As reported by the Wall Street Journal, the Obama Administration will propose a three‐year freeze for a portion of the budget known as “non‐defense discretionary” spending. Many critics will correctly note that this is like going on a drunken binge in Vegas and then temporarily joining Alcoholics Anonymous. Others will point out that more than 80 percent of the budget has been exempted, which also is an accurate criticism. Nonetheless, even a partial freeze would be a semi‐meaningful achievement.
But don’t get too excited yet. It is not clear whether the White House is proposing a genuine spending freeze, meaning “budget outlays” for these programs stay at $447 billion for three years, or a make‐believe freeze that applies only to “budget authority.” This is an enormously important distinction. Budget outlays matter because they represent the actual burden of government spending. Budget authority, by contrast, is a bookkeeping measure that — at best — signals future intentions. During the profligate Bush years, for instance, apologists for the Administration tried to appease fiscal conservatives by asserting that budget authority was growing at ever‐slower rates. In some cases, they were technically correct, but their arguments were deceptive because real‐world spending kept climbing to record levels. And needless to say (but I’ll say it anyhow), future intentions never became reality.
Domestic discretionary spending soared from less than $350 billion to more than $600 billion during the Bush years (and rose almost another $100 billion in Obama’s first year!). If the Obama Administration proposes a genuine outlay freeze, he will be taking a genuine (albeit small) step in the right direction. If the “freeze” applies only to budget authority, however, that will be another indication we are in George W. Bush’s third term.
To attack the $1.4 trillion deficit, the White House will propose limits on discretionary spending unrelated to the military, veterans, homeland security and international affairs, according to senior administration officials. Also untouched are big entitlement programs such as Social Security and Medicare. The freeze would affect $447 billion in spending, or 17% of the total federal budget, and would likely be overtaken by growth in the untouched areas of discretionary spending. It’s designed to save $250 billion over the coming decade, compared with what would have been spent had this area been allowed to rise along with inflation. …administration officials acknowledged the freeze is directed at only a small part of overall spending, but that fiscal discipline has to start somewhere. President Obama had requested a 7.3% increase last year in the areas he now seeks to freeze.