The general expectation is that this November’s election results will produce a political situation that is ripe for more budget cutting. The combination of a new Republican majority in the Senate combined with the continuing (and probably slightly larger) GOP majority in the House will mean that federal spending will be under even more pressure the
But there are actually four reasons why the opposite needs to be considered. Federal spending on programs over which Congress has control each year – i.e., military and domestic appropriations – are at least as likely to be increased as they are to be reduced.
1. The Deficit. As I’ve been pointing out for several weeks (here, here, and here), the federal deficit has fallen precipitously in recent years and is now below what had been forecast both in dollar terms and as a percentage of GDP. The deficit is projected to keep falling over the next few years to levels that may be harmful to the U.S. if the economy remains sluggish, if the private sector continues to deploy its mountain of cash in nonproductive ways and if global growth remains questionable.
It’s entirely possible, therefore, that the lower-than-expected deficit will provide members of Congress with the room they need to increase spending. Yes, this means the deficit will be higher than the latest forecasts are assuming, but it could still be kept on a downward path and be below previous projections. In addition, a Republican-spurred higher would be more politically acceptable than one that comes from Democrats (See Reagan, Ronald; and Bush, George H. W. and George W.).
2. The Pressure For More Military Spending. The military community was pushing for bigger budgets even before ISIS. Now that there are actual hostilities, that pressure is intensifying even further.
The major question may well be whether Congress and the Obama administration are willing to increase military spending without also providing an increase for domestic spending. With the White House holding the ultimate trump card – the veto that neither house of Congress will have the enough votes to override – the chances are that an increase for the Pentagon will also mean an increase for domestic agencies.
3. Sequestration. After a brief hiatus, sequestration – the automatic cuts that occur when spending is projected to exceed the limits set for the year – will return this January and be in place through 2023. As was the case two years ago when the deal put together by Senate Budget Committee Chairwoman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan made sequestration unnecessary, there will be widespread eagerness next year to eliminate the threat of annual automatic reductions. The most likely way to do this will be to raise the caps so that sequestration can’t be triggered and that means more spending.
This is another case of military spending proponents making it more likely that domestic spending will be raised. The overwhelming likelihood is that whatever happens on Pentagon spending will be duplicated on the domestic side regardless of whether that means postposing or eliminating sequestration or raising the spending caps.
4. Ebola. The fact that the Ebola situation has quickly become a political issue in the United States is anything but a shock. What has been a bit surprising is how quickly the political problem has also become a budget issue with charges about cuts to the Center for Disease Control and the National Institutes of Health becoming a big part of the discussion.
This almost certainly will result in higher spending for CDC and NIH not just in fiscal 2016 but also for the current fiscal year. Other activities like nurse and doctor training and hospital readiness for pandemic-like situations may also be included.
It also would not be surprising at all if virtually every federal department now claims some role for itself in dealing with Ebola-like challenges. For example, it’s not at all hard to imagine the Departments of Agriculture, Defense, Education, Health and Human Services, Homeland Security, Labor, State and Transportation all claiming some responsibility for dealing with a threat like this. The result would be more domestic spending.
The four reasons for more spending next year could easily blend together. For example, the caps could be raised to deal with ISIS and Ebola or funding for some department and agencies could be made exempt from sequestration. Both alternatives would, of course, increase the deficit.
But no matter what the reason or method, federal spending would be higher than it’s currently estimated to be.
