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A Project of The Annenberg Public Policy Center

Biggest Budget Cut in U.S. History?

Democrats and Republicans alike are making grandiose — and unsupportable — claims that the budget deal contains the biggest spending cut in U.S. history.

Under the bipartisan agreement, the proposed budget for this fiscal year would be $38.5 billion less than last year’s budget. The federal government spent nearly $3.5 trillion in 2010, so the cut is a little more than 1 percent of total spending.

  • President Barack Obama called it "the biggest annual spending cut in history." But to back up that claim, the White House gave us budget data that went back only to 1978. It also excluded mandatory spending and years when there were "extraordinary circumstances." If you look at total spending, there were 19 times since 1901 when spending fell by a larger rate.
  • Rep. Hal Rogers, chair of the House Appropriations Committee, declared that the "non-defense spending cuts" in the budget were "five times larger than any other cut in history." That’s wrong. His office used data that went back to only 1994 and did not adjust for inflation. The cut is not five times larger than one in 1995, when adjusted for inflation.

Big, Bigger, Biggest

Our ears perk up when someone makes a claim using absolutes. We are always suspicious when something is "always" or "never" so, or something is the "biggest" or "smallest" ever. That’s what happened when Democratic and Republican leaders congratulated themselves for agreeing over the weekend to a budget deal that averted a partial government shutdown. Congress has scheduled an April 14 vote on the budget.

The president and Sen. Dick Durbin on the Democratic side joined Rogers and Rep. Paul Ryan, chairman of the House Budget Committee, on the GOP side in declaring the cut the "biggest" or "largest" ever.

Obama, April 8: Now the same cooperation will make possible the biggest annual spending cut in history, and it’s my sincere hope that we can continue to come together as we face the many difficult challenges that lie ahead, from creating jobs and growing our economy to educating our children and reducing our deficit.

Durbin, April 8: This agreement is the largest budget cut in our nation’s history and it still preserves the investments needed to help our economy continue to recover.

Ryan, April 9: The president started this year by proposing a freeze that would make no cuts at all. But now bipartisan legislation is in sight to enact the largest spending cut in American history.

Rogers, April 12: Never before has any Congress made dramatic cuts such as those that are in this final legislation. The near $40 billion reduction in non-defense spending is nearly five times larger than any other cut in history, and is the result of this new Republican majority’s commitment to bring about real change in the way Washington spends the people’s money.

Let’s first take Obama’s claim, which was repeated by leaders of both parties.

Asked to support the president’s statement, Office of Management and Budget spokeswoman Meg Reilly provided a chart that showed budget authority figures (not actual spending) for discretionary spending (not total spending) that went back only to 1978 (she said that was the latest data available). Budget authority is the spending level set by Congress, not how much is actually spent. Discretionary spending is funding that is subject to congressional approval every year in the appropriations process and excludes mandatory spending, such as Medicare and Medicaid.

In addition to excluding mandatory spending, the administration also excluded any years in which there were "extraordinary circumstances" — such as last year, when there was a drop in spending as the 2009 stimulus funds dried up, Reilly said in an e-mail.

But the president made the unqualified statement that the budget cut was the "biggest annual spending cut in history." Period. One would expect at the very least that his analysis would extend beyond the Jimmy Carter years.

One way to judge whether it is the largest ever is to look at actual total spending going back as far as you can. For that, we looked at OMB’s historical budget table 1.1, total outlays, 1789-2016. The OMB chart does not provide annual spending levels until 1901, but we found there were 19 times since then when federal spending declined at a larger rate than it would this year under the budget agreement. It’s true that most of the spending cuts occurred during "extraordinary circumstances." Most of the spending cuts occurred at the end of World Wars I and II and during the Great Depression.

The biggest cut, on a percentage basis, occurred in fiscal year 1920 after two years of steep budget increases to finance World War I. That year, spending dropped from $18.5 billion to $6.4 billion, which is $12.1 billion decline or about 65 percent. The $12.1 billion in today’s dollars would be worth $134.3 billion, according to the Bureau of Labor Statistics’ inflation calculator.

Likewise, there was a sharp decline in spending after World War II. Beginning in 1946, Congress cut spending for three straight fiscal years. The biggest drop occurred in 1946, when spending dropped by $37.5 billion or about 40 percent (from $92.7 billion to $55.2 billion). That $37.5 billion would be worth $425.4 billion in today’s dollars — making it the largest cut in adjusted dollars.

This year’s proposed cut is not even bigger than the reduction in spending that occurred last year, when total spending declined $61.5 billion, or 1.7 percent, after the infusion of stimulus money started to dry up. The biggest drop in spending prior to 2010 occurred in 1955, when total spending fell $2.4 billion or 3.4 percent. 

‘Five Times Larger Than Any Cut in History’

The GOP chairman of the House Committee on Appropriations provided his own twist on the budget cut. In an April 12 statement, Rogers declared that the "non-defense spending cuts" in the budget agreement were "five times larger than any other cut in history."

To check this claim, we turned to OMB’s historical tables for non-defense spending (Table 6.1). We found that actual spending declined by about $94 billion, from $2.86 trillion in 2009 (which included funds for the stimulus bill) to $2.76 trillion in 2010. That’s much larger than the current budget cut, which totals $38.5 billion. Based on those figures, Rogers is way off.

House Appropriations Committee Communications Director Jennifer Hing told us that Rogers was actually referring to "non-defense discretionary" spending, not just "non-defense" spending.

But Rogers is still wrong. From 1981 to 1982, non-defense discretionary spending declined by $9.93 billion. Adjusted for inflation, that’s about $22.7 billion in today’s dollars. The current budget cut is not "five times larger" than that, as Rogers claimed.

When we presented this information to Hing, she said committee staff used "budget authority," not outlays. (As we said earlier, we prefer outlays because it measures actual spending.) She added that the committee found that the largest cut in non-defense discretionary budget authority — in plain, non-inflation-adjusted dollars, since World War II — was about $9 billion in 1995. That would be about a $13 billion cut in today’s dollars. That would make this year’s proposed cut nearly three times larger, not "five times."

Moreover, the documentation Hing provided to back up this claim only goes back to 1994, hardly sufficient to make a claim about spending cuts in "history."

One last note: You may hear members of Congress refer to the cut as $78.5 billion, not $38.5 billion, as Durbin did in his statement. That’s because the budget deal is $78.5 billion less than Obama’s proposed 2011 budget. But that’s not a spending cut, as we pointed out twice in the weeks before the budget deal was struck.

— Eugene Kiely and D’Angelo Gore, with Lauren Hitt