budget

Retired and Raking It In

President Trump’s budget yesterday provides the latest evidence of out-of-control entitlement spending. In the baseline projections, Social Security spending will grow 5.9 percent in 2020 and Medicare spending will grow 8.8 percent. Social Security will grow at a 5.8 percent compound annual rate over the coming decade, while Medicare will grow at 7.8 percent. By contrast, inflation is expected to average 2.3 percent annually over the coming decade.

The Trumps’ Mistargeted Child Care Proposal

Sadly, there’s a growing bipartisan consensus for more extensive federal involvement in child care policy. Recently, presidential candidate Elizabeth Warren proposed extensive new demand-side subsidies. Now today’s Budget from President Trump proposes additional resources for the Child Care and Develop Block Grant program to “increase the supply of child care to underserved populations.” Ivanka Trump is championing this new proposal.

Child care can be extraordinarily expensive. There are big problems with lack of availability in poorer neighborhoods. Ivanka Trump is to be commended for recognizing this is a supply-side problem, rather than just proposing throwing money at it. But that problem is generated in large part by misguided regulations in the form of staff-child ratios and occupational licensing requirements at state level that make it more expensive to provide care. Efforts to formalize the sector as more educational raises costs and so increases prices, with the inevitable regressive consequences. The Trump budget plan only works at the margins to improve affordability and availability, with big potential drawbacks. It is mistargeted.

Under Trump’s proposal, $1 billion extra would be temporarily put into the Child Care and Development Block Grant program. States could apply for funding to be used to encourage employers to invest in child care as they saw fit. But the quid pro quo is that to get the extra money, states would have to show commitments to reducing regulation or requirements that raise the cost of care.

Spending Catastrophe

I take a look at the federal budget situation in The Hill:

The 2,232-page omnibus spending deal signed into law last week threw fiscal sanity out the window. While entitlement spending has continued to grow, the relative restraint in discretionary spending had provided hope that federal budget control was possible.

Big Spenders Dominate

Congressional leaders have agreed to a 2,232-page omnibus spending package that allocates federal discretionary spending for 2018. Defense and nondefense spending levels are jacked up, budget caps are blown through, and the deficit is soaring.

California Spending Under Governor Brown

The Wall Street Journal had a flattering piece about Governor Jerry Brown’s budgeting today:

California Gov. Jerry Brown appears poised to exit office next year with a top political priority in hand: free from the massive budget deficits that had weighed on his predecessors.

… Mr. Brown has been preaching frugality for years—he kicked off one past budget talk with Aesop’s fable about the thrifty ant and the lazy grasshopper.

Oldsters vs. Youngsters

Ten years ago, if you walked down the street looking at faces passing by, you could have counted off “young, young, young, young, young, old …”. Fifteen years from now, if you do the same, it’s going to be “young, young, young, old …”.

Funding the FBI

On Fox News last night, Megyn Kelly agreed with her guest James Kallstrom that the FBI needs a larger budget. The horrific attack in Orlando has raised the issue of whether the FBI has sufficient resources to investigate potential terrorists.

I don’t know how large the FBI budget should be. The agency does fill a lot of crucial roles, including tackling never-ending corruption in federal, state, and local governments.

Presidential Spending

President Obama has issued his final federal budget, which includes his proposed spending for 2017. With this data, we can compare spending growth over eight years under Obama to spending growth under past presidents.

Figures 1 and 2 show annual average real (inflation-adjusted) spending growth during presidential terms back to Eisenhower. The data comes from Table 6.1 here, but I made two adjustments, as discussed below.

Figure 1 shows total federal outlays. Ike is negative because defense spending fell at the end of the Korean War. LBJ is the big-spending champ. He increased spending enormously on both guns and butter, as did fellow Texan George W. Bush. Bush II was the biggest spender since LBJ. As for Obama, he comes out as the most frugal president since Ike, based on this metric.

Figure 2 shows total outlays other than defense. Recent presidents have presided over lower spending growth than past presidents. Nixon still stands as the biggest spender since FDR, and the mid-20th century was a horror show of big spenders in general. The Bush II and Obama years have been awful for limited government, but the LBJ-Nixon tag team was a nightmare—not just for rapid spending during their tenures, but also for the creation of many spending and regulatory programs that still haunt us today.

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