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Five Budget Numbers to Watch

By January 30, 2015May 6th, 2015No Comments

From CQ News article by George Cahlink, Jan. 29, 2015 

President’s Barack Obama’s first lame duck budget will be, in many ways, effectively moot as soon as it hits Capitol Hill Monday.

Some proposals, including tax increases and bids for expanded domestic spending, stand zero chance of becoming law, with Republicans now controlling the House and Senate.

However, the detailed fiscal 2016 blueprint should not be dismissed entirely. It will set the tone for this year’s battles on sequester spending cuts, possible changes in entitlement programs and the coming need to raise the nation’s debt ceiling and reduce the deficit.

Moreover, most of the budget’s thousands of line-items funding government are largely routine and will make it into the annual spending bills without changes, since lawmakers focus mostly on contentious requests and policy riders.

There are, however, some numbers that lawmakers will be paying attention to in the fiscal 2016 request, as they will drive what will and won’t happen in this year’s budget battles.

1) Number to Watch: $4 trillion. The federal budget could top $4 trillion for the first time in the nation’s history, a purely political milestone that opponents of federal spending will nonetheless seize on. Last’s year’s White House budget projected spending would break that barrier for fiscal 2016, although there’s a chance an improving economy could allow the request to stay below that figure.

Whatever the top number, Republicans will charge that the Obama White House is pushing federal spending to record levels. The administration will avoid mention of the overall figure and, instead, tout how federal spending as a share of the nation’s overall GDP remains flat. It will also likely argue increases in spending would fuel economic growth.

Almost all the growth in overall federal spending is expected in mandatory spending, which accounts for 60 percent of the budget, and is expected to increase from about $2.25 trillion for fiscal 2015 to $2.47 trillion in fiscal 2016. Mandatory spending, which includes entitlement programs, is authorized by federal law, not in the annual appropriations bills, and making major cuts to them would be a heavy lift for Congress.

2) Number to Watch: $1.016 trillion. Automatic spending cuts, known as sequester, return in full force for fiscal 2016. Federal law mandates that the discretionary spending caps be set at $1.016 trillion for fiscal 2016 with a proposed $523 billion for defense programs and $493 billion for non-defense programs. Those caps can only be increased if Congress finds offsets or revises the law.

In a White House fact sheet previewing this year’s budget, the administration says it will “outline how to end sequester and pay for these investments by cutting ineffective spending and closing ineffective tax loopholes.” Budget documents reviewed by CQ reveal that defense spending will be proposed at $35 billion above the cap, with a similar boost proposed for non-defense spending. What’s not clear is whether Congress and the White House will be able to fund that increase and still meet the overall budget caps. Administration calls to end tax breaks and use the revenue to raise the caps would face GOP resistance; while Democrats will refuse to trade domestic cuts for defense spending increases.

3) Number to Watch: $920 billion. With the sequester keeping discretionary spending virtually unchanged for fiscal 2016, any increases will come from growth of mandatory programs. The Congressional Budget Office forecasts the driver again being the $920 billion marked for the largest federal program, Social Security, which it expects to continue to grow at a rate of 6 percent annually over the next decade due to the growing elderly population. Neither party is likely to back significant changes to the politically popular retirement program, but there could be some bipartisan support for modest changes in how Social Security benefits are calculated to generate savings.

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4) Number to Watch: $467 billion v. $18 trillion. Once again, the administration will tout a shrinking deficit as a reflection of an improving economy. The CBO this week forecast the deficit for fiscal 2016 will be $467 billion, $1 billion less than the red ink expected for the current fiscal year. Republicans will counter with the legislative scorekeeper’s projection that the deficit will begin rising at a steady clip in 2017 and top $1 trillion by 2025.

Senate Budget Chairman Michael B. Enzi, R-Wyo., is more focused on reducing the nation’s far larger debt, which stands at about $18 trillion and the CBO expects to grow by $9 trillion over the next decade. He says the debt “is an anchor that will sink us if we don’t change course.” Enzi might use the need for Congress to raise the nation’s debt ceiling, now expected by early fall, to try to focus attention on the debt.

5) Number to Watch: $320 billion. Obama will propose $320 billion in new tax revenue over the next decade, which would include higher taxes on capital gains for upper-income taxpayers and a new tax on large financial institutions. The White House already knows those proposals are a non-starter with Republicans, but will offer them in the budget anyway to paint the GOP as protecting tax breaks for the wealthy and corporations. The administration already had to drop one small, controversial proposal before the budget was released. Even if the tax changes were enacted, they would have little impact, since they would amount to less than 1 percent of the overall $41 trillion in federal revenue expected over the next decade.

Learn more about CQ BudgetTracker: With access to real-time updates on a bill’s status, you will know whether it is moving or has stalled, and you can see funding differences between House and Senate versions and previous years’ versions.