Domestic spending: Winners and losers in Obama’s budget

Domestic spending: Winners and losers in Obama’s budget:

The White House’s 2013 budget request is the first that has to follow the terms of last year’s debt-ceiling deal. That means it’s the first year that domestic discretionary spending — the money for agencies that Congress funds each year — gets strictly capped. So how does this shake out?

First, let’s define terms. “Non-defense discretionary spending” is a relatively small part of the budget, about 18 percent. It’s not Social Security. It’s not Medicare. It’s not the Pentagon. It’s not farm subsidies or highway bills. But it is just about everything else. The Veterans Health Administration. Medical research at the National Institutes for Health. Low-income housing assistance. And it’s all getting squeezed. Two years ago, the White House predicted that such domestic spending would amount to $477 billion in FY 2013. After the debt-ceiling deal, the White House is asking for just $410 billion — a full 14 percent less. Which means, inevitably, there are winners and losers.

Overall, domestic discretionary spending is set to decline from an estimated $450 billion in 2012 to $410 billion in 2013, as required by the debt-ceiling deal. So how would the White House divvy up that $40 billion in cuts? You can see a breakdown on page 240:

The winners: A few agencies would actually see their discretionary spending boosted under President Obama’s proposal. For the Education Department, the White House is requesting a $2.4 billion increase — or 3.5 percent more than what was appropriated in 2012. The National Science Foundation would get a $0.4 billion boost, or 5.7 percent increase. The Commerce Department would get a $0.3 billion boost, or 3.8 percent. The Energy Department would see a small hike of $0.3 billion, or 1.9 percent.

By and large, the themes here are pretty consistent. There’s a fair bit more money for R&D, education, and programs that promote exports. The Energy Department, for instance, gets more funds for clean-energy development (although overall outlays for the agency are way below last year, as the stimulus winds down). On education, the White House wants to expand the “Race to the Top” program so that states would have incentives to reform early childhood and college programs as well as K-12. Likewise, the National Science Foundation gets a 5 percent increase in R&D money. Funding for IRS enforcement would go up from $11.9 billion to $12.8 billion, which the White House argues is a cost-effective way of closing the deficit.

The losers: The heaviest discretionary cuts in the budget, on the other hand, would hit the Justice Department (the White House asks for $8.9 billion less for 2013, or 33 percent less than 2012); Health and Human Services ($6.6 billion, or a 8.4 percent less); Housing and Urban Development ($2.9 billion, or a 7.5 percent cut); the Labor Department ($1.2 billion, or 9 percent); the Treasury Department ($0.6 billion, or 4.5 percent); and the Army Corps of Engineers ($0.3 billion, or 6 percent). Also facing cuts in the discretionary budget authority are the Environmental Protection Agency, NASA, and the Department of Agriculture.

One big caveat, though: White House officials argue that these cuts aren’t as severe as they appear at first glance — in part because there are savings to be had that won’t affect actual program levels. For instance, the request for the Justice Department’s programs is actually down just 0.4 percent from 2012 (see page 137), with the rest of the savings coming from things like a change in the way the Crime Victim’s Fund is counted. Similarly, Health and Human Services programs actually see an increase of $0.3 billion under Obama’s budgets, with the costs offset by a change to performance bonuses in the Children’s Health Insurance Program (something that was done last year as well). All told, these offsets spare many agencies from getting severely pinched.

Still, some agencies would have to make do with less. The EPA, for example, is getting its third cut in as many years. The housing department will cut programs for people with disabilities and decrease the rental-assistance benefit (other programs, such as vouchers for homeless veterans, would see an increase). The Community Services Block Grant, a poverty-reduction program administered by the states, is seeing its budget cut by 50 percent in order to — as one White House official puts it — “target funding for the highest-performers with demonstrable impacts.”

And what about the long term? The White House predicts that various agencies’ budgets will keep shrinking in the coming years, once you adjust for inflation and the fact that the U.S. population continues to grow. That $410 billion for domestic discretionary this year? It will shrink to $331 billion in 2021, taking inflation and population into account (see page 214). The federal government will have to do a lot more with a whole lot less in the coming years.