Discretionary Spending in Ryan's FY 2015 Budget

Much of the focus in House Budget Committee chair Paul Ryan's (R-WI) budget inevitably falls on the changes it it would make to mandatory spending, of which there are many. However, much of the budget's deficit reduction comes through further cuts (beyond the sequester currently in place) to non-defense discretionary spending.

For FY 2015, the year that the budget resolution has to specifically lay out its discretionary spending allocations, the budget adheres to the Bipartisan Budget Act's discretionary spending cap of $1.014 trillion and its division of spending between defense and non-defense functions. That amounts to a slight increase in budget authority -- the money that is newly obligated to be spent each year -- from FY 2014 levels.

After that, the budget diverges from the spending caps in current law in a few different ways. First, it reduces total discretionary spending caps by $308 billion below sequester levels from 2016-2024, with all the cuts coming on the non-defense side. Second, as in last year's budget, it shifts $483 billion of defense sequester cuts to the non-defense side. As a result, defense spending is restored to pre-sequester levels while non-defense discretionary spending is about $1.15 trillion below pre-sequester levels. NDD spending would also be about $1 trillion lower than in the President's budget. In 2024, alone, non-defense funding would be 22 percent below post-sequester levels, effectively almost quadrupling the sequester cut. Even in nominal dollars, non-defense spending in 2024 under Ryan's budget would be below 2008 levels.  In terms of its impact on the deficit, on net, these changes to both caps will save $287 billion compared to the sequester.

^{Note: Totals only include base spending (i.e., war spending is excluded)}

The repeal of the defense sequester means that defense funding in 2016 will jump from $521 billion to $566 billion, increasing gradually from there to $696 billion by 2024. Non-defense spending by contrast will fall from $492 billion in 2015 to $450 billion in 2016 and $443 billion in 2017, before increasing slightly to $467 billion by 2024.

As a percent of GDP, the budget would accelerate the pre-existing trend of declining resources going to discretionary spending. Base discretionary budget authority would decline from 5.6 percent of GDP in 2015 to 4.3 percent by 2024, somewhat less than the 4.6 percent of GDP in 2024 called for under current law and 4.7 percent in the President's budget.

Of course, the comparisons are starker if one looks at non-defense spending. In the Ryan budget, NDD spending declines from 2.8 percent of GDP in 2015 (which already matches the 50-year historical low) to 1.7 percent in 2024, a steeper decline than the paths projected under current law and in the President's budget, which reach 2.2 and 2.3 percent in 2024 respectively. Note that the 50-year historical average is 3.8 percent, so all scenarios point to well-below average levels of NDD spending going forward.

^{Note: Totals only include base spending (i.e., war spending is excluded)}

Defense spending follows a similar trend, although there is less variation among the different paths. The Ryan budget keeps defense spending constant at around 3 percent of GDP through 2018 before it declines to 2.6 percent by 2024, consistent with the pre-sequester cap. Meanwhile, the President's budget reduces spending to 2.4 percent by 2024, just slightly above current law.

Since the discretionary portion of the budget has been the predominant focus of deficit reduction since 2011, it is no surprise that the two most prominent budget proposals and current law projections show discretionary spending as a share of GDP falling to historically low levels. Of course, undertaking entitlement and tax reform could help ease the burden being placed on this portion of the budget right now. The agreement last year between Budget Chairmen Patty Murray and Paul Ryan showed how this could be done in small steps, but a larger deal would be needed to truly change course.