12/9/2023 0 Comments Non discretionary spendingBecause GDP typically grows faster than inflation, this means that CBO generally projects that discretionary spending as a share of GDP will fall over its ten-year projection period. Thus, for its ten-year projections, CBO takes the latest year’s total discretionary spending, takes account of any legislated caps on discretionary spending (such as the ones set in the Fiscal Responsibility Act), and assumes spending increases with inflation thereafter. For any program for which Congress has not appropriated a specific sum for future years, the Deficit Control Act of 1985 requires CBO to assume that appropriations grow with inflation. When the Congressional Budget Office projects future budget deficits, it must make an assumption about the trajectory of discretionary spending because it has no way of knowing what Congress will do in the future. How does the Congressional Budget Office (CBO) project discretionary spending? The Fiscal Responsibility Act, which suspended the legal limit on federal borrowing until January 2025, set separate caps on defense and non-defense discretionary spending for two years. What was the impact of the Fiscal Responsibility Act of 2023 on discretionary spending? Non-defense spending in 2022 was 3.6 percent of GDP, a bit below its average level since 1962. It was, for instance, a bit above 4 percent of GDP during the Great Recession and the pandemic. In contrast to the significant declines in defense spending since the 1960s, non-defense discretionary spending has hovered between 3 and 4 percent of GDP in most years, with a few exceptions. Defense spending has generally declined as a share of GDP since then, reaching 3 percent in 2022. Defense spending was 9.2 percent of GDP in 1968 near the height of the Vietnam War, reached a low of 2.9 percent in 1999 after the end of the Cold War, and climbed to 4.6 percent of GDP by 2010, during the wars in Iraq and Afghanistan. A little under half of that goes to defense.ĭefense spending, of course, rises with wars and with concerns about national security. Today, discretionary spending is 6.6 percent of GDP. In 1973, discretionary spending amounted to 9.6 percent of GDP, with about 60 percent of that for defense. How has discretionary spending changed over time? Most of the spending in the Infrastructure and Jobs Act of 2021 (sometimes called the Bipartisan Infrastructure Law) and the CHIPS and Science Act of 2022 is discretionary spending. In 2022, about $750 billion, or 45 percent, of discretionary outlays went to defense, and $910 billion, or 55 percent, went to non-defense-a broad category that includes certain health spending, (including veterans’ health, the National Institutes of Health, and public health), education and training (including Pell grants for low-income college students and grants for K-12 schools with large numbers of low-income students), and transportation (including highways, bridges, and airports). Spending can also be decomposed by function. Most of the remainder goes to purchases of goods and services from the private sector. About 15 percent goes to grants to state and local governments. Much of discretionary spending-about 45 percent in recent years-goes to salaries and benefits for government employees, both military and civilian. What goes into the discretionary spending bucket?
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