Budget plan cuts spending by nickels and dimes

U.S. House Speaker Mike Johnson and the House of Representatives returned to session on Tuesday, looking for a way to fund the government in 2024 while trimming federal expenses. Two possible paths have emerged: cutting $16 billion through 12 appropriations bills or cutting $20 billion through an all-encompassing omnibus bill. In the context of overall federal spending, neither option would result in a decrease of more than 0.3 percent—or just 1.1 percent of the national deficit.

Why aren’t Republicans trying to cut more than that? Part of the answer stems from how the United States manages its expenditures. The federal government divides all its spending into two categories: discretionary and nondiscretionary. The legal distinction contributes significantly to the difficulty lawmakers face in shrinking the deficit year over year.

Discretionary expenses are those that the government isn’t obligated by law to pay. Nevertheless, vital expenditures—like transportation, regional development, natural resource cultivation, international affairs, defense spending, and even government salaries—fall under discretionary spending. Their amounts can be modified directly and must be reapproved on an annual basis.

Discretionary spending amounted to $1.7 trillion in 2023, representing a third of everything the government spent last year. Both plans currently before the House only cut discretionary spending.

“[Lawmakers] are cutting small things that make a big difference—like, for example, during COVID we paid for all school lunches for all children, but now that’s being rescinded, even though the cost of continuing free school lunches is modest,” said Linda Blines, an expert on budgeting and public finance and a professor at Harvard University.

Nondiscretionary expenses stem from obligations the government must pay. They make up two-thirds of the federal government’s outlays—a staggering $4.4 trillion in 2023. That includes programs like Social Security, Medicare, and payments on the national debt. To change the amount of nondiscretionary spending, lawmakers must modify the original terms of the obligations set forth in law.

For example, if the portion of the population 65 years or older goes up, the government’s preexisting commitment to Medicare mandates that the program should extend its coverage for those eligible. That, in turn, determines the cost. The consideration at play isn’t of a total sum, but rather the agreements the federal government has made for itself and how those agreements play out.

Nondiscretionary spending does not require congressional approval on a yearly basis, and is only getting more expensive.

“Our obligations are increasing, especially due to demographics driving entitlement, debt service, rising veterans’ expenses, and defense spending, which is highly dependent on for-profit defense contractors,” Blines said.

Reform of entitlement programs such as Medicaid, Medicare, and Social Security remains unpopular among voters, many of whom fear changes to social safety nets. According to a poll put out by the Associated Press and the University of Chicago last year, almost 80 percent of Americans opposed reducing benefits from Social Security or changing the standards for eligibility.

Some political figures have increasingly singled out entitlements as a concern. This past year, Republican presidential candidates Vivek Ramaswamy and Chris Christie both argued that meaningful spending cuts would necessitate a rework of many of these programs.

“Look, if we raise retirement by a few years for folks that are in their 30s and 40s—I have a son who’s in the audience tonight who’s 30 years old,” Christie said. “If he can’t adjust to a few years increase in Social Security retirement over the next 40 years I got bigger problems with him than the security payments. We need to be realistic about this.”