Policy Resource

Babies and the Budget: Getting our Bearings on Federal Spending

Jun 7, 2011

This is the second in a series of baby blog posts on what infant-toddler advocates need to know in the current debate over reducing the deficit and altering the federal budget process. Yesterday we looked at why raising the debt ceiling is relevant to infants and toddlers.

Before launching into the intricacies of the deficit reduction debate, today we are getting our bearings about the size and components of federal spending and the deficit.

How much do we spend?

In FY 2010, federal spending was $3.5 trillion. This amount corresponded to 24% of the nation’s economic output as measured by its Gross Domestic Product (GDP)—a measuring stick that will figure prominently in deficit reduction proposals discussed below. The federal government took in $2.2 trillion of the total amount spent in tax revenues. The remaining $1.3 trillion, the federal budget deficit, had to be borrowed.

Where does the money go?

The figure below shows the major spending categories. The major entitlement programs (Social Security, Medicaid/CHIP, and Medicare) accounted for 41% of spending. Defense and interest on our debt added another 26%. Safety-net programs—those that serve at-risk families—accounted for 14% and education for another 3%. (See figure below adapted from the Center on Budget and Policy Priorities).

Clearly, the major entitlement programs are a significant portion of federal spending and are projected to grow, fueled by factors such as the aging baby boomers, increases in health costs, and expanded Medicaid coverage. But over time, simply paying for the interest on our growing cumulative debt (the sum of all annual deficits over time) also will take a bigger share of the pie than the 6% it now consumes. The President has noted that, if we do not act, by the end of the decade the interest on the national debt alone could rise to $1 trillion.

How much do we spend on babies?

This number is difficult to arrive at. Much federal spending on infants and toddlers is part of more broadly targeted programs. However, the Urban Institute and the Brookings Institution did a baseline analysis, concluding that in 2007, 2.1% of federal outlays (that is, money actually paid out from the Treasury) for domestic programs ($44 billion) were spent on children under age 3. Another $13 billion was spent through tax expenditures such as the child tax credit and dependent exemption. The largest share of funds spent for infants and toddlers was for health and nutrition. Medicaid alone accounted for 21% of funds spent on babies. In contrast, only 7% of infant-toddler spending was for early care and education programs.[i]

What is driving our current high deficits?

Fiscal year 2009 saw the advent of $1 trillion-plus deficits. Some of the deficit results from cyclical factors related to how the economy is doing. In a recession, tax revenues drop while spending increases on programs that cushion the economic impact on individuals and families (such as SNAP and Unemployment Insurance). Policy choices, such as the level of taxes people and corporations have to pay, also influence the deficit. An analysis by the Center on Budget and Policy Priorities, based on data from the Congressional Budget Office, suggests that the largest drivers of these high deficits are the tax cuts from the early part of the last decade and the economic downturn, followed by the wars in Afghanistan and Iraq. The measures to stimulate recovery as well as to bail out troubled banks account for a small part of the current deficit.[ii]


[i] Jennifer Macomber, Julia Isaacs, Tracy Vericker, Adam Kent, and Paul Johnson. Federal Expenditures on Infants and Toddlers in 2007. Washington, DC: The Urban Institute and the Brookings Institution, 2009.

[ii] Kathy A. Ruffing and James R. Horney. Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits. Washington, DC: Center on Budget and Policy Priorities, 2011.

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