Issue Position: The Federal Budget

Issue Position

In recent years, the continued accumulation of federal debt has generated widespread concern. It was not long ago that large federal surpluses had Americans thinking that its government had kicked the borrowing habit. The events of 2001 altered that state of affairs, and Congress has battled persistent deficits ever since. Much of the blame for this situation can be pinned to continued spending increases. Federal spending has risen from $1.8 trillion in fiscal year 2000 to $2.47 trillion in FY 2005, an increase of 37 percent.

Congress did make an effort to address deficits in FY 2005, and partial success can be seen in a deficit that was $96 billion less than had been forecast by the nonpartisan Congressional Budget Office (CBO). Needless to say, more needs to be done. In crafting the recent budget reconciliation legislation, the Deficit Reduction Act, Congress targeted mandatory spending programs (also known as entitlements) for savings. The final version of this legislation, which was passed by Congress in February 2006, will provide nearly $40 billion in spending restraint over the next five years.

The attempt to bring mandatory spending under control represents the beginning of a long-term effort to battle budget creep in these programs, whose benefits are provided to any individual meeting program criterion without reference to any limits on overall spending. Getting the upper hand in this area requires Congress to change the rules to limit coverage to only those most in need of government assistance. Without such action, mandatory programs threaten to swallow an ever growing share of the federal budget. In fact, according to the CBO, mandatory spending represented 53 percent of the federal budget in FY 2005 and is forecast to grow to 64 percent by 2016.

Medicaid spending, for instance, grew 104 percent between 1995 and 2005, an average of 7.4 percent each year, reaching a total of $181.7 billion in 2005. Even with passage of the Deficit Reduction Act, Medicaid spending is expected to grow to $189.8 billion in FY 2006. In other words, despite congressional efforts to limit benefits to the neediest among our citizens and the often politically motivated complaints of "deep budget cuts," persistent increases in the cost of the Medicaid program continue to test our collective ability to pay.

As these debates continue, it is important to keep in mind that we are not cutting spending, but rather, devising ways of reducing the annual increases in expenditures which have fueled the recent growth in deficits. Prior to consideration of the Deficit Reduction Act, the CBO forecast that federal spending, as expected under current law, would total $14.3 trillion. Were the cost of all federal programs held to their anticipated FY 2006 level, spending could be reduced to $12.9 trillion. Surely, somewhere inside the spending swell of $1.4 trillion some compromises can be found to bring our budget back into balance.

Budget and spending issues cannot be framed in black and white. Over the next decade, however, our budget debates will be about setting priorities and preserving our government's ability to meet the nation's most important needs, both at home and abroad.

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