Discretionary Spending Cuts Could Net $1.8 Trillion in Deficit Savings, CBO Says

By Matt Cover | March 14, 2011 | 5:01 AM EDT

(CNSNews.com) – Cuts of 15 percent over 10 years to the Defense and non-Defense discretionary budgets could yield nearly $1.8 trillion in savings, according to a report from the Congressional Budget Office (CBO).

In a report titled “Reducing the Deficit: Spending and Revenue Options,” CBO said that cutting both Defense and non-Defense discretionary spending by one percent per year over the next decade would result in a $1.79 trillion savings. Cutting each budget by one percent per year from current levels would amount to a 15 percent total reduction in discretionary spending.

The report, which lists more than 100 options for deficit reduction said that if Congress reduced the Defense Department’s budget to 2007 levels, taxpayers would save $862 billion.

“Reduce defense appropriations by 1 percent annually from the 2011 level, thereby decreasing outlays by an estimated $862 billion (or 15 percent) over the next 10 years,” the report recommended.

“Under that alternative, DoD’s appropriations would return to their 2007 funding level—in nominal terms—by 2021,” it added.

CBO explained that the DoD budget has grown – excluding the wars in Iraq and Afghanistan – by nearly 75 percent over the past 10 years. Reducing the Defense budget to 2007 levels would give the Defense Department more buying power in 2021 than they would have had if the budget had grown along with the economy.

“Funding for DoD’s regular activities (excluding appropriations for overseas contingency operations) has increased by approximately 75 percent over the past 10 years, the study explained. “If regular defense appropriations had grown at the rate of inflation since 2001 and continued to do so through 2021, budget authority in 2021 would total $465 billion, $200 billion less than the amount in the baseline.

“Even if those appropriations were reduced by 1 percent per year from the current level (as described in the third alternative), funding would still be $10 billion more in 2021 than it would have been if appropriations had grown with inflation since 2001,” it added.

CBO also said that reducing non-defense spending would save taxpayers billions as well. Cutting non-defense discretionary spending by one percent each year for the next 10 years would save approximately $932 billion.

“Reduce those resources by 1 percent each year from the 2011 level, thus decreasing outlays by about $932 billion (or 15 percent) over the same period,” CBO said.

CBO noted that making such cuts would be equivalent to eliminating the entire budgets for the Departments of Health and Human Services, Veterans Affairs, and Agriculture.

“That reduction is roughly equivalent to the total discretionary resources projected under CBO’s baseline assumptions for the Departments of Health and Human Services, Veterans Affairs, and Agriculture.”

Like the Defense budget, CBO noted that the reductions it recommends would still give the government more buying power than it would have had if the growth of government had been pegged to the growth of the economy.

“Over the past 10 years, discretionary funding (other than for DoD) has increased by about 60 percent, or by more than 30 percent after adjusting for inflation. Thus, federal agencies would have more buying power than they had a decade ago,” CBO explained.

CBO said that these cuts to discretionary spending could probably be made without adverse effects on the economy, because they would increase the amount of capital available for more productive uses and decrease the amount of money available for government to waste or spend fraudulently.

“One rationale for reducing discretionary spending is that it has been growing faster than inflation and the size of the economy, thereby diverting ever more resources from the private sector, restraining economic growth, and contributing to the increase in federal deficits and debt,” it added.

“Furthermore, some observers believe that many programs spend money ineffectively and that there is little relationship between expenditures and results; thus, reductions could be made with little negative impact on individuals or on the economy.”