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Billions of 2009 Dollars

$24

$61

$39

$11

$5

$400

$76

$75

$76

$79

FIGURE 14 Actual and Projected Expenditures on Children, 2008–13

$300

$74

$72

$200

$298

$309

$327

$333

$333

$331

Source: The Urban Institute and The Brookings Institution, 2010. Authors' estimates based on data from the Budget of the U.S. Government Fiscal Year 2011 and previous years and CBO and Urban-Brookings Tax Policy Center Microsimulation Model projections. Note: The ARRA spending shown above do not total to the $156 billion cost estimate presented in table 3 because this figure uses inflation-adjusted dollars and does not show spending in 2014–19.

$500

ACTUALS

PROJECTIONS

2009

2010

$100

$0

2008

2011

2012

2013

ARRA

Pre-ARRA Tax Expenditures

Pre-ARRA Outlays

Projected Spending on Children and Other Major Items in the Federal Budget

The impact of the American Recovery and Reinvestment Act on children’s expenditures, already seen in the 2009 out- lays, will continue over the next few years (figure 14). ARRA expenditures will peak in 2010 and remain significant in 2011. Except nutrition assistance and two school bond provisions, however, most programs will have less than 10 percent of their ARRA funds remaining for 2012 and later years. Recall that this analysis tracks outlays, which occur some months or years after grants are awarded. Most pro- grams will exhaust their funds available for new obligations even more rapidly than the outlay stream shown above.

As a result of ARRA and the continued high caseloads for Medicaid and nutrition assistance (food stamps), out- lays on children will rise temporarily to a record high of 2.7 percent of GDP in 2010, with the lingering effects of ARRA and the recession keeping spending as high as 2.5 percent of GDP in 2011. Total governmental spending will also remain high—24 percent of GDP—throughout 2009 to 2011, be- fore gradually declining (figure 15). As already noted, these projections do not incorporate the impact of health reform or other proposals in the president’s fiscal year 2011 budget.

Over the long run, spending on children, defense, and unspecified areas is projected to decline as the temporary boost in spending under ARRA and other recovery legisla-

tion is fully spent down. Specifically, if ARRA provisions are not extended, federal spending on children is projected to fall to 1.9 percent of GDP in 2015–20, the same level as in 2006 and 2007. As a share of the federal budget, outlays on children are projected to fall further, to 8 percent, assum- ing no change in policy or law. Put another way, although significant permanent growth in the budget is scheduled under current policies, children do not share in that growth.

In contrast to the projected decline in spending on children, spending on the elderly and disabled is projected to rise steadily. The non-child portions of Medicare, Med- icaid, and Social Security are projected to increase from 8.9 to 10.4 percent of GDP in 2020. This growth stems from a number of factors, including large increases in the number and share of the population that is elderly as the baby boom generation ages (the baby boomers began retiring in 2008) and the continuing rise in health care costs. As a result, spending on the elderly and disabled under these three major entitlement programs is projected to swell to nearly half (45 percent) of the entire federal budget in 2020. Since these programs are mandatory, they automatically grow unabated unless current policy is changed.

The strong growth in these three entitlement programs places upward pressure on total governmental outlays, which drop to 22 percent of GDP in the middle of the pro- jection period and then creep back up to over 23 percent by 2020. Federal outlays far outstrip federal revenues in every

AN ANALYSIS OF FEDERAL EXPENDITURES ON CHILDREN

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