There is no correlation between “Mandates” and Budget Deficits

So often I will read deficit hawks rail against “Mandatory Spending” programs.  This completely perplexes me.  When looking at government spending, what is the point of looking only at Mandatory or just Discretionary.   The only difference between the two is if congress has to re-approve the spending every year.  That’s it.  So why do groups and politicians talk about them as if they are so different?

Here’s and example of what I mean.  The Free Republic and the Heritage Foundation reported this year that “Mandatory Spending has increased 5 times faster than Discretionary Spending”.  To this, I say so what?  If your problem is with increased spending, why does it matter if the increase is Mandatory or Discretionary.  It might matter if there was a correlation between the percentage of the budget that’s mandatory and an increased budget deficit, but there isn’t.

For those who might claim otherwise, they might show a graph that shows how spending increases along with total spending.

mandatory_and_total_spending

(Click chart for larger image.  Click here for the numbers)

The only thing that can be said is the obvious: total spending goes up as mandatory spending goes up.  Of course, that’s like saying customers to my store go up when more brown-haired customers show up… duh!  Here’s a more interesting observation about mandatory spending.  Mandatory and discretionary spending almost always go up and down together.

mandatory_vs_discretionary_spending_dollars

(Click chart for larger image.  Click here for the numbers)

While they often rise and fall together, they just don’t raise and fall at the same rate.  Again, so what?  In terms of balancing budget, it’s all just spending.   Now here’s the point.  No matter what percentage of the total spending is Mandatory, it has no correlation to how much of a budget deficitsurplus there is.  Here’s the chart that shows what percent of spending every year had to be borrowed, and what what percent of the spending was mandatory spending.

mandatory_spending_%_and_borrowed_spending_%
(Click chart for larger image.  Click here for the numbers)

Now I ask you, do you see ANY correlation between those two series of data?  Despite this you will still hear politicians say stupid things like Roy Blunt when he says, “I led the fight in 2005 and 2006 to cut the so-called mandatory spending” or the RNC proclaiming that their plan “slows the average annual growth in mandatory spending”.  If you’re proud of spending cuts, why call out Mandatory spending?

Republicans aren’t the only ones that make this artificial distinction.  President Obama’s spending freeze is only on discretionary spending.  It seems like a fairly artificial line to draw on any kind of spending cutfreeze.

At the risk of beating a dead horse I want to make sure everyone gets this.  There is no correlation between how much federal spending is Mandated and the sizeexistence of Budget Deficits.

Adding to the Mandate List

Over at the whitehouse site, they have an excel sheet that also summarizes a large portion of the Mandatory spending programs. Unfortunately, they group programs together differently so it’s hard to tell what to add or remove, or what was grouped together differently.

Fortunately their totals are about equal to the totals that the CBO lists in it’s Spending Outlook document I linked to yesterday. CBO = 2094 billion, Whitehouse = 2092 billion. I believe the 1 billion in difference has to do with rounding.

I tried to figure out how the WhiteHouse and CBO groupings were different. In the end it was impossible to determine. For instance, the CBO lists “Higher Education” on a single line, but the whitehouse document combines it with at least 3 other programs that may or may not be in the CBO’s “other” category. (If you think you can do better, here’s a link to the google doc where I tried to piece them together)

The whitehouse document does list some of the programs that were in the CBO’s “other” category. In fact, the whitehouse document’s “other” category only listed 4 billion in spending. Not great, but better than 33 billion. So here are the programs that the whitehouse specified that the CBO grouped into other categories.

  • Community and Regional development
  • General Government
  • Energy
  • International affairs
  • National defense

Not exactly what I was looking for. They’re just a more precise grouping and not an actual list of government programs. My quest goes on…

Need a Full List of Mandatory Programs

I figured out a few days ago the difference between Mandatory and Discretionary Spending. At the time it didn’t sound like there were a lot of Mandatory spending. However, reading this about.com article, it seems there are dozens of them:

  • Social Security – $730 billion
  • Medicare – $491 billion
  • Medicaid – $297 billion
  • TARP – $11 billion
  • Jobs Programs – $25 billion
  • Health Care Reform – Budget reduction of $17 billion
  • All other mandatory programs – $619 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans.

It’s that “All Other mandatory programs” category that I’m interested in. If so-called “Mandatory” spending programs are over half of our budget, I need to find a list of every single one of them to figure out where the federal government is spending all it’s money.

I did some more searching and I had no idea the list of Mandatory spending was so huge. The list below is from a chart from the CBO(Congressional Budget Office). It is the most complete list I could find of all Mandatory Spending program that existed as of FY2009. It is in no particular order

  • Social Security
  • Medicare
  • Medicaid
  • SNAP(supplemental nutrition assistance Program)
  • Unemployment Compensation
  • Supplemental Security Income.
  • Earned income and child tax credits
  • Family support
  • Child nutrition
  • Foster care
  • Making Work Pay
  • First-Time Homebuyer Credit
  • The American Opportunity Tax Credit
  • Acceleration of Research and Experimentation Tax Credits in lieu of bonus depreciation
  • Payments made when the credit for the AMT exceeds a taxpayer’s liability
  • Income tax rebates that result from the Economic Stimulus Act of 2008(Public Law 110-185) and the American Recovery and Reinvestment Act of 2009(P.L. 111-5)
  • Military Retirement Fund
  • Federal Civilian Retirement Fund
  • Other Retirement(???? I don’t know that this is)
  • Veterans Income Security(veteran’s compensation, pensions, and life insurance)
  • Veterans Other(education subsidies)
  • Fannie Mae and Freddie Mac
  • TARP(The Bank Bailout)
  • Agriculture(In the future I’d like to make this category a little more granular)
  • MERHCF (???? I’m not sure what this is. I tried to google it and only got more confused. It has something to do with medical care and the military.
  • Higher Education
  • Universal Service Fund
  • CHIP
  • Social Services
  • Deposit Insurance

Finally, at the very end, the chart has an “Other” category. Other(I really hate constantly finding this category)- Being that, according to the chart, this category accounts for 32 billion in spending, I’d like to know more of where it’s going. I’m going to see if I can figure out more details. I can’t believe that it’s so hard to figure out where 32 billion dollars of federal mandates is going.

The Two Types of Government Spending

My first task towards understanding the federal spending is to find websites that might explain it for me. After quite a few fruitless google searches, I stumbled upon a pamphlet(pdf) created by the New York Fed back in 2000. The target audience of the pamphlet was kids which is great because it’s explaining things at a level even I can understand.

A lot of the pamphlet is about income and deficit vs surplus etc… The key thing I learned is the two types of federal spending, Mandatory and Discretionary and their differences.

The federal government’s budget contains both mandatory and discretionary elements. Consider, for example, Social Security, which accounts for more than 20 percent of total federal expenditures. (Social Security is a program that taxes people when they are working, and then provides them with income when they retire; it also provides income for workers who become disabled and for the dependents of workers who die.) By law, the government has to pay Social Security benefits to anyone who qualifies for them.

[snip]

Other examples of mandatory spending are Medicare, Medicaid, benefits to retired civil servants, and interest on the debt that the government has accumulated over the years. (Medicare is a program that pays for health care for the elderly and certain disabled persons, while Medicaid is a joint federal-state program that provides medical assistance to low-income persons.) In contrast, spending on items such as national defense, space exploration, and the FBI is discretionary; the government can do more or less of it, as it decides.

There was a chart accompanying the description, but being from 2000 was quite out of date so I decided to omit it. This is great info, unfortunately I’m not any closer to understanding how much money is being spent on what.