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POLICY INSIGHT
BEYOND THE NUMBERS

Senate Balanced Budget Amendment an Extreme Version of a Bad Idea

Congress would have to cut all programs by an average of one-fourth by 2018 to meet the spending cap in the constitutional balanced budget amendment that the Senate is expected to consider this month, a new CBPP report explains. Like any version of a balanced budget amendment, the Senate proposal — introduced by Minority Leader Mitch McConnell (R-KY) and Sen. Orrin Hatch (R-UT) — risks serious harm to the economy by requiring that the budget be balanced even during an economic downturn.  But this proposal would do far more damage because it also would prevent the federal government from meeting the nation’s basic needs even when the economy is healthy. That’s because the amendment would enshrine a severe cap on total federal spending in the Constitution.  If Congress cut all programs by the same percentage to fit within the cap:
  • Social Security would be cut $266 billion in 2018 alone and almost $1.7 trillion through 2021.
  • Medicare would be cut $169 billion in 2018 and almost $1.1 trillion through 2021.
  • Medicaid and the Children’s Health Insurance Program would be cut $115 billion in 2018 and more than $700 billion through 2021.
  • Veterans’ disability payments, pensions, and other entitlement benefits would be cut $19 billion in 2018 and $123 billion through 2021.
  • Key safety-net programs — Supplemental Security Income (SSI) for the elderly and disabled poor, the Supplemental Nutrition Assistance Program (formerly food stamps), the school lunch and other child nutrition programs, and the refundable portions of the Child Tax Credit and the Earned Income Tax Credit — would be cut $59 billion in 2018 and almost $370 billion through 2021.
  • Defense would be cut more than $140 billion in 2018 and almost $900 billion through 2021. These cuts, combined with cuts already scheduled under current law, would shrink defense spending to 2.0 percent of GDP in 2018, a level not seen since before World War II.
  • Appropriations for non-defense discretionary programs — the part of the budget that includes education, housing, veterans’ medical care, transportation, law enforcement, biomedical and other scientific research, environmental protection, and others — would be cut more than $140 billion in 2018 and almost $900 billion through 2021.  These cuts, combined with cuts already scheduled under current law, would shrink this part of the budget to 2.0 percent of GDP, the smallest percentage since 1930.
If Congress opted for smaller cuts in some programs, it would have to cut other programs even more severely.  For instance, if it exempted Social Security, it would have to cut other programs by more than one-third on average. Click here for the full report.