Vice President for
Federal Fiscal Policy
Update, February 14th, 2014: We've updated this post to reflect new Congressional Budget Office estimates.
The Murray-Ryan budget deal is a step in the right direction, but it provides only a temporary respite from the cuts in non-defense discretionary programs that sequestration requires.
This part of the budget includes a diverse set of public services, ranging from environmental protection and food safety to veterans’ health care and border security. It supports investments that can boost future productivity, such as in education and basic research, and helps low-income Americans meet basic needs and climb the economic ladder, such as through Head Start, job training, and services for frail elderly and disabled people.
The Murray-Ryan agreement provides $45 billion of relief from sequestration in 2014, evenly divided between defense and non-defense discretionary programs. For non-defense programs, that halts a sharp downward trend in funding — which fell by 18 percent between 2010 and 2013, after adjusting for inflation — and restores a modest amount of the cuts.
But the downward trend begins again the next year.
After accounting for inflation, non-defense discretionary funding is slated to fall in 2015 nearly back to the 2013 post-sequestration level. By 2016, funding will have dropped below the 2013 post-sequestration level, meaning that all of the gains from the Murray-Ryan deal will be gone (see graph). The 2016 funding level is $105 billion — or 18 percent — below the 2010 level, after adjusting for inflation.
Just to stay even with inflation (as projected by the Congressional Budget Office), non-defense funding would need to rise by 2.1 percent in 2015 and 2016. But under the deal, it will rise by less than 1 percent in those years.
Further, looking only at the effects of inflation understates the funding pressures that non-defense discretionary programs face. Many of them need additional funds to keep pace with population growth; grants to school districts and administering programs like Social Security and Medicare are just two examples.
Some programs can face cost pressures on top of inflation and population growth. For example, veterans’ medical care grew more rapidly than these factors over the past decade, largely because of rising per-person health care costs across the health care system (both public and private).
And the picture does not brighten after 2016. Under the Budget Control Act’s funding caps and sequestration, non-defense discretionary funding barely keeps pace with inflation each year from 2017 through 2021.
So while Murray-Ryan was a positive step, policymakers ultimately will need to revisit the funding limits in current law to prevent the further erosion of funding for critical programs.