Although federal spending for children’s programs has increased in actual dollar amounts and as a percentage of GDP since 1960, the percentage of the federal domestic budget spent on children has decreased, according to Kids’ Share 2008: How Children Fare in the Federal Budget, a new report from the Urban Institute and the New America Foundation (1). Looking ahead to 2018, the report finds that federal spending on children will continue to shrink as a percentage of domestic spending unless major adjustments are made to current policy and budget trends, especially if spending on entitlements continues to spiral out of control.
“The squeeze between growing entitlements and existing taxes—a squeeze affecting children’s programs and many traditional government functions—is not waiting for some future date; it is taking place now,” said Eugene Steuerle, a senior fellow at the Urban Institute and one of the report’s authors. “By action and inaction, both political parties bear responsibility for choosing this path and for allowing other priorities to take precedence.”
According to the report, which defines children as individuals under nineteen who are not in postsecondary education, federal spending on children, adjusted for inflation, grew from $55 billion in 1960 to $354 billion in 2007. But although federal spending on children has grown dramatically, it makes up a smaller portion of domestic federal spending in 2007 (16.2 percent) than it did nearly fifty years ago (20.2 percent).
During the same time period, however, spending on nonchild Social Security, Medicare, and Medicaid more than doubled, growing from 21.9 percent to 49.1 percent of domestic spending. As a result, real federal spending on Social Security, Medicare, and Medicaid rose from $3,057 per senior in 1960 to $20,530 in 2005, compared to $819 and $4,680 per child.
The report also finds that federal spending on children’s programs grew as a percentage of gross domestic product (GDP), but not nearly at the same pace as spending on entitlement programs, such as Social Security and Medicare, which tended to outpace both growth in the economy and inflation. From 1960 to 2007, entitlement spending grew from 2.0 to 7.9 percent of GDP, whereas federal spending on children rose from 1.9 to 2.6 percent of GDP. And of the eight major budget categories that spend money on children that were featured in the report, only health, which grew 4.5 percent in real terms, gained ground relative to the economy. Education, which actually fell 2.1 percent in real terms, lost the most ground.(2)
Assuming that current policy and budget trends continue, the report predicts that spending on children should increase in real dollar amounts from 2007 to 2018, but that its portion of domestic spending will continue to decrease as entitlement spending continues to eat away at the rest of the budget. Specifically, it says that children’s spending in real dollar terms will increase by 15.5 percent from 2007 to 2018, compared to a 63 percent increase for the adult portions of Social Security, Medicare, and Medicaid.
Consequently, the report estimates that domestic spending on children in 2018 will represent just 13.8 percent of federal domestic spending, down from 16.2 percent in 2007. Meanwhile, spending on the nonchild portions of Social Security, Medicare, and Medicaid will consume 59.2 percent of domestic spending by 2018.
“It is clear that, absent major adjustments to our current way of doing business, we are rapidly approaching the day when there will be no federal dollars left for any program outside the three major entitlements, plus defense, international affairs, and interest on the debt,” the report reads. “If more people pay higher taxes, or some of the president’s recent proposals to cut Medicare growth are enacted, or the defense budget falls by more than projected, then the squeeze is lessened. The budget pressures will not go away, however, without major reforms to both revenues and spending.”
The complete report is available at http://www.urban.org/UploadedPDF/411699_kids_share_08_report.pdf.
1. Domestic federal spending excludes spending on defense, homeland security, and international affairs.
2. The report divides federal programs that spend money on children into eight major budget categories: income security (e.g., Temporary Assistance for Needy Families), nutrition (food stamps), housing (low-income home energy assistance), tax credits and exemptions (child tax credit), health (Children’s Health Insurance Program), social services (Head Start), education (Education for the Disadvantaged), and training (Workforce Investment Act).