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Voodoo Economics, Pt. 1 - The Stimulus Raises Baseline Spending

A fascinating report was delivered this week from the Congressional Research Service to the Senate Budget Committee. Titled, “Spending for Federal Benefits and Services for People with Low Income, FY2008-2011”, this report is chock full of some very interesting facts and figures – even non-wonks will find the conclusions of this report intriguing. This is part one of a multi post series that will delve into these numbers and shed light on the massive increase in spending in several areas of welfare under the Obama Administration, and how much of this increase is due to the Stimulus (ARRA).

What’s that you say? The Stimulus was meant to fund job growth and minimize the rise in unemployment, and wasn’t meant for welfare programs? Turns out, what they really meant was that we should throw a bunch of money at the unemployed and other social programs instead of funding job growth so people can get off welfare.

From the report abstract:

As the memorandum shows, federal spending for low-income programs .... grew by 23% from FY2008 ($563 billion) to FY2009 ($692 billion). FY2009 also was the first year of ARRA funding, which accounted for at least 65% of the increase in spending for these programs from FY2008 to FY2009.1 Some portion of the non-ARRA-related spending growth in FY2009 was attributable to increased caseloads for recession-sensitive programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps). The memorandum further shows that federal spending for low-income programs grew at much slower rates in FY2010 and FY2011. Without the two veterans programs, spending totaled $733 billion and $746 billion in those years, respectively, increasing by 6% between FY2009 and FY2010 and by 2% between FY2010 and FY2011. ARRA was a declining but still significant source of the increased spending in these two years, representing at least 58% of the increase between FY2010 and FY2009 pre-ARRA levels, and at least 45% of the increase between FY2011 and FY2010 pre-ARRA levels.

So as we can see, the Stimulus was a key driver in the increased spending we’ve experienced, not just at the time of its passage, but in the four years since. This is the sneaky aspect of the Stimulus that some of us warned about – the Obama administration has not just created a one time spending spike. They’ve reset the baseline higher by astronomical amounts:

[The] largest category of spending – health – was 37% higher in FY2011 than in FY2008, primarily due to increased spending for Medicaid. Cash aid is the second largest category and was 12% higher in FY2011 than in FY2008, while spending for the third largest category – food assistance – was 71% greater in FY2011 than in FY2008, largely due to growth in SNAP. Education was 57% higher in FY2011, almost exclusively due to growth in Pell grants.

Pretty neat trick to expand baseline spending on social programs without having to actually pass a budget.

And what has all this increased spending gotten us? Four years of $1 + Trillion deficits, a debt that has ballooned by 60% to over 100% of our GDP, and the slowest recovery on record for a recession. (Just in case you remain unconvinced, click here for some handy charts.)

This is just my first blush reading of this report from this report from the Congressional Research Service. In future posts, I will dive into some of the numbers and break down how much our spending has increased based on economic sector.