Stealth U.S. Austerity

Spending After the Budget Wars

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After the big budget battles that twice brought the U.S. government to the brink of default and shut it down in 2013, the conventional wisdom was that the Republicans in Congress had lost. Even the Republicans in Congress thought that. In terms of popularity, polls showed it was true. In terms of spending policy, it’s not. The U.S. is in the first stage of a decade of budget cutting that comes straight out of the Republican playbook, in a battle House Republicans won over three years while hardly realizing it. The fights now are about nickels and dimes as the government settles in to an age of stealth austerity. 

The Situation

Congressional committees are at work crafting 12 bills they’re supposed to pass by Sept. 30 to allow the government to spend money in the new fiscal year. The atmosphere is unusually cordial, though recent history suggests that they are likely to fail — Bill Clinton was president the last time Congress met its deadline. Confined by a bipartisan agreement struck in 2013 by the House and Senate Budget chairmen, Paul Ryan and Patty Murray, the committees have to keep discretionary spending — stuff like national parks and airport security but not counting war spending — under $1.014 trillion in 2015. That’s 0.2 percent more than this year, a cut when adjusted for inflation. If they fail, lawmakers risk another government shutdown or, more likely, a temporary patch. In good-government circles, this process is held up as evidence of dysfunction. From the perspective of those who think government is too big, it functions nicely. Ryan’s budget proposal for the 2012 fiscal year called for $3.53 trillion in spending, while President Barack Obama wanted $3.71 trillion. Actual outlays that year were $3.54 trillion. For fiscal 2013 and 2014, spending has come in below Ryan’s projections.

Source: Congressional Budget Office
Source: Congressional Budget Office

The Background

It’s the price of peace. Republicans took control of the House in 2011, elected on a promise to cut the budget. Democrats wanted to keep spending to drive the economic recovery. Republican demands that an increase in the debt ceiling be tied to deep cuts brought the government to the brink of default. After a grand bargain of cuts and tax increases fell through, the parties were forced to resort to a backup plan — 10 years of automatic annual spending cuts created more as a threat than a policy. Two years of brinksmanship followed, capped with a government shutdown in October. Fed up with the endless showdown cycle, lawmakers in December passed what amounts to legislative detente. The deal between Ryan and Murray basically took shutdowns off the table for almost two years.

The Argument

Next year, a new Congress that won’t be bound by the Ryan-Murray deal will have to decide not only what it wants federal spending to be but how to go about setting it. Republicans point to worrisome projections that show deficits widening again as baby boomers age and collect more Social Security and Medicare. Democrats point out that the size of the deficit has  declined to its smallest share of GDP since 2007. Economists at the U.S. Federal Reserve say the cuts have created “fiscal headwinds” holding back the recovery. (Sterner government cuts in Europe after the financial crisis are often blamed for worsening conditions there.) On the 2015 horizon loom two of the triggers that set off the budget battles in the first place: a need to raise the debt ceiling and to set spending levels for the 2016 fiscal year that, under current law, would be subject to even bigger automatic cuts. Between now and then: an election Republicans hope will give them control of Senate, strengthening their hand in any future showdown.

The Reference Shelf

  • The Library of Congress tracks the status of appropriations bills.
  • The Congressional Budget Office has a baseline of what spending will look like through 2024. And how Obama’s latest budget would change it. And Ryan’s.
  • A primer on how the Budget Control Act of 2011 would automatically cut spending in future years from the Center on Budget and Policy Priorities.

First Published May 1, 2014

To contact the writer of this QuickTake:

Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editor responsible for this QuickTake:

Jodi Schneider at jschneider50@bloomberg.net