Democrats’ counter-offer to big domestic spending cuts is… big domestic spending cuts?
As Paul van de Water recently pointed out, some of the plans floated by supercommittee members cut non-defense discretionary spending by about the same amount as the sequestration trigger would. This is because the proposals to cut discretionary spending do not include a firewall between defense and non-defense, so it is likely that a large cut to the entire discretionary budget—such as the Democratic offer to cut $400 billion—would all end up falling on the non-defense side. Remember, the trigger was supposed to be so bad and disastrous that it would scare Congress into striking a deal. But apparently it’s just scaring Congress into making pretty much the same cuts to non-defense discretionary and just sparing defense.
Why should we care about non-defense discretionary? There are a lot of reasons to care about this portion of the budget, which includes just about every federal government function outside of Social Security, Medicare/Medicaid, defense, and net interest, despite only representing less than 20 percent of the budget. But one of my main concerns is public investments such as infrastructure, education, and research and development. Economists across the board—even presidential candidate Mitt Romney’s economic advisor!—recognize that these investments must be sustained and even expanded to ensure long-run economic growth and global competitiveness. But according to Office of Management and Budget account-level data, these investments make up 1.7 percent of GDP, or about 40 percent of non-defense discretionary. This means that it would be extremely difficult to hit the budget targets proposed without taking a decent-sized hunk of flesh from these accounts.
Second, non-defense discretionary has been on a downward path as a share of the economy since the late 1970s (about the time that income inequality really started taking off, hmmm…). The discretionary caps enacted into law as part of the debt ceiling deal would force non-defense discretionary to record lows: to just 2.7 percent of GDP, far lower than the levels of the 1990s and 2000s, and a 29 percent reduction relative to the funding in the 2000s. And both the sequestration trigger and the $400 billion cut—were it all to fall on domestic discretionary—would cut these services even further.