weakening revenues and directing its benefits disproportionately toward those who least need them. Rather than doubling down on an agenda that combines large tax cuts with damaging program cuts, policymakers should put the budget on a more sustainable path that protects key domestic investments and raises sufficient revenue to keep pace with the nation’s needs.