Freezing Discretionary Spending...

UPDATE: Stan Collender thinks we might be making ice mountains out of snow hills.

According to a number of news reports, President Obama has begun asking agencies to plan for a discretionary spending freeze next year -- or perhaps a 5 percent cut. The President may propose such as initiative as part of a deficit-cutting themed State of the Union address in January.

Although we often tend to focus on entitlement reform here at CRFB, discretionary cuts can and should play a significant role in closing the fiscal gap -- especially in the short-medium term (and certainly, cutting discretionary spending will do a lot more than just assuming lower TARP spending).

In fact, over the last decade, discretionary spending has grown at a very similar rate to mandatory spending.

Source: Congressional Budget Office

Simply freezing all non-stimulus non-war discretionary spending at 2010 levels would mean that, in 2011 alone, we'd be spending $60 billion less than what is proposed in the President's Budget. If normal discretionary spending were to grow at the same rate as in the President's budget after 2011, we'd be spending $600 billion less through 2019 -- and probably another $150 billion less in interest payments.

Source: Congressional Budget Office and author's calculations
Note: Excludes stimulus and war spending, assumes freeze occurs to outlays rather than budget authority

Freezing domestic (non-defense) discretionary spending alone would have roughly half that effect -- which would still be quite significant. A 5% cut of all discretionary spending, on the other hand, would have nearly double the effect.

Of course, even freezing (let alone cutting) discretionary spending will be quite difficult. And sustaining the growth rates currently included in the President's budget will probably require tough budget rules and significant sustained political will.

And ultimately, no amount of discretionary cuts can close the fiscal gap by themselves -- since Medicare, Medicaid, Social Security, and net interest are quickly consuming a growing share of the budget.

That said, the potential savings from a discretionary spending freeze (or significant slowdown) coupled with strong discretionary caps would be quite large. And we strongly support any effort the President makes to bring spending in this area of the budget under control.

This is a great step taken by

This is a great step taken by president. It is really very beneficial for the economy as a whole. In the view of next ten years, it is an important declaration by the president. It was a necessary step and proper implementation of the same is equally important to see better results. It will be advantageous in the performance of different sectors of the economy. Freezing discretionary spending should result in closing fiscal gap to a great extent. The proposed five percent cut in such spending was really reasonable and acceptable. IRS wage garnishment

This site has been great and

This site has been great and also useful. I think many people will enjoy this article. I would support a budgetary freeze. But freeze EVERYTHING­! All defense, domestic, descrinary­, mandatory, etc. Wage garnishment

Good savings

It is good that we are spending $60 billion less than the proposed budget plan. I think it is good amount of money and we will p[aln someting good by using this money.

Motorhomes for sale

Not enought

I don't thinks that this cut of only 5 % of expenses could be enought,yo need al least a 40% off of the militar expenses... frases de amor

Post a New Comment

By submitting this form, you accept the Mollom privacy policy.