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Funding for Domestic Programs in the Budget

Posted by Peter Orszag on March 18, 2009 at 02:46 PM EDT
How much does the Administration’s FY 2010 Budget increase domestic programs this coming year?  If you listen to some critics, you would think that the answer is "the biggest increase ever."  But if you approach the question analytically and make an apples-to-apples comparison, it becomes clear that the Budget proposes to increase next year’s domestic funding by a relatively modest 3.2 percent.  And a substantial majority of that increase is devoted to making overdue investments in education, infrastructure, and our nation’s veterans. 

An Apples-to-Apples Comparison

The President’s Budget requests that funding for domestic discretionary programs grow from $500 billion to $515 billion from 2009 to 2010, after making adjustments to compare these two years on an apples-to-apples basis.  Two sets of adjustments are appropriate: those necessary to make one year comparable to another, and those necessary to adjust for exceptional factors in 2010. 

The first set of adjustments reflect (1) inflation, since a dollar next year buys less than a dollar this year, and (2) population growth, since the benefits—and costs—of discretionary programs will be spread over a growing population.  

The second set of adjustments reflect (1) the Census and (2) the Federal Housing Administration.  In particular:
 
  • Census. The Constitution requires us to conduct a complete census of the population every 10 years, and 2010 is that year. The Census adds more than $4 billion in costs in 2010, but then those costs go away for another decade. A decade ago, Congress declared the 2000 census an "emergency," outside of its regular budget, but we refuse to use that accounting gimmick.
  • Federal Housing Administration. The Federal Housing Administration (FHA) guarantees mortgages for moderate-income people who make a sufficient down-payment and pay fees to the FHA. The previous administration estimated that the fees would cover the risk of default and so showed the program to be costless. Over the last few years, however, the program has been anything but costless; the Congressional Budget Office recently estimated those loans of the last few years would rack up $15 billion in losses. Unlike the previous administration, we are reflecting the true costs of this program on the Budget’s discretionary ledger, where it belongs. Even though it is likely that the program costs no more this year than last year, the prior administration was able to hide—due to an obscure scorekeeping rule—FHA costs in the mandatory portion of the budget and show no discretionary costs for this program.
With these adjustments, the funding increase in the President’s budget amounts to 3.2 percent.
 
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