Varney: Discretionary Spending Is “Totally Out Of Control”

Varney Claims Discretionary Spending Is “Out Of Control,” Citing Medicaid And Food Stamps. After playing a clip of Senator Mary Landrieu (D-LA) saying “I am not going to keep cutting the discretionary budget, which, by the way, is not out of control, despite what you hear on Fox News,” Fox's Stuart Varney said:

VARNEY: I'll tell you where we start -- Senator Landrieu is wrong. She says discretionary spending is not out of control. I'm sorry senator, it is totally out of control. We spent a trillion dollars on this discretionary spending in the year 2011. And it's going to go up 80 percent in the next 10 years. Food stamps spending, doubled. That's discretionary spending. What else do we have? Medicaid, up 37 percent in the last 3 years. Out of control spending. The senator is flat-out wrong. [Fox News, Fox & Friends, 1/30/13]

Varney's Examples Of Soaring Discretionary Spending Are Wrong

Varney's Examples Of Medicaid And Food Stamps Are Mandatory Spending, Not Discretionary Spending. A Congressional Research Service report on mandatory spending since 1962 explains the difference between mandatory spending, which includes Medicaid and food stamps, and discretionary spending, which includes defense:

Federal spending is divided into three broad categories: discretionary spending, mandatory spending, and net interest. Mandatory spending is composed of budget outlays controlled by laws other than appropriation acts, including federal spending on entitlement programs. Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending. Other mandatory spending programs include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), unemployment insurance, some veterans' benefits, federal employee retirement and disability, and Supplemental Nutrition Assistance Program (SNAP). In contrast to mandatory spending, discretionary spending is provided and controlled through appropriations acts. Net interest spending is the government's interest payments on debt held by the public, offset by interest income that the government receives.

In FY2011, mandatory spending accounted for over half of total federal spending and over an eighth of GDP. Social Security accounted for a fifth of federal spending. Medicare and the federal share of Medicaid, the fastest growing components of mandatory spending, together accounted for 23% of federal spending. [Congressional Research Service, 3/23/12]

CBO: Spending On Food Stamps Will Decline Over Next Decade. In an April 2012 report, the Congressional Budget Office (CBO) projected that:

Spending (mostly for benefits and administrative costs) on SNAP in 2022 will be about $73 billion, CBO projects. In inflation-adjusted dollars, spending in 2022 is projected to be about 23 percent less than it was in 2011 but still about 60 percent higher than it was in 2007. [Congressional Budget Office, April 2012]

In the overview of its report, the CBO included the following graph showing a projected decline in SNAP spending:

[CBO, 4/19/12]

Government Spending On Health Is Increasing Because Health Care Costs Are Soaring. Health care spending is the only category of federal spending projected to grow substantially over the next two decades due to soaring health care costs. And government health insurance programs, including Medicaid, are more efficient than private sector insurance. [Media Matters, 1/8/13]

Non-Defense Discretionary Spending Has Been Cut To Its Lowest Level In 50 Years

CBPP: Non-Defense Discretionary Spending To Shrink To “Its Lowest Level” As A Share Of GDP “Going Back To 1962.” The Center on Budget and Policy Priorities (CBPP) explained that the 2011 Budget Control Act helped cut discretionary spending by $1.5 trillion over 10 years:

Two-fifths of the $1.5 trillion in savings from cutting and capping funding for discretionary programs comes from defense, while the other three-fifths comes from reductions in domestic and international programs.  These reductions will shrink non-defense discretionary spending to its lowest level on record as a share of GDP, with data going back to 1962.

The CBPP report included the following graph:

[Center on Budget and Policy Priorities, 11/8/12]

Discretionary Spending Projected To Decline Then Remain Flat. A post on The Washington Post's Wonkblog featured a chart from the Bipartisan Policy Center which shows that discretionary spending is projected to decline over the next decade and then remain flat:

[The Washington Post, Wonkblog, 1/7/13]

And Economists Say Further Spending Cuts May Harm The Economy

Krugman: Europe Shows That “Slashing Spending When You Still Have A Depressed Economy Is Really Destructive.” During an appearance on MSNBC's Morning Joe, Nobel Prize-winning economist Paul Krugman said that the lesson from Europe's experiment with austerity that applied to the U.S. economy is that “slashing spending when you still have a depressed economy is really destructive.” [MSNBC, Morning Joe, 1/29/13]

Economist Menzie Chinn: “A Front Loaded Fiscal Contraction, Heavy On Spending Cuts” Would Make The “Current U.S. Recovery Worse Than That Of The Great Depression.” Comparing the U.S. economy to that of the United Kingdom, University of Wisconsin economist Menzie Chinn writes on the blog Econbrowser:

[W]e too can make the current US recovery worse than that of the Great Depression; just implement a front loaded fiscal contraction, heavy on spending cuts. Furthermore, in order to maximize the contractionary impact, harass the monetary authorities to tighten policy by inciting fears of high inflation (à la Rep. Paul Ryan), when year-on-year inflation as measured by the personal consumption expenditure deflator is 2.1%. [Econbrowser, 5/3/12]

Reich: “Cutting The Budget Means Fewer Workers.” Former Labor Secretary Robert Reich wrote on his blog that cutting the budget will lead to job losses:

When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. [RobertReich.org, 2/3/12]

Wash. Post Wonkblog: IMF Study Found “A One Dollar Change In Government Spending Could Knock As Much As $1.80 In Output From The Economy.” A post on The Washington Post's Wonkblog noted that a recent International Monetary Fund study found that “budget cuts hurt growth a lot” and continued:

A new study (pdf) by the International Monetary Fund raises a further warning flag for fiscal cliff negotiators in the U.S. In what it bills as the first-ever study of its kind, the fund analyzed decades of data on the world's major industrialized countries to estimate how changes in government spending or revenue affect economic output.

The news isn't good. Given current circumstances, with a U.S. economy that is growing but still trying to make up lost ground from the 2008 crisis, a one dollar change in government spending could knock as much as $1.80 in output from the economy -- what fund researchers called a “statistically significant...and sizeable” outcome. [The Washington Post, Wonkblog, 12/5/12]