Why Utah should expect ongoing drops in federal funding

With sequestration now in place, federal funding for low-income and special education students, national defense (read: Hill Air Force Base), and for local government programs and services will be decreasing, with impacts which have yet to materialize. The impacts may be severe, or they may not be as bad as some believe – only time will tell.

But while the actual impact of sequestration is as yet not fully known, one thing seems more certain: Federal funding to public education, national defense, and the poor will continue to go down.

This is because, as columnist Robert Samuelson articulately points out in a Washington Post opinion piece, the single biggest factor in the federal government’s spending problem – namely federal retirement programs, such as Medicare and Social Security – is politically off limits. As Samuelson points out, the sequestration policy, consisting of significant cuts to everything except Medicare and Social Security, is a manifestation of this political reality. Further, no one in power in Washington is seriously calling for significant changes to these retirement programs any time soon. President Obama seems to see no reason to even have a serious conversation about the issue, and even Rep. Paul Ryan’s budget doesn’t enact Medicare reforms until 2024.

In the meantime, the federal government deficit problems will continue to create political pressure, and eventually economic pressure, to decrease federal spending. And if those spending cuts are not to come from federal retirement programs, they will come from everything else – meaning those areas for which Utah receives federal funding, including public education, transportation, health care for the poor, etc.

Like the sequestration, the impacts of these forthcoming spending cuts are uncertain – will they focus on a few areas such as public schools and Medicaid, or will they be spread around evenly? But it is certain that they will come – it is simply a mathematical reality.

As an illustration, the American Institute of Certified Public Accountants estimates that current outstanding debt and Medicare/Social Security obligations ($61 trillion) are already greater than the household net worth of the entire country ($58.5 trillion). In other words, if the government simply stopped funding public schools, transportation projects, national defense, etc., and taxed away every penny of net worth from American households, it would still not be able to pay its debts and federal retirement obligations, falling short by a staggering $2.5 trillion.

In other words, for all of the focus on how sequestration may harm public school children and families who depend on Hill Air Force Base for their livelihood, these federal spending cuts simply represent the beginning of what the future holds. As long as 2 plus 2 continues to equal 4, this is simply the reality Utah faces.

This reality creates a moral obligation to our families and our children’s future to start preparing for this predictable predicament. Slowing state and local government spending growth in favor of setting aside ongoing revenue streams to cushion the blow of ongoing cuts in federal funds would be a prudent way to start.

This entry was posted in Budget and tagged , . Bookmark the permalink.