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While outlays on children have increased in dollars and as a percentage of GDP,children are receiving a smaller share of the domestic federal budget, as shown in a comprehensive analysis that includes children’s tax expenditures as well as outlays. Under this measure, the children’s share of domestic federal spending—spending that excludes defense and inter- national affairs and adds children’s tax expenditures—has

the recession and ARRA. As the ARRA provisions expire, however, we project that spending on children will shrink, falling from 2.3 percent of GDP in 2009 to 1.9 percent of GDP by 2015 and remaining at that level through 2020, if current policies continue unchanged. In contrast to the projected decline in spending on children, spending on the elderly and disabled is projected to rise steadily in real

terms, as a percentage of GDP and as a percentage of total spending. Between 2009 and 2020, total out- lays are projected to increase by roughly $1.1 trillion. While these projections do not fully incorporate the additions and subtractions in outlays from health re- form or any other legislation passed in the near future, they still provide a baseline by which to consider the path before us. Nearly three-quarters (74 percent) of the anticipated increases in federal spending will be used for automatic growth in Medicare, Medicaid, and Social Security. Grow- ing interest payments on the national debt consume another two-fifths (42 percent). Together, the escalating costs of the three largest entitlements and interest payments will consume more than 100 percent of the anticipated growth in spending over the next 11 years, putting a sig- nificant squeeze on other spending. Absent reform, many programs will be cut. While some cuts will occur with the decline in emergency spending under the Troubled Asset Relief Program (TARP), many also involve a relative and sometimes absolute cutback in other government services. Federal budget outlays totaled $3.5 trillion in 2009, of which less than 10 percent ($334 billion) was devoted to children. actually shrunk over time, from 20 percent in 1960 to 14 per- cent in 2009. In contrast, spending on the non-child portions of Social Securit , Medicare, and Medicaid has doubled, rising from 22 to 44 percent of domestic spending. The increase in spending on children from 1960 to 1980 resulted from the expansion of federal programs, includ- ing introduction of food stamp benefits, Medicaid, Title I Education for the Disadvantaged, public housing, and other programs serving children and families. Since the mid-1970s, however, total spending on these and dozens of other programs benefitting children has risen only moder- ately as a percentage of GDP, and until ARRA, that growth was solely because of growth in Medicaid spending. Other than Medicaid and ARRA, most of the significant increases in spending on children since the 1990s have occurred through tax provisions, including the expansion of the earned income tax credit in 1993 and the enactment of the child tax credit in 1997. These projections of continued current law and policy suggest that under the “no reform” scenario, children’s programs will receive a mere 3 percent of the new funds, with most increases in children’s health. Outside health, children’s programs will share in essentially none of the ad- ditional $1 trillion or more of additional spending over the coming decade. Defense will absorb another 5 percent. Cur- rent policy projections also assume large cuts (23 percent of the total) in other unspecified areas of the budget that could carry back over into pressure on children’s programs. Our analysis of spending on children distinguishes between mandatory and discretionary spending programs. Over time, mandatory programs, many of which have automatic growth built into them, have grown more than discretionary programs, which are subject to annual ap- propriations action. In fact, discretionary spending on children declined in real dollars between 2005 and 2008. This downward trend in discretionary spending was re- versed in 2009, with the additional appropriations for education, social services, training, and housing programs in the Recovery Act. Somewhat unusually, ARRA expanded both mandatory and discretionary spending in one bill. Unless current conditions change, the allocation of additional outlays over the next decade suggests a pat- tern where spending on children declines relative to the economy. This path can be altered, however. Reforms not considered in this analysis—such as the 2010 health reform and any further health reforms, any possible extensions of ARRA, and the proposals in the president’s budget regard- ing education, taxes, and other areas—may alter the picture of outlays spent on children in the future. Projections, 2010-20 In the near term, federal expenditures on children will continue to expand as a result of the lingering effects of

AN ANALYSIS OF FEDERAL EXPENDITURES ON CHILDREN

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