Discretionary Spending

Victoria Newbill

AP Gov

Discretionary spending encompasses a wide range of programs and is not easily characterized. About half of discretionary spending goes towards defense, and the other half is spread across programs like education, health, transportation, energy, justice, and community development. Much of our public investment is made through discretionary spending, as is most of the spending on "public goods"-programs that benefit the country as a whole, rather than just a single individual or household. The Budget Control Act was passed in 2011 to fix the fiscal crisis, but it tried to cut spending too quickly and focused on the wrong kind of spending. What it ended up doing was cutting off support for a struggling economy right when it needed public funding the most. Discretionary spending has fallen to its lowest level in decades. In fiscal year 2013, discretionary spending amounted to just 7.6 percent of GDP, down from 12.6 percent five decades earlier. If the sequester remains in place, this trend will continue. The Congressional Budget Office (CBO) estimates that discretionary spending will amount to just 5.5 percent of GDP in 2023-the lowest level in the postwar era. The Office of Management and Budget tracks a category of spending called "Total investment outlays for major physical capital, research and development, and education and training"-which is a pretty decent measure of government investment in infrastructure and human capital. Over the past 50 years, our spending on this type of investment has plummeted from 34.5 percent in 1963 to 15.0 percent in 2013. Congressional agreement on partially reversing the sequester would be a small but critical first step towards improving public investment. Long-term deficit reduction is undoubtedly one of our nation's biggest challenges, but the solution lies in cutting back entitlement spending and raising sufficient revenues, not pushing down discretionary spending far below historical lows.

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