William_T._Bianco,_David_T._Canon]_American_Polit

Tools and theories of economic policy 553

Second, on the other side of the Keynesian coin, tax increases or spending cuts

during good economic times are much more difficult to implement than tax cuts or

spending increases, which are more politically popular. Although the latter are limited

by the difficulty of timing these fiscal policies to have a maximum economic impact,

the former are limited by politics: politicians do not like to raise taxes or cut spending.

Furthermore, even if politicians wanted to cut spending to influence the economy or

to reduce the federal deficit, it is becoming increasingly difficult to do so because a

growing portion of the federal budget is devoted to mandatory spending—that is,

entitlements such as Social Security, which must be spent by law, and interest on the

federal debt, which must be paid (if the United States defaulted on its debt, there would

be an international economic meltdown).

With the 2019 deficit projected at $973 billion, Congress would have to eliminate

all nondefense discretionary spending—spending that can be cut from the budget

without changing the underlying law, which is everything other than defense,

entitlements, and interest on the debt ($550 billion)—and 59 percent of discretionary

defense spending ($423 billion of $716 billion) to balance the budget.^42 This would

literally mean shutting down the State Department; Homeland Security; the Justice

Department, which includes the FBI and all federal law enforcement; and the Interior

Department, which includes the National Park Service and the National Forest

Service; and eliminating all spending on science, including the National Science

Foundation and NASA; transportation; the arts and public broadcasting; student loans;

and the food stamp and child nutrition programs. The share of the budget allotted to

discretionary spending is projected to fall from 13 percent of GDP in 1968 to only 5.5

percent by 2028 (see Figure 15.5). This has clear implications for efforts to balance the

budget in the future: it cannot be done through cutting discretionary spending alone

and will have to include cuts in mandatory spending (such as Social Security and

Medicare) and tax increases.

mandatory spending

Expenditures that are required by

law, such as the funding for Social

S ec u r it y.

discretionary spending

Expenditures that can be cut from

the budget without changing the

underlying law, which is everything

other than defense, entitlements, and

interest on the debt.

FIGURE

15.5

0

4

8

12

16

1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028

Net Interest

Mandatory

Discretionary

Actual Projected

Mandatory and Discretionary Spending, 1968–2028

The percentage of the budget allocated for discretionary spending has been shrinking since the 1960s. What implications does

this have for members of Congress and the president as they try to reduce the federal deficits?

Source: Congressional Budget Office, The Budget and Economic Outlook, 2018–2028, Figure 2-1, p. 45, http://www.cbo.gov/system/files/115th

-congress-2017-2018/reports/53651-outlook.pdf (accessed 4/24/18).

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