November 18th, 2011
12:30 PM ET

What happens if the super committee fails?

Editor's Note: Isabel V. Sawhill is Senior Fellow at the Brookings Institution, focused on Economic Studies.

By Isabel V. Sawhill, Brookings

Almost everyone is agreed that we need to get our fiscal house in order and that the super committee needs to find the political will to get this done. As their deadline for acting draws nearer, a favorable outcome looks doubtful, and the prospect of an automatic sequester looms large.

However, if action continues to be focused on a small slice of the budget, too much of any fiscal discipline will fall on a very limited number of programs without making a real dent in our long-term deficit problems.

To stabilize the ratio of debt-to-GDP we need deficit reduction in the neighborhood of $4 trillion over the coming decade. So far virtually all of the action has focused on discretionary spending. The Budget Control Act of 2011 (BCA), passed in the wake of the debt ceiling crisis, put new caps on discretionary spending that will, according to CBO, reduce such spending by about $900 billion between 2012 and 2021, including debt service. The law also called for a Joint Committee (aka the Super Committee) to come up with at least $1.5 trillion in additional spending cuts. At the present time, many observers are skeptical about the ability of the committee to come up with much in the way of savings, given partisan disagreements.

Don't Let the Super Committee Fail

If the committee fails to enact savings of $1.2 trillion (including interest), the law calls for a sequester that, together with the committee’s actions (if any), would cut spending by $1.2 trillion, half from defense and half from nondefense. Although not all of this second tranche needs to come from discretionary spending, it would once again take the brunt of the cuts because of the exemption of Social Security, Medicaid, and some other entitlement programs, a limit on cuts to Medicare, and no provision for new revenues.

CBO estimates that the proportion borne by discretionary programs would be 71 percent and the proportion borne by nonexempted mandatories would be 13 percent (with the remainder taking the form of debt service savings). These new cuts would begin in 2013 and would be on top of the initial reduction achieved by reducing the caps in the first tranche. Thus, total discretionary spending would be reduced by about $1.6 trillion.

This scenario may seem quite reasonable to many members of the public. After all, people are justifiably disgruntled with government. They believe that a lot of money is wasted or spent ineffectively; they are suffering from a depressed economy, and they have little idea of exactly what the government does with their tax dollars. With this in mind, it is useful to look at these discretionary programs in a little more detail, focusing especially on the nondefense portion. (It’s a lot easier to imagine what defense dollars go for — weapons systems, the armed forces, and related expenses.)

What the Budget Control Act Means for U.S. Defense

The roughly $600 billion spent on nondefense domestic discretionary programs in 2012 is a relatively small part of what the federal government spends every year. It accounts for only 18 percent of the total, but includes everything from education and the environment to transportation, housing assistance, veterans' health care, and the FBI.

To help people better understand what this 18 percent is spent for, I categorize the total into four areas according to their purpose, broadly defined. One is programs that address the competitiveness gap that the president has frequently cited. This includes investments in education, training, infrastructure, and research. The second area is programs that help the disadvantaged, such as housing vouchers for low-income families and nutrition assistance for low-income women and their babies. The third is programs devoted to protecting the public - including the safety of the food supply, prescription drugs, airlines, nuclear plants, highways, workplaces, and patrolling the nation's borders - along with disaster relief. The final is programs for veterans, especially their health care. If one were to wall off these four areas from cuts, there wouldn't be a lot left from which to cut.

I estimate that out of the total nondefense domestic discretionary spending in 2012, 44 percent was for competitiveness purposes (mostly education, training, and transportation), another 12 percent was for low-income programs, 13 percent was for public safety and disaster relief, and 11 percent was for veterans. The remainder totals about $145 billion. That $145 billion may sound like a lot of money (and it is) but it is only 4 percent of total federal spending. I compare it to total federal spending since most of it is what I would call "overhead" - salaries and office space for the people who run the government, administer the laws, promulgate and enforce the regulations, prepare Social Security checks, monitor fraud, respond to Congressional and citizen requests, and so forth. Even relatively efficient organizations have overhead rates that are as high or higher than 4 percent.

Help Wanted: A Left-of-Obama Voice on the Federal Budget

Some important caveats: any exercise of this sort is no substitute for the kind of careful scrutiny of what actually goes on within each line item in a budget and allocating programs across these five categories is somewhat subjective. Are there efficiencies to be had and activities that could be privatized, consolidated, devolved to lower levels of government, or done away with entirely?

Undoubtedly. Still, the kind of cuts the BCA has imposed will necessitate some extraordinarily tough choices and make it very difficult if not impossible to protect veterans, low-income families, public safety or "investments" in future growth. Moreover, cutting “overhead” - for example, such expenses as the administration of Social Security or disability benefits, will lead to some combination of poorer service for beneficiaries and inappropriate payments.

In sum, assuming that the members of the Joint Committee are unable to agree to an alternative set of actions, a sequester of these domestic discretionary programs on top on the caps already enacted are going to force draconian cuts in this relatively small portion of the budget. Those who are willing to accept such cuts should worry about the likely effects on our competitiveness, on the disadvantaged, on public safety, on veterans, and on the ability of the federal government to responsibly administer a wide variety of laws and programs in a way that does not lead to greater fraud and abuse. Instead, the debate badly needs to shift to the over $1 trillion we "spend" (through the backdoor) on tax subsidies, and the $1.5 trillion that funds just three big programs: Social Security, Medicare, and Medicaid. If we are serious about fiscal discipline, everything needs to be on the table. Everything.

The views expressed in this article are solely those of Isabel V. Sawhill.
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Topics: Economy • Politics

soundoff (8 Responses)
  1. GOPisGreedOverPeople

    Just think. When the GOP regain power, they will start a war with Iran (totally unfunded of course). Then they will draft all the poor people to fight(die) in the war (just like the GOP wants) and give "no bid" contracts to the rich people. Killing two birds with one stone!!! Then we can use Iran's oil to pay for the war. And when the war is over, Iran will sell us cheap oil!!! Just like Iraq........Oh wait........Never mind.

    November 18, 2011 at 2:21 pm | Reply
    • BAM

      Iraq hasn't sold us one barrel of "cheap oil" as you can see by the price of gas at over 3.50 a gal. When Bush was in it was $1.87 a gal...

      November 21, 2011 at 8:11 am | Reply
    • BAM

      By the way its Democrats that like to draft people–you might want to go back to school & study history president Johnson expanded the war. He didn't get us out of it....geeezzz

      November 21, 2011 at 8:14 am | Reply
  2. Onesmallvoice

    Anybody with an IQ of no more than 10 would know that we desperately need to cut the defense spending and get us out of all these stupid wars overseas. The people on this so-called "super committee" are only displaying just how stupid they are, the morons!!!

    November 18, 2011 at 7:37 pm | Reply
  3. j. von hettlingen

    Only $600 billion spent on nondefense domestic discretionary programs – 18% of the total federal spendings.

    November 19, 2011 at 3:54 pm | Reply
    • j. von hettlingen

      Only a fraction is spent on education, training and R&D etc..

      November 20, 2011 at 9:47 am | Reply
    • j. von hettlingen

      Party politics will dominate the agenda of the super committee, national interests are secondary!

      November 21, 2011 at 8:03 am | Reply
  4. Don Pellicano

    Mayor Bloomberg lambasted President Obama and Congress. He asked President Obama to step up to the plate on taxes by having the haves and have nots to shoulder more taxes. I was very impressed by what he said and how he said it. In my dreams I think he should run as a third party candidate promising one term only. He then he could find candidates for congress and the senate to sign a pledge to negotiate.

    November 21, 2011 at 9:52 pm | Reply

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