Economy

5 Charts That Explain Why Obama Wants To End Automatic Spending Cuts

CREDIT: AP/Mandel Ngan

Obama delivers the 2015 State of the Union address

In the budget President Obama released on Monday, he will call for spending levels that are 7 percent, or $74 billion, higher than current caps set in place by across-the-board automatic spending cuts known as sequestration. That would mean spending $561 billion on defense and $530 billion on non-defense programs.

Sequestration requires these cuts to adhere to caps for a decade. It wasn’t meant to go into law; rather, it was meant as a threat to get lawmakers to come up with a deal to reduce the deficit in 2011. But when Congress failed to come to such an agreement, the caps went into effect starting in 2013. Last year, Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) reached a budget deal that eased some of the cuts (although not all of them) through November of this year but would allow them to come back into effect after that. The effects have been wide-ranging, impacting the elderly, preschoolers, scientists, defense employees, low-income renters, domestic violence victims, and others.

This deal was meant to reduce the deficit by $2 trillion amid concerns that it was on an unsustainable path. But things have changed significantly since then.

When lawmakers were seeking a grand bargain on the budget and the deficit, spending was elevated thanks to the economic crisis. But as the economy has slowly recovered, the funding that was needed to meet increased need for things like unemployment benefits and food stamps has fallen. Spending on discretionary programs, which is what sequestration cuts, has fallen particularly low and is at the lowest point since 1965:

CBO discretionary spending

CREDIT: Congressional Budget Office

It’s also projected to remain low over the next two decades.

The deficit has also fallen significantly in that time. It fell faster in 2013 than in any year since World War II. It dropped from $1.1 trillion in 2012 to $680 billion in 2013.

NYtimes deficit

CREDIT: New York Times

It was declining even before sequestration went into effect, however, and has continued to decline rapidly last year and this year without the caps fully in place. The Congressional Budget Office estimates that this year’s deficit will be smaller than last year’s and will be the smallest relative to GDP since 2007.

CBO deficit

CREDIT: Congressional Budget Office

While it’s expected to grow again after holding steady for the next three years, it’s not projected to balloon to crisis-era levels.

Those worried about economic growth should also be wary of austerity. In the United Kingdom, for example, austerity missed its targets.

Reset-chart-3

CREDIT: Center for American Progress

And here at home, sequestration’s austerity wasn’t even necessary to achieve deficit reduction targets in the first place. Instead, it has been estimated to reduce GDP.

Reset-chart-61

CREDIT: Center for American Progress

Obama’s budget request marks a real departure, given that he endorsed deficit reduction in 2010, mentioning it in his State of the Union address. But while Republicans initially tried to pin sequestration cuts on Obama, they’ve since come to own them and advocate for keeping them.