Deficit Reduction, Phase One

September 25, 2012 at 3:42 pm

Debates over how — and how much — to reduce projected deficits often overlook the fact that the first stage of large-scale deficit reduction is already in law.  As our new report explains, legislation enacted last year, most notably the Budget Control Act, will produce $1.5 trillion in savings in discretionary (that is, non-entitlement) spending for fiscal years 2013 through 2022.

Update, November 9: we’ve updated this graph as explained here.

These cuts will shrink non-defense discretionary funding — which includes an array of domestic programs ranging from education to law enforcement, food safety, and environmental protection, as well as international programs — to its lowest level on record as a share of GDP, with data going back to 1976 (see graph).

The $1.5 trillion in discretionary cuts also will produce $250 billion in savings on interest payments on the debt, bringing the total deficit reduction achieved to date to more than $1.7 trillion.

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More About Richard Kogan

Richard Kogan

Richard Kogan rejoined the Center in May 2011 after having served as a Senior Adviser at the Office of Management and Budget since January 2009. During his second tour at the Center, from 2001 to 2009, he served as a Senior Fellow specializing in federal budget issues, including aggregate spending, revenues, surpluses and deficits, and debt. Kogan is also an expert in the congressional and executive budget processes and budget accounting concepts.

Full bio | Blog Archive | Research archive at CBPP.org

1 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Robert Bostick #
    1

    Something is seriously amiss as Americans consider the implications of Federal deficits and debt. We have been bombarded by Presidential Commissions, media economists, renowned academic and private sector financial and economic advisors, and pundits of all political stripes that deficits and debt will be our undoing if we don’t tax more and reduce spending significantly.

    What’s missing in this cacophony of “woe is us” is context; no of the above individuals or groups provides the modern day backdrop upon which they then verbally paint the picture of “The Deficit. Americans are never told that the Federal Government’s deficit must be viewed as one part of a three sector identity in a closed economic system for accounting purposes. We have three sectors, the public sector, the non-public sector, and the trade sector. One or more but not all of these sectors must either be in surplus or deficit. These three components must be placed on our canvas to view a complete picture of our national accounts. Leaving out two sectors is cynically subversive.

    We must acknowledge that when the Federal government spends, it spends into the other two sectors. To where else would Federal dollars flow? This being axiomatic, one or both of the other two sectors (non-government or private sector, and the foreign sector) must be in surplus or deficit. And the sum of these deficits and surpluses must equal zero. This is the meaning of sectoral balance.



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