Putting $800 Billion in Context

Putting $800 Billion in Context

Posted by Bryan Berky on 05/15/2017

$800 Billion in PerspectiveIt has been reported that President Trump’s budget proposal will include $800 billion in entitlement cuts over the next 10 years – which would seem to be a yuge deal.  But the problem with DC math is that the numbers are so large that they can lose meaning.  This number needs to be put into an understandable context.

First, it appears that the Administration will define entitlements as mandatory spending programs – which is DC budget-speak for all the federal programs that are on auto-pilot and do not require an annual act of Congress to fund.  This includes Social security and Medicare, along with Medicaid, disability insurance, food stamps, unemployment insurance, veterans benefits, government and military pensions, and a handful of other programs.

Mandatory SpendingThe federal government is projected to spend $52.5 trillion over the next 10 years, nearly two-thirds of which ($34 trillion) falls under the mandatory spending category.   Given this substantial sum, the Administration is correct to look to mandatory spending to address our serious budget problems.

Proposed Cuts in ContextHowever, just like 6’4’’ can be the tallest man in the office but just a point guard in the NBA - $800 billion has the appearance of significance but is only a miniscule amount when placed in the proper context. $800 billion is really only a 2 percent cut to the $34 trillion that will be spent on mandatory programs over the next decade.  Not so impressive anymore.

To illustrate how small $800 billion is within the context of our nation’s debt issues, let’s compare the amounts to a family saving for down payment on a house or a vacation.  

If the goal is to save $38,500 for a down payment, cutting $800 billion out of the projected $9.4 trillion debt increase in the next decade is the same as saving $3000 for the house – not even 10 percent of the way there.  Or, if a family is trying to save $4000 for a family vacation to Disney World, the announced cuts are the equivalent of $320 bucks.  Say goodbye to Mickey.  

Alternatively, if the goal is to balance the budget 10 years from now – which is currently projected to be a $1.4 trillion deficit – the planned $800 billion in mandatory cuts are still a long ways off.   Using the same comparisons, we are only at the equivalent of $4,400 for the down payment and $457 towards Disney World.1  Renting and camping is still in our foreseeable future.  

It is great to see the Administration begin to address our serious deficit issues.  But, the amount of savings that will be necessary to get to a sustainable budget must be much larger.  And to get to those larger numbers everything must be put on the table.

That is why it is so unfortunate that President Trump plans to stick with his campaign speeches to not touch Social Security and Medicare in his upcoming budget proposal.  $21.7 trillion of the $34 trillion in 10 year projected mandatory spending is in just Social Security and Medicare.  These two programs alone “drives nearly three-quarters of the growth in mandatory spending” over the next decade.  

Budget ProblemsNot touching Social Security and Medicare is the equivalent of not touching our budget problem.  And not touching our budget problem is the equivalent of forcing the next generation to pay for these excesses at the expense of their own economic livelihood.  The budget proposal can do a lot more to produce mandatory savings than just the announced $800 billion over the next 10 years.  If lawmakers want future generations to have the same opportunities past generations have had, addressing our budget problem is a must.

1. This assumes that 20 percent of the $800 billion will occur in year 10 – which estimated based on the CBO score of the Medicaid cuts in the American Health Care Act that had 17 percent of the total savings occur in year 10.

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Bryan BerkyBryan Berky
Executive Director
Bryan joined Restore Accountability in 2017 and provides expertise and commentary on today's important issues. Previously, he spent seven years on Capitol Hill working as a policy advisor for Senator Tom Coburn and Senator James Lankford...FULL BIO