The budgets of 14 cabinet-level agencies (excluding the Department of Defense [DoD]); 21 large independent agencies; and more than 80 commissions, boards, foundations, and other federal entities account for almost 50 percent of all discretionary resources.1 The Departments of Health and Human Services, Education, Transportation, Veterans Affairs, and Homeland Security received just over half of those funds in 2010.
Aside from DoD and Postal Service personnel, the federal government spent approximately $175 billion in 2010 on about 1.3 million civilian employees, the large majority of whom were paid with discretionary appropriations. The federal government also makes about $250 billion in discretionary grants to state and local governments. The variety of programs that federal agencies administer provide a wide range of options for absorbing budget cuts of various magnitudes. Those cuts could be targeted toward selected agencies, leaving most federal programs unaffected, or they could be distributed more evenly among many of them, avoiding the need to drastically reduce or eliminate any particular program.
This option includes three broad alternatives for reducing the growth in discretionary funding for nonmilitary departments and agencies--that is, excluding appropriations for DoD--relative to the baseline budget projections of the Congressional Budget Office:
Over the past 10 years, discretionary funding (other than for DoD) has increased by about 60 percent, or by more than 30 percent after adjusting for inflation. Thus, federal agencies would have more buying power than they had a decade ago even if their budgets were reduced substantially relative to the amounts in CBO's baseline. If those discretionary resources had grown at the rate of inflation since 2001 and continued to do so through 2021, they would total $592 billion in 2021--$185 billion less than the baseline amount. If those resources were reduced by 1 percent annually from the current level (as described in the third alternative), budget authority in 2021 would be $27 billion less than it would have been if funding had grown with inflation since 2001.
One rationale for reducing discretionary spending is that it has been growing faster than inflation and the size of the economy, thereby diverting ever more resources from the private sector, restraining economic growth, and contributing to the increase in federal deficits and debt. Discretionary outlays for programs other than DoD's averaged 3.7 percent of gross domestic product (GDP) in the 1990s and climbed to 4.7 percent of GDP in 2010; those outlays would decline to between 2.4 percent and 2.9 percent of GDP in 2021 under the alternatives in this option. Furthermore, some observers believe that many programs spend money ineffectively and that there is little relationship between expenditures and results; thus, reductions could be made with little negative impact on individuals or on the economy. An argument against cutting non-DoD discretionary funding is that it supports important programs such as education, infrastructure, housing, and law enforcement, among others. Providing those services to a growing population could be difficult if spending declined to historically low levels as a percentage of GDP, as it would under the alternatives in this option. In the current budget environment, state and local governments would have difficulty compensating for reductions in federal expenditures. Implementation could be challenging as well; discretionary appropriations, which are comparable in amount with DoD's appropriations, are widely distributed among more than 100 agencies. Implementing well- targeted cuts in those appropriations would therefore be much more challenging than making such cuts in DoD's spending.