Legislators frequently use recurring rhetorical devices to simplify budget debates. For example, they’ll call for dollar-for-dollar agreements and the parity principle across defense and non-defense spending. As simple and fair as these concepts may appear on the surface, Congress should budget based on fiscal realities and in accordance with national priorities, instead of basing decisions on catchy, yet misguided, tag lines.
Both concepts were used during the debt limit debate of 2011, culminating in the Budget Control Act—a law to raise the debt limit in exchange for spending reductions of the same size (dollar-for-dollar), with cuts targeting defense and non-defense discretionary spending by roughly equal amounts (parity).
There is a major problem with this approach: There is no parity between defense and non-defense spending in the federal budget. As the graph below shows, non-defense spending has far outpaced defense spending when it comes to the overall federal budget.
Cumulatively speaking, over the past 50 years, non-defense spending grew nine times faster than defense spending, after adjusting for inflation. Just considering fiscal year 2022, non-defense spending was more than seven times larger than defense spending.
Over the next ten years, the U.S. federal government is projected to spend $10.8 trillion on defense and $69.1 trillion on non-defense (with $36 trillion of that amount alone going to pay for Social Security and Medicare benefits). These projections are based on the latest Congressional Budget Office report.
Divided by U.S. households, American taxpayers will be hit with $78,172 in defense spending, $340,683 in spending on Medicare, Social Security, and interest on the debt, and an additional $239,800 in other non-defense spending over the next ten years. That’s the size of one gigantic short-term mortgage that will only partially be paid for with taxes. The rest will add to the already massive federal debt.
Parity in spending reductions among defense and non-defense categories, in the context of the entire federal budget—not just the one-third of discretionary appropriations legislators haggle over each year—means something very different than dollar-for-dollar cuts.
A New Budget Control Act
As Congress engages in debt limit negotiations this spring and summer, some Republican members are considering pushing yet again for an agreement that would raise the debt limit by one dollar for every dollar in spending cuts. Exact figures are not yet under discussion, but one possible bid could be for another Budget Control Act to reduce and cap discretionary spending.
One of the proposals currently in circulation among House Republicans would reduce non-defense discretionary spending (transportation, education, energy, etc.) by $130 billion next year, reducing the overall spending level to what it was in fiscal year 2019. This would return non-defense spending to pre-pandemic levels—a very reasonable target.
If members of Congress froze non-defense at the pre-pandemic level for the next ten years while increasing defense spending at no more than two percent each year, this would save about $4 trillion from 2024 through 2033. $4 trillion is also roughly the amount Congress would need to save, if legislators wanted to strike a deficit reduction deal that’s at least as large as the Budget Control Act of 2011 was.
The math is simple: the Budget Control Act, if fully implemented, would have shaved five percent of projected spending over the ten years during which it was to take effect. Five percent of projected spending over the next ten years amounts to roughly $4 trillion. A new Budget Control Act should account for how fiscal realities have shifted since 2011.
So at least in theory, Republicans are aiming at a deficit reduction deal roughly equivalent to the Budget Control Act of 2011; only this time all the savings would come from the non-defense side of the discretionary budget.
Reduce Spending Growth to Stabilize the Debt
Another problem is that $4 trillion in spending reductions saves only about half of what’s needed to stabilize the debt at its current elevated levels. U.S. debt levels are projected to exceed the size of the entire U.S. economy as measured by gross domestic product (GDP) as soon as next year.
Such high and rising debt levels slow economic growth, reducing Americans’ incomes and dragging down productive investments. Without reforms, unsustainable debt growth will limit the federal government’s ability to respond to unforeseen emergencies, whether they be a public health crisis like COVID-19 or a major war engagement. Excessive debt growth also increases the risks of a fiscal crisis in the United States, during which legislators could be forced to make sudden and steep spending cuts and significant tax hikes, as interest rates spike and inflation grows out of control.
To avoid further adding to the debt as a share of the economy, legislators would need to agree to reduce deficits by at least $8 trillion over the next ten years. Such a deal would shave about ten cents off every dollar the federal government is currently projecting to spend. Seems doable.
Put another way, annual federal spending is projected to grow from $6.2 trillion in 2023 to nearly $10 trillion in 2033. That amounts to a cumulative increase in spending of about $18 trillion, compared to implementing a budget freeze in 2023. The federal government could stabilize debt as a percentage of GDP by cutting the projected growth in spending in half.
Congress should adopt an agreement to stabilize federal debt over the next ten years, at no more than its current level. Congress can achieve this goal by reducing the projected growth in spending. The responsible choice as Congress confronts the need to raise the debt limit later this year is to adopt spending reforms that stop further growth in debt as a share of GDP.
.find_in_page{background-color:#ffff00 !important;padding:0px;margin:0px;overflow:visible !important;}.find_selected{background-color:#ff9632 !important;padding:0px;margin:0px;overflow:visible !important;}
