If you really want to know what a particular government agency is doing, how it spends its money, how many employees it has or what it has accomplished in the past or seeks to accomplish in the future, you must read the appendix to the federal budget. That information doesn’t exist anywhere else.
The president’s budget used to be a big deal. Analysts, including me, anxiously awaited its publication, usually a week after the State of the Union address, and newspapers like The New York Times devoted hundreds of column inches to reporting its contents.
No more. The president’s budget has been “dead on arrival” for years, and the White House now treats it more as a chore to be done and gotten out of the way than the showcase of its legislative program.
Yet while the president’s budgetary proposals no longer carry the weight they once did, it would be a mistake to assume that the process of producing the budget is wasted or lacks substance. For example, the appendix to the budget lists every single line item in the federal budget and is the essential starting point for all appropriations.
Another extremely useful budget document is the historical tables. These are critical for putting budget data into context. It is particularly helpful to have budget categories such as military spending, nondefense discretionary spending, mandatory spending and entitlements laid out consistently over time for analysis.
Too much budget commentary, especially on the right, just lumps all spending together as equally worthless and deserving of across-the-board cuts or abolition.
But my favorite budget document is something called the Analytical Perspectives. It wasn’t published until March 10, a week after the formal budget was presented. That is where I find many of the tables and analyses that are most useful to me in understanding how the government operates and what its real fiscal problems are.
Given the interest in the budget deficit, one useful place to start is on Page 21, where it is separated into its “cyclical” and “structural” components. The former results from temporarily slow growth; the latter is what would remain even after the economy returns to some semblance of “full employment” (5.4 percent).
In this table, the nonaccelerating rate of inflation — the level of unemployment in an economy that does not contribute to inflation — is assumed to be 5.4 percent.
Generally speaking, economists do not worry about the cyclical portion of the deficit but rather about the structural component. The budget shows that at least for the foreseeable future, both are declining to manageable levels.
Another useful table, on Page 16, shows the extent to which higher interest rates, slower economic growth and inflation affect budget projections. (All data are symmetrical in either direction.) Conservatives in particular always say that growth is the cure for all that ails us. And indeed the data show that projecting 1 percent higher economic growth every year from 2014 to 2024 would shave almost $4 trillion off projected deficits. The problem, of course, is that conservatives always want to cut taxes to achieve growth, which never materialized in the 2000s, leaving only bigger deficits.
On Page 47 is foreign ownership of the federal debt. In 1965, almost all federal debt was owed to ourselves, to American citizens. At the end of 2013, foreigners owned almost half the $12 trillion public debt outstanding. Many people worry that allowing this percentage to rise will give other countries that own large amounts of Treasury securities, such as China, the ability to exercise power over us. However, the greater their holdings, the greater their financial incentive to maintain our ability to continue making interest and debt repayments as well.
On Page 304 is a table on federal investment. Many conservatives and libertarians routinely talk as if all government spending goes down a rathole. In fact, much spending is for long-term investments that clearly yield benefits to society that we would all suffer without. This includes research and development in medical and other technology, physical capital in public infrastructure, and education and training. This year the federal government will spend almost $500 billion on such activities.
Chapter 13 discusses a curious budget concept that even many experts are unaware of — offsetting receipts. These are federal revenues not counted as revenues, but as negative spending. The impact on the deficit is the same, but total spending and revenues are lower than they really are. A well-known example of an offsetting receipt is Medicare Part B premiums.
Chapter 14 reviews tax expenditures, which in many ways are indistinguishable from ordinary spending, although conservatives maintain that there is an absolutely fundamental philosophical difference between a tax giveaway and a spending giveaway. People can read and judge for themselves.
Lastly, I would call attention to the data in Chapter 5, which examines miscellaneous indicators of the nation’s social development. Table 5-1 is a compendium of data showing how we have changed as a society over the last 50 years or so. For example, the percentage of the population that has ever been married has fallen to 68.6 percent from 78 percent; average family size has fallen to 3.1 people from 3.7; single-parent households have risen to 9.1 percent from 4.4 percent; the high school graduation rate has risen to 88.4 percent from 58.1 percent, and college graduates have risen to a third of the population from 11 percent.
Once in a while, it is interesting to step back and try to look at the budget and society in a broader perspective. For those with an interest, the Analytical Perspectives volume of the budget is an offbeat source.
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform — Why We Need It and What It Will Take.”