Foundation

The Budget Control Act Saved $7,400 per Household, Reset Spending on Lower Path

by Demian Brady / /

In 2011, a Republican House majority, Democratic Senate majority, and a Democratic president passed legislation that is on track to save taxpayers more than $16,000 per household by 2021. But here in 2017, a Republican House majority, Republican Senate majority, and a Republican president threaten to wipe away some of those savings if they succeed in dismantling restraints instituted through the Budget Control Act of 2011 (BCA).

The President’s budget, competing Congressional budget resolutions, and the military reauthorization bill passed by the House, would all exceed the FY 2018 caps on defense, setting up a budget battle down the road. Lawmakers should step back and consider what has been achieved before sweeping away reforms that instituted real, enforceable limits on spending, and lead to savings of $7,400 per household through 2017. Overtime these will grow, amounting to $16,463 per household by 2021 … if the limits are kept in place.

In 2015, The Congressional Research Service (CRS) sought to ferret out how the BCA reduced the budget baseline as a result of its spending caps and automatic sequestration. Together, the reforms reduced baseline outlays by over $1.6 trillion. Savings from debt interest payments contributes an additional $276 billion to the total, bringing the net savings to over $1.9 trillion.

Along with the gradual economic recovery, and the winding down of the of so-called “stimulus” spending, the BCA was a contributing factor in reducing spending as a share of GDP. Despite Congress watering down the discretionary caps and evading limits on defense spending through Overseas Contingency Operations funding, the BCA nevertheless helped to reset the budget on a lower trajectory.

The charts below compare the actual total, discretionary, and mandatory outlays with the Congressional Budget Office’s (CBO) budget outlook in early 2011. CBO’s annual forecast provides a baseline of future spending based on current law.

  • Total actual outlays saw decreases in 2012 and 2013, only the second back-to-back nominal drop since the end of World War II.
  • Through FY 2016, outlays were lower than the forecast by an average of 9 percent, or $364 billion annually.
  • Discretionary spending has run 11 percent lower since 2011, while mandatory spending is 8 percent lower, but is projected to continue to increase as a share of spending.

The economy and budget have improved since 2011, but significant challenges remain. As a share of the economy, federal spending is still running higher than the historical average. In its most recent outlook, CBO projects that federal debt will grow by $11 trillion over the next ten years. Worse, there are factors that will likely pile the debt load even higher than the projection.

As lawmakers finalize the FY 2018 budget and figure out how to address the October debt ceiling deadline, they should not be so quick to wash away most significant budget reform achievement in recent memory. Instead, Republicans and Democrats should be working together to find ways to reduce wasteful spending, as NTU Foundation and the U.S. Public Interest Research Group did in our Common Ground report that identifies $260 billion of deficit reduction recommendations with appeal from across the political spectrum.


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