Federal Spending on Kids to Increase Only 2 Percent Over Next Decade

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Urban Institute

Children’s programs are projected to receive only 2 cents on every dollar of a $1.4 trillion increase in federal spending over the next decade, says a new Urban Institute report.

During the same period, overall federal spending is projected to increase a whopping 41 percent, to $4.8 trillion, owing largely to spending on programs for the elderly, the national debt and higher interest on it, the Washington-based think tank’s Kids’ Share 2014 report says.

Spending on children will rise by about $26 billion, or just 2 percent, between now and 2024, it says. That compares with an increase of about 10 percent on federal children’s spending from 2003 to 2013.

Julia Isaacs, a senior fellow at the Urban Institute and a co-author of the report, said it underscores the need for the federal government to make some hard choices: raising taxes, slowing the growth of programs serving the elderly like Social Security and Medicare — or both.

“They’re a very hard sell, and so the danger is that we will do nothing, and children’s programs will continue to be squeezed,” she said.

But, Isaacs said: “We’re a very rich nation. We have a lot of resources. We have the economic capacity to be investing more in children.”

A vice president at the Center on Budget and Policy Priorities believes that the federal government needs to raise more revenue to meet the needs of both populations.

In 2013, federal expenditures on children totaled $464 billion, up slightly from $460 billion the previous year, but well below the peak of $499 billion in 2010. (All the report’s figures are in inflation-adjusted 2013 dollars, and projections are based on Congressional Budget Office estimates.)

As a share of the gross domestic product, federal spending on children is expected to decline from 2.1 percent in 2013 to 1.7 percent in 2024. By contrast, combined spending on Social Security, Medicare and Medicaid are expected to rise to more than 10 percent of GDP.

“The projected declines in federal expenditures on children over the next decade are troubling,” the report says. “Without changes to current law and a righting of the structural imbalance between revenues and spending, we risk not only the well-being of our children but the well-being of the nation as a whole.”

Sharon Parrott, the vice president at the Washington-based Center on Budget and Policy Priorities, said the report clearly shows federal “underinvestment” in children, particularly low- and moderate-income children, who rely on federal funding more than higher-income ones. It reflects the reality that Social Security and Medicare costs are rising with the aging of the baby boomers.

“In our system, for better or for worse, the federal government provides health care for seniors but not for other people, and we know that seniors have higher health care costs than kids,” Parrott said. “Kids are very inexpensive to cover in terms of health insurance.”

Arguing that the nation spends too much on Social Security and Medicare begs the question of whether that’s a good use of that money, she said.

She said higher revenues, from higher taxes, would be necessary to “maintain a safety net for seniors and adequately invest in kids.”

“And I think part of what’s happened is people say we’ve historically had revenues at a certain level of the economy and therefore we should never go higher, but the circumstances of today are just different. We have different demographics and different health care costs than we’ve had in the past.”

The federal gap between increases in spending for the elderly and for children can be attributed largely to built-in increases in funding for Social Security and Medicare and the lack of such increases for discretionary programs, which Congress must fund annually, Isaacs said.

The majority of funding for children comes from state and local sources: In 2011, the report said, 62 percent of spending on children, excluding tax expenditures, came from state and local sources, almost all of it for education or health.

But even when combining federal, state and local funding, the amount spent on the elderly is more than twice that spent per child (about $29,000 per capita to $12,770), Isaacs said.

She said Congress has enacted legislation to help children in the past, pointing to the child tax credit, increases in the earned income tax credit and the Children’s Health Insurance Program (CHIP) as well as spending targeting children in the American Recovery and Reinvestment Act, or the federal stimulus.

“So I think that we’ve seen examples in the past where Congress passes legislation that invests more in children, and Congress could do that again in the future,” Isaacs said. “The point is that if they don’t do anything, that’s how children will suffer.

Edward Lorenzen, a senior policy advisor at the Washington-based Committee for a Responsible Federal Budget, agrees that with built-in increases, spending on programs for the elderly “grows on autopilot and it’s squeezing out the discretionary budget … and Congress has failed to do anything to control the growth of those programs.”

“We need to step back and decide what our priorities are and how we would allocate the budget from a clean slate instead of having so much of it already baked and locked in by formula,” Lorenzen said.

The report points to rising debt and interest rates and says with revenues continuing to fall short of spending and current low interest rates expected to rise, spending on interest payments on the debt are expected to exceed spending on children in 2017 and thereafter­ — and by larger amounts each year.

Spending on children is expected to fall in the next decade in all categories except health, for which spending will increase almost entirely due to Medicaid for children.

The biggest decline in federal children’s spending will be in funding for K-12 education, which is projected to fall by about 12 percent, from $43 billion in 2013 to $38 billion in 2024, the report said.

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