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Non-Defense Discretionary Cuts Could Be Larger With a Budget Deal Than Without One

If the congressional “supercommittee” doesn’t agree on new deficit-reduction measures, non-defense discretionary spending — the part of the budget that includes education and training, research and development, transportation, public health, veterans’ health care, and the administration of justice, among other things — will face about $300 billion in automatic, across-the-board cuts over the 2013-2021 period.  That’s in addition to the large cuts that the Budget Control Act already put in place.

But proposals that the committee is considering — such as the Democratic offer of early last week — could cut non-defense discretionary spending by even greater amounts.

Some argue that it is important for the supercommittee to reach an agreement in order to avoid automatic cuts in non-defense discretionary spending.  For example, 130 university presidents have signed a letter to supercommittee members urging them to cut entitlement spending and increase revenues in order to avoid further cuts in scientific research.  But a deal could prove worse for nondefense discretionary spending than simply allowing the automatic cuts to go into effect.

The Democratic offer would cut discretionary spending as a whole — defense and non-defense combined — by $400 billion over ten years.  The offer states that these cuts would be divided equally between defense and non-defense programs, but it doesn’t explicitly include the critical mechanism needed to guarantee that this would happen:  separate caps for defense and non-defense spending for each year from 2014 through 2021.  (Under current law, separate caps will exist in those years only if the committee fails to achieve $1.2 trillion in deficit reduction.)

Republicans are certain to oppose establishing separate caps, but without separate caps, most of the proposed $400 billion in discretionary savings is likely to come from non-defense programs.  If $300 billion of the discretionary savings were derived from non-defense programs, the outcome would be exactly the same as under the automatic spending cuts.

The only likely way to avoid further deep cuts in non-defense discretionary spending over the next ten years is to enact a deficit-reduction package that includes a significant revenue increase and puts the budget on a sustainable path.  Unfortunately, the Democratic offer contains relatively little in the way of revenue increases and falls far short of what is needed to avoid more deficit reduction in the next few years.

Using the same baseline as the Bowles-Simpson commission, and including the spending cuts already enacted in the Budget Control Act, the ratio of spending cuts to tax increases in the Democratic offer is 14-to-1.  The Democratic offer also would make raising taxes more difficult in subsequent deficit-reduction efforts by locking in the Bush-era tax cuts for upper-income households.  As a result, its adoption would create substantially greater pressure to cut nondefense discretionary spending in the future.

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