Current Expenditures on Children
Federal spending on children increased between 2008 and 2009, although not as rapidly as the overall increase in spending in this period of recession and extraordinary ef- forts to shore up the financial and housing sectors. While federal outlays on children rose from $298 to $334 billion (measured in inflation-adjusted 2009 dollars), spending
on children actually fell modestly as a percentage of the total budget, from 9.8 to 9.5 percent. Much of the increased spending on children was due to the American Recovery and Reinvestment Act of 2009, which increased federal outlays on children by an estimated $25 billion in 2009 and $146 billion over 2009–2019, the period covered by the CBO cost estimates. In fact, the children’s share of ARRA was more than twice as large as the children’s share of the federal budget as a whole.
In addition to outlays from a range of federal programs and refundable tax credits, there was $72 billion in reduc- tions in tax liabilities for families with children. With these tax expenditures, which represent only 8 percent of the total tax expenditure budget, federal expenditures on children totaled $406 billion in 2009.
Half of all children’s expenditures are accounted for by four programs: Medicaid and three tax provisions (the child tax credit, the earned income tax credit, and the dependent exemption). In 2008, Medicaid became by far the largest single children’s program in the federal budget. Medicaid spending on children grew by an estimated 42 percent between 2008 and 2009 from a combination of enhanced federal funding under ARRA, higher enrollment of needy children in response to the recession and expansions in public coverage, and ever-increasing health care costs. Most other programs grew more slowly but did show higher
spending in 2009 than in 2008, a result of the combined ef- fects of the recession and the Recovery Act.
Education received the largest infusion of children’s spending under ARRA, $62 billion, of which $10 billion was spent in 2009. Much of the increased federal spending on education in ARRA was in response to declines in state and local expenditures, which account for more than 90 percent of K–12 education funding and two-thirds of total public investments in children. Therefore, it remains uncer- tain whether total federal-state-local funding for education increased or decreased. Most ARRA funds will be exhausted by 2011, after which federal spending on children will drop markedly, particularly in education.
Total (federal/state/local) public spending on children was $10,642 per child in 2007, split roughly one-third federal and two-thirds state and local. The federal government pro- vides 7 percent of education spending on children,59 percent of health spending on children, and 88 percent of all other children’s spending, a category that includes income security, the refundable portions of the earned income and child tax credits, social services, housing, training, and nutrition.
For comparison, public spending on the elderly was roughly $24,300 per elderly person, or 2.3 times the amount spent per child in 2007. The vast majority of public spend- ing on the elderly is federally funded, primarily through Social Security and Medicare. Looking solely at the federal budget, an elderly person receives seven federal dollars for every dollar received by a child.
Trends in Federal Spending, 1960–2009
Federal budget outlays totaled $3.5 trillion in 2009, of which 9.5 percent, or $334 billion, was devoted to children. In contrast, 36 percent of total outlays, or $1.26 trillion, was allocated to the elderly and disabled portions of Social Se- curity, Medicare, and Medicaid.
Spending on defense relative to the size of the economy has declined dramatically over the past 50 years or so, with an uptick since 2002 because of wars in Iraq and Afghani- stan. Meanwhile, domestic spending has increased. Social Security, Medicare, and Medicaid (excluding any money going for children) have increased more than fourfold from 1960, from 2.0 to 8.9 percent of GDP. Outlays on children also have grown, but from a very low base. They more than doubled between 1960 and 1980 (from 0.6 to 1.4 percent of GDP) and increased more gradually after that, reaching 2.0 percent of GDP in 2005. Federal spending on children hit a record high of 2.3 percent of GDP in 2009, largely as a result of the recession and increased investments under ARRA.