Maya MacGuineas: Federal Budget Increasingly Tilted Against Investment in Children

Maya MacGuineas is president of the nonpartisan Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. She recently wrote an op-ed for The Hill. It is reposted here. This piece is part of our ongoing initiative Budgeting for the Next Generation.

Globalization, technological advancements and the changing nature of work mean that the next generation will face a very different economy than the one we have experienced.

As the world changes in ways that will be nothing short of dramatic, it is more important than ever that we make necessary investments in human capital, otherwise known as … our kids.

Yet, our budget decisions reflect the opposite priorities where we are less focused on giving our nation’s youth the tools they will need, and instead are dangerously willing to leave them a legacy of debt. 

The case for investing in children is a strong one: Of all demographic groups, children are least able to provide for themselves and most likely to contribute to the long-term prosperity of the country.

The returns on investments made when children are very young can be particularly substantial, because the benefits will accrue over a child’s life. Rates of return from preschool programs, for example, have been estimated as high as 20 percent.

There are multiple positive externalities to spending on younger generations, including fewer children living in poverty, less crime and more equality of opportunity. Productive investment in kids leads to lower expenditures on special education, health care and social services programs as the children get older.

Despite the needs of the youngest population and the economic benefits of investing in future generations, federal spending on children comprises a startlingly small and declining share of the federal budget.

According to the Urban Institute’s 2017 Kids’ Share report, federal spending on children under the age of 18 (directly or through their parents) was $377 billion in 2016, or less than 10 percent of the federal budget.

By comparison, we spent about one-third of the federal budget on the elderly. (While the numbers are better if you include state and local government spending, they are still tilted wildly to those aged over 65.) 

This is a concerning statistic when one considers the economic benefit of investing in children and the fact that 18 percent of children still live in poverty — compared to 12 percent of working-age adults and 9 percent of the elderly.

Of even greater concern, spending on children is declining over time. Prior to the recent tax and budget deal bills, Kids’ Share estimated spending on children would fall to 7.5 percent of total outlays by 2027, but the share will likely be even lower after accounting for recent legislation. By comparison, we’ll spend about 40 percent of the budget on the elderly.

To make matters worse, at the same time we’re devoting a declining share of federal dollars to children, we’re burdening our kids with an ever-rising national debt.

On its current trajectory, debt will likely exceed the size of the economy within a decade in order to finance tax cuts and spending for today’s adults along with rising entitlement spending for the elderly. 

As a result, wage growth will fall, interest rates will rise, and an ever-increasing share of the budget will be devoted to servicing that debt. In fact, federal spending on interest on the debt will exceed spending on children within the next few years. 

Sadly, the current budget process stacks the deck against children. While programs for the elderly mostly grow rapidly on autopilot, programs for children generally have to be re-approved every year or every few years; and rarely do they grow much faster than inflation.

As recent events remind us, government shutdowns and failures to fund programs in a timely manner are becoming increasingly regular, leaving these programs vulnerable. Meanwhile, the federal debt just keeps rising. 

If we truly want to help our children, we are going to need to fix our budgeting and fix our fiscal situation. As we do, we must make sure we are truly considering the full scope of challenges of the 21st century. New technologies, advancements and ways of working present many opportunities — but also many challenges. 

Children really are our most valuable resource; it is time we started acting that way. 

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.