Where US spending cuts will hurt most

At least 37 federal programs will lose $500 million or more. If enacted all at once, 9 years of reductions would lower the current debt by just 7.5%.

By MSNMoney partner Sep 17, 2012 2:48PM
US News logoBy Rick Newman

There's a paradox about government spending. A lot of taxpayers think there's too much of it, but when it comes to cutting specific programs, they want to leave everything the way it is. It turns out that we like what our government buys more than we realize.

The big spending cuts due to kick in at the start of 2013 present the same conundrum. Under the Budget Control Act signed into law in summer 2011, Congress is supposed to start cutting about $110 billion per year in spending, with half coming from defense and half coming from other programs.

It sounds reasonable. The cuts represent less than 3 percent of all government spending, and we have to start somewhere if we're going to begin paying down a national debt that now tops $16 trillion.

But once the ax hits specific programs, the cuts seem scarier. The Obama administration, no doubt, was well aware of that when it drafted a recent report detailing where, exactly, that $110 billion is going to come from every year. The Budget Control Act stipulated that some programs would be exempt from cuts, including Social Security, Medicaid, food stamps, veterans' benefits, and a few other things. Taking those off the table means the remaining programs will need to be cut by proportions generally ranging from 7.6 percent to 9.4 percent.

Cuts of that magnitude would be painful. In its report, the White House argued that such cuts "would be deeply destructive to national security, domestic investments, and core government functions." Instead of immediate, across-the-board spending cuts, President Obama would prefer to address the problem with a mix of smaller spending cuts, higher taxes on the wealthy, and other reforms that include a higher eligibility age for Medicare and Social Security.

The scheduled cuts are now law, and they'll go into effect unless Congress changes the law. I scoured the White House report to get a feel for where the money will come from: At least 37 federal programs will lose $500 million or more, which will account for about $81 billion of cuts. The remaining $29 billion will come from an array of smaller programs.

Here's where some of the biggest cuts will occur:
  • Operations and maintenance for the Army, Navy, Air Force, Marines and National Guard: $20.4 billion in cuts
  • Military procurement: $11.5 billion
  • Medicare: $10.6 billion. (The new law limits cuts in Medicare to 2 percent of total spending.)
  • Military research: $6.5 billion
  • Defense health programs: $3.3 billion
  • National Institutes of Health: $2.5 billion
  • Special ed and education funding for the disadvantaged: $2.3 billion
  • Rent subsidies for low-income tenants: $1.5 billion
  • Afghan security forces funding: $1.4 billion
  • Federal unemployment insurance: $1.4 billion
  • Diplomatic and consular funding: $1.1 billion
  • NASA: $1.1 billion
These are just the cuts that will exceed $1 billion per year or so. Many smaller programs could suffer more, since they have less money to work with overall. And remember, these cuts are scheduled to be enacted every year through 2021.

Though the numbers may sound large, the economy can probably handle such cuts. There might be layoffs at defense contractors and some government agencies, along with lower spending by people getting smaller government subsidies. Still, the cuts represent less than 1 percent of the nation's total economic output. On their own, the scheduled cuts would slow the economy but probably not induce a recession.

The problem is that they wouldn't cut the national debt by all that much either. The Budget Control Act cuts amount to just $1.2 trillion over nine years (the numbers don't add up precisely because part of the savings includes interest expenses that won't have to be paid). If enacted all at once, those nine years of cuts would lower today's debt by just 7.5 percent. For all the pain that scheduled cuts would cause, a lot more is coming.

More from US News & World Report

Sep 25, 2012 11:23AM
Let the cuts begin folks ! And guess what the congress will only work 12 days from sept to dec ! Only in the USA can the useless congress of the USA go on another vacation . I say to the American people get rid of your congress man or woman who has been there over two terms! These people in this body of government has lost all touch with main street America. Dems or rep ! They both stink and truly need to go !
Sep 25, 2012 10:14AM

What I would do

            No government sponsored aid to foreign countries.

            No prohibiting individual aid to a foreign country unless the country is an enemy.

            No tax on wages. No tax on investments. Tax on sales only.

            No aid to anyone who is not a citizen.

            To be a citizen in full standing you must be born of two citizens or be born of one citizen on United States land. Being born of one citizen in a foreign country or being born in this country of two non citizens would give you the right of dual citizenship on your 18th birthday; you would not be entitled to any benefits you had not earned.

            No elected or hired employee of the government would be exempt from any law.

            No government employee would be allowed to belong to a union.

            All embassies in hostile countries to have marine security.

Sep 25, 2012 9:49AM

The military budget definitely needs to be slashed. I'm a proud patriotic vet. But one thing I witnessed in the service that bugged the **** out of me was LARGE amounts of BRAND NEW supplies being buried EVERY YEAR just so budgets can be maintained and increased. WHY? ????

