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FIGURE 17 Composition of Spending on Children in 2008 and 2009 (Actual) and 2020 (Projected)

0.60 0.60

Percentage of GDP

0.44

0.32

0.34

0.30

0.29

0.37

0.23

0.27

0.34

0.28

0.50

0.45

0.25

0.51 0.51

0.43

2008 2009 2020

0.16

0.17

0.13

0.09 0.09

0.07

Health

Income Security

Education

Nutrition

Housing

Social Services

Refundable Tax

Tax Expend.

& Training

Credits

& Depend. Ex.

Source: The Urban Institute and The Brookings Institution, 2010. Authors' projections based on the Budget of the U.S. Government Fiscal Year 2011 and past years, CBO's Budget and Economic Outlook, 2010–20, and Urban-Brookings Tax Policy Center Microsimulation Model. Note: Refundable tax credits are unusually large in 2008; they were 0.38 percent of GDP in 2007.

through increased spending on health. Outside health, chil- dren would share in essentially none of the additional $1 trillion or more of additional spending over the coming decade. Defense would absorb another 5 percent. This bud- get also schedules large cuts (23 percent of the total) in other unspecified areas that could carry back over into pressure on children’s programs (figure 16).

We don’t mean to imply that this is what will occur. Health reform, enacted in 2010, will have effects that are still being debated, including provisions to cut costs and provisions to expand them. Further, an out-of-balance budget requires fixing, and the president and Congress will face challenging policy choices. Policymakers will have to make major reforms in entitlement spending for the elderly, successfully control the rate of increase in health care costs, increase taxes to pay for higher levels of spending, and/or cut spending significantly in the rest of the budget, including spending on children, if we are to avoid a future of ever- higher portions of our income servicing our national debt.

Composition of Children’s Expenditures in 2008, 2009, and 2020

In the absence of legislative actions to increase or cut spend- ing on children, CBO baseline projections suggest that spending on children will decline modestly as a percentage of GDP and rise modestly in absolute dollar terms. Outlays are projected to increase from $334 billion in 2009 to $366 billion in 2020, an average annual increase of 0.8 percent over the next 11 years. Total expenditures on children, in-

cluding tax expenditures and the dependent exemption as well as outlays, are projected to rise by roughly 0.9 percent annually, from $406 billion to $450 billion.

Much of the increased spending on children will oc- cur in Medicaid, as increasing health care costs drive up Medicaid spending for children as well as the elderly and disabled. As shown in figure 17, health is the only category of children’s expenditures that comes close to maintaining its spending level between 2009 and 2020 when measured as a percentage of GDP, at 0.60 percent. The drop in enroll- ment of needy children as the recession eases will be offset by increased health care costs. Again, this analysis does not include the effects of health reform.

Spending is projected to decline as a percentage of GDP in almost all other areas, not just relative to 2009 (when spending was elevated due to the recession and ARRA) but also relative to 2008. The one exception is nutrition, where the 2020 level is below the 2009 level but slightly higher than the 2008 level: SNAP and child nutrition are both manda- tory programs with benefits automatically adjusted for inflation, and thus hold their own better than many other children’s programs.

Education spending is projected to decline more than other areas, whether measured from the ARRA-supported levels of 2009 or the pre-ARRA levels in 2008. There are no mandatory or entitlement spending programs in educa- tion; all education spending is discretionary and subject to annual struggles to maintain appropriation levels. Chil- dren’s programs that face annual appropriations may be particularly vulnerable to future cuts as policymakers face a grim budget outlook.

AN ANALYSIS OF FEDERAL EXPENDITURES ON CHILDREN

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