BEYOND THE NUMBERS
The upcoming budgets from the Trump Administration and congressional Republicans are expected to contain deep cuts in domestic programs. A pair of CBPP reports show why two of the principal arguments that proponents will likely use to justify such cuts — that widespread growth in federal programs throughout the budget is the source of the nation’s fiscal problems, and that programs assisting people with low or modest incomes are burgeoning in cost — don’t bear up under scrutiny.
The first report finds that:
- Federal program spending outside Social Security and Medicare has fallen below its 40-year average as a percent of the economy and is projected to keep falling. The Congressional Budget Office (CBO) projects that total federal program spending (exclusive of interest payments on the debt) outside Social Security and Medicare will be 11.3 percent of gross domestic product (GDP) in 2017 — below the 40-year average (from 1977-2016) of 12.0 percent, and below the 11.7 percent level in 2008, the year before President Obama entered office. Program spending outside Social Security and Medicare will decline further to 10.5 percent of GDP by 2027, CBO projects.
- Social Security and Medicare spending is projected to keep rising, but this reflects the aging of the population and rising costs across the U.S. health care system (both public and private), not more generous benefits. CBO projects that combined spending for these programs will rise from 8.0 percent of GDP in 2017 to 10.2 percent by 2027, compared with the prior 40-year average of 6.4 percent. Roughly two-thirds of this growth reflects the aging of the population as the baby boom generation retires. The remaining growth reflects rising per-person health care costs, stemming in part from new treatments that improve health but increase costs.
Recent congressional Republican budgets have called for hitting programs helping low-income families especially hard. Sixty-two percent of the $6 trillion in non-defense cuts in last year’s House Budget Committee plan were in low-income programs, even though they account for just 28 percent of non-defense program spending. These cuts would have shrunk low-income programs by more than two-fifths by the plan’s tenth year.
Such cuts are hard to justify, especially using the argument that these programs are growing substantially. As our second report finds:
- Federal spending for low-income programs outside health care has fallen six years in a row when measured as a share of GDP and is projected to keep falling over the next decade. After rising during the Great Recession, spending on these programs is back down to its prior 40-year average of 2.1 percent of GDP — and is projected to decline further to 1.7 percent by 2027, the lowest level since 1990.
- Even including spending on low-income health care programs, overall spending on low-income programs isn’t projected to rise as a share of GDP. Spending on low-income health programs is projected to rise as a percent of GDP, largely due to the aging of the population and rising health care 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 low-income spending is expected to fall slightly between 2017 and 2027, from 4.7 percent of GDP to 4.6 percent.
To be sure, as we have documented, the nation faces long-term fiscal challenges, as debt is projected to rise faster than GDP. The large tax cuts and defense spending increases that President Trump says he favors would make the challenge even more daunting. But as policymakers debate ways to put the budget on a more sustainable path over the longer term, they should avoid misleading diagnoses implying that spending — either throughout the federal government or specifically on programs serving less fortunate Americans — is growing rapidly, which isn’t the case.