Sep 24, 2012 11:17AM
Same old stuff, 'nuther day.  Don't see anything in there for pay reductions or benefit reductions or expense account reductions for those in their Ivory Towers do we? It will be the frail elderly and disabled and terminally ill who bear the brunt of it, those who cannot care for themselves when they further reduce staff in the squalid horror known as a nursing home. Leadership comes from leading by example, not lecturing and mudslinging, how's about all the top political people and their staff making over $100K all get a 10% pay reduction and let them contribute to their benefit costs? No, easier to push Grandma off the cliff when she is too frail and sickly to get up out of her wheelchair......
Sep 22, 2012 4:18PM

There in lies the problem Mr. Rick Newman - you don't view a 7.5% decrease as substantial.  We need to make the cuts, and we need to do it in increments. It would be moronic to think we were going to balance the budget next year - we could't possibly tax enough, nor would it be wise to cut that much. You yourself say in the article the economy could sustain it - sounds to me like a good balance then - sustainable cuts that MUST BE DONE, we can't go on borrowed money forever. We need to initiate cuts, and as the economy adjusts, more cuts, slow and incrementally until we get our financial house in order.

Sep 21, 2012 2:33PM

I have made my living in agriculture all my life. There is absolutely no need for price supports, government loan programs, subsides, etc. they should have been gutted in 1945. We do not need house and senate agriculture committees, a United State department of agriculture. Give agriculture a fresh fruit and vegetables commodities market. Put agriculture on the world wide free market. Agriculture will produce what we want to consume, not what government subsidizes. Government is the greatest  contributor of obesity, it subsidizes fats and oils, sugar, corn sugar and the like. Productivity will increase in agriculture by 20% a year as poor management is forced to leave agriculture and resources are redistributed among growers who produce what the consumer want.

Sep 21, 2012 12:43PM
Cut all foreign aid. Use the money to AID the American People and drive down the debt.
Sep 20, 2012 8:35AM
We need to relook the concept of the Earned Income Tax credit. The EIC should be capped at no more than the total amount of tax withheld.  Last year when I did my two daughter's taxes one had $1,800 withheld but received a $5,600 refund, the other had $2,200 withheld and received $3,800 refund. Sure looked like a freebie to me.  Subsidies need to come with strings and rules.  Cap the EIC and relieve the pressure on well run and governed subsidy programs.
Sep 18, 2012 2:30PM
SSI is supposed to be a supplementary income for disabled persons who can't work and have less than 40 working quarters (10 years) which makes them ineligible for SSD. So why are all these people getting SSI for young children who are in school. 
Sep 18, 2012 2:15PM
Sep 18, 2012 2:03PM
They can start by ending and banning PORK BARREL NONESENSE.
Sep 18, 2012 2:00PM
Folks would do well to have a forty hour work week and get paid 20.00 bucks an hour. I cant live on 7.00 hourly with a whole 10 hours a week. **** here in NC one 40 hour job is busted up among 4 sheeples!How can one go on with out  pay raises? Dems want stamps, reps wont let us have decent wages, yet were on our own.
Sep 18, 2012 1:57PM
These cuts wouldn't be an issue today,

If we didn't blow   4.5 TRILLION dollars ( and still counting) on wars in the Middle East.

You were misled. Why should the innocent suffer?

Sign a petition for the Re-investigation of 911 and put the blame where it belongs.
Or continue to suffer unnecessarily.

Sep 18, 2012 1:54PM
Watch! ACORN will probably get a load of cashed dumped their lap.
Sep 18, 2012 1:53PM

Keep it simple, make straight across the board cuts in all government agencies. TFB if your favorite program takes a hit, let everyone take the hit. Isn't that what being "fair" is all about?

Sep 18, 2012 1:53PM
Theres too many people in NC sucking up stamps, welfare, disability, just for being FAT.Yet my daughter works fulltime, for a measly **** 300.00 a week. She was told that she makes too much money. Too much for who?The ileagal ALIEN that got her knocked up doesnt help out with a dime.The worst part of it is, this family I know get 2000.00 SS per month for being FAT, AND, 670.00 per mnth in stamps. for a fat family of four.They are UNGRATEFULL because theyre always complaing, that theyre not GIVEN enough! 
Sep 18, 2012 1:51PM
Oh, yeah, you can add 'students' into the entitlement-minded parasites who think other people should pay for their "higher' education.  College is a privilege, not a right, so pay for it yourself.
Sep 18, 2012 1:48PM
Cutting spending never hurt anyone.  We have far too many 'adult parasite losers', deadbeats, bums and fat welfare mom's who think they are entitled to other people's hard-earned money.

Well, guess what?  Think again?  It's time to get off your lazy, fat, f*****g asses and get a job.  You want something to eat?  Get a job!  You want a car?  Get a job!  You want a house?  Get a job!  You want the new iPhone?  Get a f*****g job!!!  I don't care if it's flipping f*****g hamburgers or being a garbage man - GET A F*****G JOB!!!

Oh?  There aren't any jobs?  Then vote for Romney/Ryan!  Elections have consequences and "Dumbo" and his idiot sidekick, "Plugs", are NOT the answer.
Sep 18, 2012 1:46PM
Im still waiting to see the filthy, dirty, rich, get their **** taxed. I dont think taxing the rich will help out the debt. but will make most us that are taxed extremely high in lower income earners, feel alot better. After all the rich get tons of perks just because theyve got the most moolah! Hell Im from middle class, got taxed 20% for the few bucks my father left me. So, Ill be RETHINKING how I leave anything to my  kids.
Sep 18, 2012 1:36PM
Phew, glad Planned Parenhood, NPR/PBS were not listed . . .
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