Budgetary Realities

As you likely know, the Congress seems poised to pass a $1.012 trillion omnibus spending bill to avoid another shutdown (see coverage from the Wall Street Journal, the Washington Post, the Hill).  It appears that both the Democrats and Republicans will get things they hold dear in the spending provisions and the riders (Ed O’Keefe has a list of winners and losers). The GOP seems to have won this round–more money for the Pentagon, riders preventing NLRB e-Card Check for unions and the enforcement of the incandescent light bulb ban. There is even mention of Benghazi and “Operation Fast and Furious.” Score!

Of course, the spending bill deals with discretionary spending, and from a long-term perspective, discretionary spending is not driving the long-term budget problems. This chart, based on data from the Office of Management and Budget’s Historical Tables (table 8.4) gives a sense of the long-term trends.


Mandatory spending and interest have dominated the budget for some time, increasing from 6.2 percent of GDP in 1962 to 15 percent today, and within the mandatory programs, Social Security, Medicare and Medicaid have grown the fastest.  The Congressional Budget Office’s 2013 Long-Term Budget Outlook projects that Social Security and the major health care programs will grow from 9.5 percent of GDP (2013) to 14.2 percent of GDP (2038). Indeed, by 2038, the CBO projects spending to be at 26.2 percent of GDP, with revenues of 19.7 percent of GDP. All of this is under the extended baseline scenario. Obviously, 2038 is a long way away, and these are but projections (I can offer my own prediction: in 2038, no one will remember Operation Fast and Furious).

None of this is impacted at all by the new omnibus spending bill, which from a long-term perspective is trivial despite the heavy press coverage.

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