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Wednesday, July 13, 2011

Not a dime's worth of difference

by digby

The Economic Policy Institute analyzed all the current budget plans and issued a report comparing them side by side. It isn't exactly reassuring:

The current budget debate has generated various plans to bring revenues and spending into alignment, including proposals by the president, congressional caucuses, individual legislators, and outside groups. The majority of these plans focus disproportionately on the non-security discretionary (“domestic discretionary,” or NSD) budget, that portion of the overall budget that not only delivers the primary source of investment in our nation’s future, but also provides vital services to people in need, protects Americans from corporate abuses and environmental degradation, and keeps the government itself operating...

This analysis examines President Obama’s 2012 budget proposal, the president’s April framework, the Bowles-Simpson debt commission’s plan, and House Budget Committee Chairman Paul Ryan’s budget resolution. The major findings of this analysis are summarized below:

• Each of the proposals cuts the NSD budget [as a share of GDP] to its lowest level in over half a century.

• Under the proposals, the NSD budget in 2021 would range from 1.5% of GDP (Ryan) to 2.2% of GDP (President Obama’s 2012 budget request)— below the previous low of 2.6% in 1962; far below the historical average of 3.3%; and well below its averages during both the Reagan (3.4%) and Clinton (3.0%) presidencies.

• Over half of the NSD budget is composed of public investment (for example, education, infrastructure, and R&D), so these proposed cuts make it practically impossible to maintain our investment levels—let alone begin to close our substantial public investment shortfall—without cutting at the rest of the NSD budget by at least 70 percent.

This is how we are going to Win The Future?

If one were to "negotiate" using these proposals as a starting point, the leftward position is NSD spending lower than it's been since 1962.

The last fifty years of the non-security discretionary budget can be characterized by four time periods. From the early 1960s to the late 1970s, the NSD budget rose from less than 2.6% of GDP to about 4.5% of GDP, mostly due to increased investments in ground transportation (nearly all of which went to highway investment), training and employment, pollution control and abatement, and housing assistance (see Figure A).

From 1980 to 1989, the NSD budget was cut by over one-third, from 4.5% to 2.9% of GDP, with the most severe cuts made to training and employment, community development, ground transportation, pollution control and abatement, and energy supply.

Between 1989 and 2008 the NSD budget remained relatively constant, never rising above its 1995 high of 3.2% of GDP or falling below its 1999 low of 2.7% of GDP. It averaged 3.0% of GDP during this 20-year period and ended exactly where it started, at 2.9% of GDP. But the composition of the NSD budget changed, with education (mostly K-12), health care services, health research and training, and ground transportation
investments rising as a share of the budget and defense-related atomic energy environmental activities (technically part of the NSD budget despite being associated with security activities), space activities, and training and employment spending falling.

Ok, let's set aside the lunacy of any of these people proposing to do this while unemployment is still high and the economy is faltering. But even if the economy was recovering smartly, why in the world is a Democrat proposing to go below 3%? Are they just giving up the idea of liberal government altogether? Apparently so, although it's unclear if they know it:

This would be the lowest level in over half a century and about one-third below its previous low of 2.6% in 1962. Keep in mind that 1962 was before the entire Great Society and before modern environmental regulation; back then the federal government’s role in funding education, law enforcement, and keeping families off the
street was minimal. In short, an NSD budget level that falls short of its 1962 level would cripple basic government functions and fail the needs of a growing population.

Yet the budget plans by House Budget Committee Chairman Paul Ryan, the Bowles-Simpson debt commission, and President Obama as outlined in his April speech all propose to slash NSD to an even lower level than that reached in 1962. As shown in Figure A, the Bowles-Simpson plan and the president’s April plan both propose to cut the NSD budget down to 2.0% of GDP in 2021, while Chairman Ryan proposes to cut it down to 1.5% of GDP. Not even President Obama’s 2012 budget request proposes allowing the NSD budget
to keep up with inflation (the CBO baseline), with funding in 2021 at 2.2% of GDP—still lower than it has been in over half a century. And all of these plans propose NSD levels far below the averages during both the Reagan (3.4%) and Clinton (3.0%) presidencies

The cuts proposed under these plans will be even more difficult and painful than the topline numbers suggest. Public investments—such as education, infrastructure, and R&D—are vital to the nation’s long-term economic growth and global competitiveness. Yet public investments are extremely low, currently near their lowest level in 60 years (Pollack 2011), leading to a lagging and inadequate education system, crumbling infrastructure, and absence of innovation. Accordingly, support for safeguarding public investment has grown, as evident in the Bowles-Simpson commission plan, which proposed protecting public investment spending, and the president’s 2012 budget, which proposed expanding public investment.

Yet an analysis of account-level data provided by the Office of Management and Budget reveals this to be a near impossibility because public investments represent over half of the non-security discretionary budget. Furthermore, the NSD portion of public investment represents nearly 90% of total federal non-defense public investment. In other words, it would be practically impossible to cut the non-security discretionary budget to the levels proposed in the various plans without either significantly cutting public investments or nearly eliminating everything else.

I'll leave it to you to decide whether these people know what they're doing or not. But any way you slice it, this cutting fetish is hugely destructive regardless of their alleged good intentions. The numbers don't lie.

It's hard to see where this ends but it's obvious that it's going to be extremely hard to crawl back out of the hole that's already been dug. Proposing to cut already inadequately financed programs has already made it impossible to grow them, even if the draconian cuts of Ryan or the other plans are stillborn. Why?