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The City Café

For those interested in sharing ideas and perspectives regarding local government.

With everyone buried in the middle of the UT Legislative Session maybe you missed that Monday President Bush delivered his FY2008 budget to Congress. Just by mentioning the federal budget most eyes droop or glaze over…it is hard to see the relevance to local politics or to relate to numbers like trillions. However, there are some real factors for us to be aware of. Here are a couple of points to note:

  • Current budget deficits will likely diminish then disappear over the next decade (According the Congressional Budget Office).
  • While the deficit will decrease mandatory spending (Social Security, Medicaid, Medicare) continues to rapidly grow.
  • Currently Social Security, Medicaid, and Medicare amount to 8.7% of GDP or $1.1 trillion
    • CBO estimates that in 20 years these programs will nearly double, resulting in 14% of GDP.

The question becomes…what happens to the discretionary piece of the federal budget while mandatory spending grows? Discretionary spending includes all programs that impact state, county, and municipal governments. It is important to keep on eye on this to accurately assess the future of federal, state, and local fiscal partnerships.

The Tax Policy Center is a great resource to better understand federal budget issues and the budget process. Check here.

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