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How Will the Budget Cuts Work?

Matt AlsdorfPosted Friday, Nov. 19, 1999, at 3:15 PM ET

Yesterday, the House passed a massive budget bill that included a 0.38 percent "across-the-board" budget cut. How will this cut be applied?

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Although the cut is billed as across-the-board, it affects only "discretionary" spending, which is less than half of the estimated $1.7 trillion budget. Nearly $1 trillion in spending is deemed "mandatory," so it's exempt from the cuts. This includes Social Security, Medicare, Medicaid, unemployment benefits, government pensions, the earned income tax credit, and other programs that the government is obligated to fund. Although it is not considered a mandatory expense, Congress also exempted military salaries from the cut--as well as its own.

To achieve the 0.38 percent reduction, cabinet secretaries will have to cut that amount from their departments' total discretionary spending. Congressional Republicans had originally proposed that the reduction be applied equally to each of the nearly 1,000 discretionary programs listed in the appropriation bills--that is, the Navy's $6 billion allocation for aircraft acquisitions and the $50 million budget of the Consumer Product Safety Commission would each have been reduced by 0.38 percent. But the final measure allows the cabinet secretaries to allocate the cut as they see fit. They will be able to reduce the spending of individual programs by up to 15 percent, while leaving other programs' budgets alone. The only department not granted this flexibility is the Pentagon, which is required to distribute the reduction proportionally among operations, procurement, and research programs.

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