Part III-A: What Should We Use for the Minimum Size of the Federal Government? (America Great Series; Taxes, Economy & Jobs)

For today, I will describe the U.S. Federal government budgeting process, break down federal spending based on the 2015 fiscal year budget, and determine a “minimum size of federal government” based on a rough consensus of economic plans and statements from the field of republican presidential candidates. In my next post, I’ll discuss the 2016 budget resolution from the House of Representatives in which the budget deficit would be eliminated within nine years (it may take a while before I can make that post – the budget resolution is 210 pages of descriptions and tables).

In order to figure out the number of jobs that would be lost from a cut in government spending, we need to know the size of that cut. For 2015, the federal government spent $3.68 trillion to pay for the expenses dictated by law, as determined by appropriations bills passed by Congress and signed by the president. That spending falls into three categories: Interest on Federal Debt ($229 billion, 6.03%), Mandatory Spending ($2.45 trillion, 64.63%), and Discretionary Spending ($1.11 trillion, 29.34%). I’ll provide more detail on the spending categories a bit later, but first I wanted to give a primer on how those appropriations bills become law.

The Budget Process in the United States
1. The President submits a detailed budget request to Congress by the first Monday in February for the fiscal year which begins in October of that year;
2. Congress holds hearings to question administration officials about their requests and then develops its own budget plan which is called a “budget resolution;”
3. Congress passes annual appropriations bills to authorize disbursements to federal agencies in the amounts outlined in the budget resolution;
4. The President signs the appropriations bills which thus become law.

Current Breakdown of Spending
Based on the 2015 fiscal year budget, the government spends $3.68 trillion as follows:
Social Security, Unemployment & Labor: $1.28 trillion (33.26%)
Medicare & Health: $1.05 trillion (27.42%)
Military: $609.3 billion (15.88%)
Interest on Debt: $229.15 billion (5.97%)
Veteran’s Benefits: $160.63 billion (4.19%)
Food & Agriculture: $135.7 billion (3.54%)
Education: $102.26 billion (2.67%)
Transportation: $84.99 billion (2.22%)
Housing & Community: $61.48 billion (1.60%)
International Affairs: $50.22 billion (1.31%)
Energy & Environment: $44.85 billion (1.17%)
Science: $29.81 billion (0.78%)

The U.S. Treasury divides all federal spending into three groups: mandatory spending, discretionary spending and interest on debt. The breakdown:

Mandatory Spending
Social Security, Unemployment & Labor: $1.25 trillion
Medicare & Health: $985.74 billion
Military: $10.81 billion
Veterans Benefits: $95.31 billion
Food & Agriculture: $122.57 billion
Education $0
Transportation $58.7 billion
Housing & Community $0
International Affairs $0
Energy & Environment $0
Science $0
Other $0
Government $0
TOTAL: $2.57 trillion

Discretionary Spending
Social Security, Unemployment & Labor: $29.13 billion
Medicare & Health: $66.03 billion
Military: $598.49 billion
Veterans Benefits: $65.32 billion
Food & Agriculture: $13.13 billion
Education $69.98 billion
Transportation: $26.28 billion
Housing & Community: $63.24 billion
International Affairs: $40.94 billion
Energy & Environment: $39.14 billion
Science: $29.7 billion
Other: $58.18 billion
Government (split among the departments listed above): $72.89 billion
TOTAL: $1.11 trillion

Since I’m evaluating the economic plans for the republican presidential candidates in this post, I will make the “minimum size of federal government” decisions based on the general consensus of candidates’ campaign promises. In general, the republican candidates have indicated that they would cut the size of the federal government, but end the sequester cuts to the military and increase support to seniors, veterans, Israel, and energy exploration. In addition, all candidates would repeal and replace ObamaCare. Based on these statements, I formulated the following assumptions to calculate the amount of money to cut, if any, from every discretionary line item in the 2015 federal budget. I also assume some partisan actions. Guidelines:
1. Cut programs which benefit likely Democratic voters (e.g., mass transit) more than those for likely Republican voters (e.g., farm income stabilization);
2. Don’t cut programs that benefit seniors or veterans;
3. Cut programs with a regulatory component to reduce regulation;
4. End the sequester funding cuts to the military;
5. No cuts to programs which help businesses;
6. Cut environmental programs;
7. Don’t cut law enforcement programs;
8. Don’t cut aid and military guarantees to Israel;
9. Repeal and replace ObamaCare.

Minimum Size of Federal Government
Since spending from the Mandatory category is off-limits, how do these guidelines reduce the $1.11 trillion Discretionary spending?

Discretionary Spending: 1.11 trillion
minus $102 million from National Defense
minus $31.8 billion from International Affairs
minus $24.636 billion from General Science, Space & Technology
minus $2.152 billion from Energy
minus $23.687 billion from Natural Resources and Environment
minus $639 million from Agriculture
minus $2.654 billion from Commerce and Housing Credit
minus $931 million from Transportation
minus $5.83 billion from Community & Regional Development
minus $20.568 billion from Education, Training, Employment & Social Services
minus $3.039 billion from Health
minus $0 from Medicare
minus $12.484 from Income Security
minus $0 from Social Security
minus $0 from Veterans Benefits & Services
minus $630 million from Administration of Justice
minus $2.089 billion from General Government
plus $100 billion to bring Military back to 2011 funding level
EQUALS $1.083 trillion

Together, these assumptions represent a total reduction in government spending of $31.241 billion and a total budget of $3.65 trillion instead of the $3.68 trillion for the 2015 budget, a 0.8% reduction. Note that using these assumptions, there would be no or greatly reduced federal spending on science research, environmental protection and cleanup, foreign aid other than Israel, housing & community, international peacekeeping, and many other programs.

Additional federal government savings could come from a repeal and replacement of ObamaCare, however, that is by no means a given. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) – excluding the effects of macroeconomic feedback which is the norm for CBO evaluations – concluded that a repeal of the Affordable Care Act (ACA) – commonly known as ObamaCare – would increase the federal deficit by $353 billion over the next 10 years. The increased economic activity that the CBO & JCT expect to result from a repeal of the ACA would generate $216 billion over that same period leaving a net deficit of a repeal of $127 billion. Without detailed information on a replacement plan, it is impossible to estimate its affect. Consequently, I will not address the repeal of ObamaCare in the “minimum size of government” calculation because there is not enough information to determine a replacement program’s effect and because its repeal alone would increase the size of government.

The Minimum Size of the Federal Government that I will use to determine the effect of budget cuts on jobs and the economy is $3.65 trillion.

I will upload a spreadsheet next week with the information showing the amounts I cut from each discretionary line item and my reasoning.

Next Time: Part III-B: An Evaluation of the 2016 House of Representatives Budget Resolution

About tonyj126

I'm a 50+ married man who always seems to have a large backlog of work to do, but also a lot of flexibility in my schedule. Much of the work I do is volunteer or taking care of extended family members. I suffer from, as my priest calls it, "the sin of self-sufficiency," which means I can figure out how to do most things myself, and consequently, reduce the need for community to solve problems. As a logical extention (at least to me), I find myself called to comtemplate the country's and the world's woes and offer my observations. I hope someone out there will find them useful.
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