President Obama gives Congress his budget proposal for the next fiscal year on Monday, and how he plans to tackle two issues – the federal government’s spending, and the growing deficit – is the center of heated debate.
For the White House and Congress to begin to address the deficit, serious budget cuts are all but required. The harder questions are where to cut and how much.
Entitlements vs. discretionary spending
Federal spending is expected to reach $3.7 trillion in this fiscal year, up about 7 percent from the year before, according to a report from the Congressional Budget Office (PDF). That growth is mostly due to increases in entitlement benefits such as Social Security, Medicare and Medicaid. Entitlements account for more than half of federal outlays, but Social Security and Medicare, especially, have historically been untouchable.
Discretionary spending controlled by annual appropriations is a smaller slice of the pie – and much smaller if defense spending is excluded. Discretionary spending also pays for activities from education grants to environmental protection to housing assistance.
Here’s the problem: Spending on entitlements is expected to grow considerably during the next decade, even measured against the growth of the economy. So the only way to make a dent in the growing deficit is to cut entitlements or raise taxes.
Meanwhile, interest payments on the government’s borrowing will continue to grow.
Here are the Congressional Budget Office’s projections through 2021:
What to expect from Obama’s budget
President Obama is expected to call for a five-year freeze on domestic discretionary spending, which the Administration says will save about $400 billion.
And he has committed to a two-year freeze of federal civilian employees salaries, which is expected to save $5 billion. Pentagon spending will also be scrutinized.
But the president says he wants to increase spending on education, high-speed rail, and wireless infrastructure.
The president’s budget proposal is just that – a proposal. Congress must vote to authorize spending.