The Federal Spending Juggernaut

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By Nicole Kaeding

Over the weekend, the Senate approved the $1.1 trillion Cromnibus spending package, which funds parts of the government through September 2015.

CATO-InstituteThe ink isn’t even dry on this spending bill, and already big spenders in Congress are gearing up to increase next year’s spending above agreed upon limits. The Wall Street Journal describes the situation:

After four years of a divided Congress, Republicans will take full control of both chambers in January with hopes of passing individual spending bills under an orderly process rarely seen in recent years. But complicating their task will be the return of the across-the-board spending cuts known as the “sequester” birthed out of the 2011 debt-ceiling deal, which set caps on spending for the next decade.

A two-year bipartisan budget deal brokered by Senate Budget Committee Chairman Patty Murray (D., Wash.) and House Budget Committee Chairman Paul Ryan (R., Wis.) eased those cuts for fiscal years 2014 and 2015. But the $1.1 trillion bill passed over the weekend, which will fund most of the government through September 2015, marks the final stretch of that agreement.

In fiscal 2016 the cuts return in full force. Lawmakers broadly agree the reductions inflict blunt pain on the federal budget. But Democrats and Republicans are at odds about how to mitigate them in a dispute likely to grow in intensity during the coming months.

How big are the cuts? The Wall Street Journal continues:

For fiscal 2016, which begins Oct. 1, funding for discretionary spending—the chunk of the federal government that Congress must approve each year—will stay relatively flat. The cap on military spending will rise slightly, to $523 billion from $521 billion, while the cap on nondefense discretionary spending will fall slightly to $492.3 billion from $492.4 billion. Democrats note the government’s purchasing power is diminished when inflation is taken into account.

Yes, you read that right. The budget “cuts” that will “inflict blunt pain”  will increase spending by about $2 billion.

Those figures also ignore two large categories of federal spending. The first, the Overseas Contingency Operations (OCO) slush fund, funds military operations in Iraq and Afghanistan and is not subject to the Budget Control Act spending limits. In the most recent Cromnibus, OCO was allocated $64 billion.

Second, it ignores the biggest source of federal spending, entitlement programs. In fiscal year 2016 the government will spend $2.5 trillion on entitlement programs such as Social Security, Medicare, Medicaid, ObamaCare, and food stamps. According to the CBO, entitlement spending is expected to rise $188 billion in 2016.

So while most discretionary spending is roughly frozen for 2016, the federal spending juggernaut rolls on in entitlement spending. Members of Congress are so used to the increases thatthe threat of just holding some spending constant strikes fear into many of them. Spenders cry foul and warn of a crisis befalling the country if a freeze is allowed to take effect, but little happened following the sequester cuts of 2013.

The incoming Republican Congress should ignore the big-spending voices and abide by the Budget Control Act. Arguably the biggest policy win in the last three years for Republicans was getting President Obama and Democrats to agree to these capped spending levels to limit the growth of the discretionary part of the budget. They should not use their new majorities to undo their own handiwork and ramp up federal spending.

Nicole Kaeding is a budget analyst for the Cato Institute and focuses on federal and state spending policy.

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