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Tuesday, May 24, 2011

FY2012 Budget Highlights for the Human Resources “Superfunction”: Education, Training, Social Services, Health, Income Security, and Veterans

Karen Spar
Specialist in Domestic Social Policy and Division Research Coordinator

Gene Falk
Specialist in Social Policy

The 112th Congress is focusing attention on short- and long-term efforts to reduce the federal deficit and stabilize the national debt, including proposals to alter the overall size and composition of total federal spending. Components of the federal budget categorized as “human resources” account for the majority of federal outlays (70% in FY2010) and would be affected by these proposals. Six functional categories comprise the human resources “superfunction”: education, training, employment, and social services; health (primarily Medicaid); Medicare; income security; Social Security; and veterans benefits and services.

President Obama submitted a detailed FY2012 budget request to Congress on February 14, and in April, he released a set of deficit reduction policies intended to build on the February proposal called the President’s Framework for Shared Prosperity and Shared Fiscal Responsibility. On April 15, the House passed a concurrent resolution on the FY2012 budget (H.Con.Res. 34) that was based on a document called Path to Prosperity, released by Budget Committee Chairman Paul Ryan on April 5. The Senate has not yet acted on a budget resolution for FY2012.

As a share of the national economy, spending for human resources is expected to have peaked at 16.4% of Gross Domestic Product (GDP) in FY2010 and, according to the Congressional Budget Office (CBO), will fall to 14.8% in FY2014. This decline reflects the assumed economic recovery, lower spending for programs that respond automatically to economic conditions (e.g., Unemployment Insurance, Supplemental Nutrition Assistance Program), and expiration of stimulus funding under the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). However, CBO estimates that, with no changes in current law, human resources spending will rise again as a share of GDP and reach 15.7% by FY2021 due to the continuing effects of the baby boom generation’s retirement and increased enrollment in Medicare and Social Security, real growth in initial Social Security benefits, medical cost inflation in excess of general inflation, and new spending related to the health care reform law of 2010.

Reflecting these trends, all projected growth in the human resources budget will occur in three functional categories: health (primarily Medicaid), Medicare, and Social Security. CBO estimates that spending for income security will contract as a share of GDP over the next decade, as will spending for the two smallest human resources categories (i.e., education, training, employment, and social services; and veterans benefits and services).

Both the President’s budget and H.Con.Res. 34 include provisions intended to reduce spending overall. However, the President’s February proposals would result in spending for human resources that would closely follow, and slightly exceed, the CBO current law baseline, while the House resolution sets spending targets that are significantly lower. Specifically, human resources spending would equal 15.9% of GDP in FY2021 under the Administration’s February budget and 13.5% under the House resolution, compared to CBO’s baseline estimate of 15.7%. The most significant reductions from the CBO baseline, if all provisions assumed in the House resolution were enacted, would occur in three categories: education, training, employment, and social services (the smallest human resources category); Medicaid; and income security. As widely reported, the House resolution assumes enactment of legislation to convert Medicare into a “premium subsidy” program; however, this change would not occur until FY2022, which is after the resolution’s 10-year budget window. Thus, the House resolution sets spending targets for the next 10 years that are relatively close to CBO’s baseline projections for Medicare, Social Security, and veterans benefits and services.

Date of Report: May 17, 2011
Number of Pages: 36
Order Number: R41827
Price: $29.95

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