Federal Dysfunction Results in Surprise End to Austerity Era

By Doug Wertman (Flickr: Beaver Lake Dam – Floodgates Open) [CC BY 2.0], via Wikimedia Commons

February 9, 2018; Washington Post and the New York Times

A long time ago, way back in December 2017, the New York Times headline read, “Heading Toward Tax Victory, Republicans Eye Next Step: Cut Spending.”

That thinking is so 2017. It’s two months later, and there will be a lot of ink spilled on the budget that was passed. And, to be sure, a lot remains unresolved, including the fate of the 690,000 undocumented immigrants brought to the United States as children who call themselves “Dreamers.” But, on the budget itself, one message stands out: The era of federal austerity has been severely interrupted, if not ended entirely.

Ironically, this has happened under unified Republican Party government—you know, the alleged “party of small government.” Well, maybe not. Bottom line, Republicans wanted to increase defense spending more than they wanted to cut government spending overall, and they were also willing to allow increased spending on domestic programs to get a budget passed.

Federal nondefense discretionary spending has long been in decline. Between 2010 (admittedly the peak of stimulus spending) and 2016 (last year where final figures are available), domestic discretionary spending fell from 4.4 percent of gross domestic product to an estimated 3.3 percent, a 25 percent decline relative to the size of the economy. In terms of (inflation-adjusted) dollars, spending fell from $648.3 billion in 2010 to $534.3 billion in 2016, a 17-percent drop.

The new budget decisively ends this austerity policy. Overall, domestic discretionary spending is expected to increase from an estimated $539 billion in 2017 to $591 billion in 2018 and $605 billion in 2019, the New York Times reports. Nonprofits that might have expected major cuts could instead see increases for the first time since the early Obama stimulus years.

As Heather Long and Jeff Stein in the Washington Post point out, “the deal includes more money for areas including child care, college affordability and infrastructure. There is also additional money going to fund the Internal Revenue Service and Social Security Administration, so there will be more staffers to help Americans who need help with paperwork.”

“Federal health programs,” Long and Stein explain, “get much-needed funding… [including] billions of dollars for several key health-care priorities—funding community health centers for two years [totaling $7 billion], extending the Children’s Health Insurance Program for an additional four years [for a total of 10 years], and staving off several cuts to Medicare and Medicaid.” The budget also commits an extra $2 billion a year in 2018 and 2019 to help reduce the healthcare backlog at the Department of Veterans Affairs. The money for the nation’s 2,000-plus network of community health clinics, which provide care for 26.5 million Americans, is particularly welcome, as these clinics had been threatened with closure.

“The deal,” Long and Stein add, also allocates “$6 billion over two years to fight the opioid crisis with new grants, prevention programs and ‘law enforcement efforts’ across the country. States with the highest mortality rates would get the most federal dollars.”

“All I can say is the obvious: It’s great to get the funding for these finally nailed down,” said Tim Jost, a health-care expert at the Washington and Lee University School of Law. “It finally brings stability to some very important healthcare programs.”

The budget also provides “nearly $90 billion in disaster relief for Puerto Rico, the U.S. Virgin Islands, Florida and Texas…more than double what the Trump administration initially requested.” The money still is likely insufficient for the need though. Puerto Rico Governor Ricardo Rosselló had estimated Puerto Rico’s need to be as high as $94 billion; the $16 billion of the $90 billion that is slated for Puerto Rico helps, but falls far short of that amount.

Other specific allocations, as noted in the New York Times, include $20 billion for infrastructure projects, $5.8 billion for the Child Care Development Block Grant program, and $2 billion for National Institutes of Health (NIH) research.

And how is this all paid for? Alicia Parlapiano in the Times notes that the combination of tax cuts, increased defense spending, and increased domestic discretionary spending is expected to increase total federal borrowing to $1.2 trillion by 2019, roughly double the 2016 level.

Whether it proves economically wise for the federal government to enact a de facto stimulus package when unemployment is at a 17-year low remains to be seen. But while the budget bill is anything but a triumph of good government, many nonprofits will welcome the unexpected funding boost, even if that boost is primarily a result of federal government dysfunction rather than representing a newfound consensus to fund domestic needs appropriately for the long haul.—Steve Dubb