How the President Met the 2013 Cap

Continuing on in our blog series, we will be discussing discretionary spending proposals in the President's budget.

The FY 2013 budget was notable for being the first time that President Obama had to lay out specifically how he would adhere to the discretionary spending caps in the Budget Control Act. Prior to the budget's release, we already knew what defense spending cuts would be contained in the budget (see here for our summary). Beyond that, we had heard some scattershot investment plans, but no details on levels for discretionary spending.

Overall, discretionary spending is capped at $1.043 trillion for 2012 and $1.047 trillion for 2013; however, the Obama Administration shows discretionary spending authority at $1.058 trillion for 2012 and $1.043 trillion for 2013. Why is that? For 2012, since adjustments are allowed for disaster relief spending, the caps ended up being higher than those originally specified. For 2013, about $4 billion of transportation spending is transferred from discretionary to mandatory spending, so they have lowered the discretionary spending caps to compensate.

Still, the 2013 discretionary total is obscured because of so-called "discretionary changes in mandatory spending" that net against discretionary budget authority by $18 billion. You may remember these "CHIMPs" as a way that Congress softened the cuts to discretionary spending that took place in the final FY 2011 CR. It is not a gimmick to count CHIMPs against discretionary spending, but it does not provide the best picture for which agencies are getting funding increases or decreases.

Excluding CHIMPs, discretionary spending will increase slightly from $1.058 trillion to about $1.061 trillion in 2013, an increase of 0.3 percent. We have represented that spending in the table below.

^{Note: The reduction in Department of Labor spending is mostly due to an accounting change and shifting a program to Health and Human Services. Taking out these changes shows a slight reduction in Labor spending.}

As you can see, Departments like Education, Commerce, and Energy get sizeable increases, which is no surprise considering President Obama's emphasis on "investment" spending and help for manufacturers. Although no Department really had a major cut, the Defense, Justice, and Homeland Security Departments all had slight reductions.

The cross-cutting category of R&D is a category that gets a big boost in the President's budget. According to the text of the budget, total R&D spending is funded at $141 billion in 2013, a five percent jump from the previous year. Spending in this category includes money for the National Science Foundation, National Institutes of Health, clean energy programs, and advanced manufacturing programs.

Since the debate on discretionary spending is not really about overall levels anymore (besides discussion about the sequester), the composition of discretionary spending will become more important in the fiscal debate. President Obama has shown us one way of meeting the BCA caps.