The idea that the United States has an out of control spending problem has gripped Washington D.C. for most of the economic recovery, and nowhere is that more evident than in recent budget negotiations, where the conversation has been almost solely about when budgets will balance and by how much they will reduce the debt. House Republicans offered a budget that contains draconian levels of spending cuts to domestic spending, other Republicans, like Kentucky Sen. Rand Paul, offered even bigger cuts.
The government, however, has no such spending problem, according to the Congressional Budget Office. Excluding wars and disaster relief funding, in fact, America’s discretionary spending has grown at a slower rate than inflation since 2007 and now makes up a smaller share of the economy than it did before the Great Recession, CBO director Doug Elmendorf wrote today:
Excluding appropriations for those purposes, discretionary budget authority rose from $892 billion in 2007 to $987 in 2013, an increase of about 11 percent. During that period, prices (as measured by the consumer price index for urban consumers) rose by 13 percent, and nominal gross domestic product (GDP) increased by 16 percent. As a result, discretionary appropriations—based on the House-passed appropriations for 2013 and excluding funding for overseas contingency operations and hurricane relief—declined by 2.2 percent in real (inflation-adjusted) terms between 2007 and 2013 and dropped from 6.4 percent of GDP to 6.2 percent of GDP over that period.
As we’ve pointed out before, spending levels have plateaued in recent years as Washington has focused on reducing debt and deficits, and that has resulted in a slower economic recovery from the recession. Government spending has typically driven recoveries in the past; this time, spending cuts have hampered recovery efforts. Further spending cuts to programs that help Americans stay on their feet would only exacerbate that problem.
With low borrowing costs and high unemployment, the U.S. has a chance to make investments that help boost growth and put more people back to work. Instead, too many lawmakers are focused on preventing a spending and debt crisis that doesn’t actually exist.