Like all Federal budgets, the FY 2013 budget was supposed to fund the U.S. government for that fiscal year (October 1 2012 - September 30 2013). Instead, tea party Republicans resisted the normal budget process, so it was never approved. Here's what happened instead.
January 24, 2012 - President Obama outlined his budget priorities in the 2012 State of the Union Address. The theme was to reduce income inequality by extending the 2010 tax cuts to everyone except those making $250,000 a year or more.
February 13, 2012 - President Obama submitted his budget to Congress.
March 20, 2012 - House Budget Committee Chairman Paul Ryan submitted the House budget proposal, Path to Prosperity. It suggested repealing Obamacare, privatizing Medicare and change Medicaid to state block grants. This was a no-go for the Senate.
September 22, 2012 - Congress passed a continuing resolution that funded the government from October 1, 2012 to March 2013 at a level just slightly higher than the FY 2012 budget.
March 2013 - Congress passed another continuing resolution to fund government operations through the end of that fiscal year (September 30, 2013).
September 30, 2013. Tea party Republicans refused to pass another resolution unless Obamacare was defunded. The government shut down for 16 days.
The Budget Control Act of 2011 also impacted FY 2013 spending. Congress passed this Act to end the 2011 debt ceiling crisis. It used sequestration to cut Federal spending by $1.2 trillion over 10 years. It cut $85 billion from the FY 2013 year as follows:
- A 7.5% cut in military spending, totaling $54.7 billion.
- A 2% cut to Medicare provider reimbursements.
- An 8% cut to all other Mandatory budgets.
- An 8.4% cut to all other non-military Discretionary budgets.
The FY 2013 Budget
Here's a breakdown of the major components of the FY 2013 budget, updated with figures from the release of the FY 2014 budget on April 10, 2013. Keep in mind that the FY 2014 budget assumes that sequestration will be repealed by Congress, and imposes its own spending cuts. Congress has said this budget will also not be passed. However, it's the most recent estimate of actual government revenue for FY 2013. It also gives you an idea of the President's priorities, as expressed through funding.
The Federal government expected to receive $2.712 trillion in revenue in FY 2013. Income taxes contributed 46%, payroll taxes were 34%, corporate taxes were 11%, and the remaining 9% came from excise taxes, estate taxes and other miscellaneous sources. Here's the actual breakdown of tax amounts:
- Income - $1.234 trillion.
- Social Security payroll taxes - $673 billion.
- Medicare payroll taxes - $208 billion.
- All other payroll taxes - $70 billion.
- Corporate - $288 billion.
- Excise taxes - $85 billion.
- Tariffs - $34 billion.
- Earnings on deposits at the Federal Reserve - $83 billion.
- All other - $37 billion. (Source: Office of Management and Budget, FY 2014 Budget, Table S-5)
The OMB estimated the Federal government would spend $3.685 trillion by the end of FY 2013. Instead,the cuts from sequestration kicked in. Since government spending is a component of GDP, these spending cuts slow economic growth. This is very risky at this phase in the business cycle, which is just starting to expand after the 2008 financial crisis.
Mandatory - Sixty percent, or $2.203 trillion, is spent to fulfill mandatory programs. This spending is mandated by law, and cannot be changed without a literal act of Congress. It includes Social Security ($813 billion), Medicare ($504 billion) and Medicaid ($267 billion). All other mandatory programs total $620 billion. These include programs like Food Stamps, Unemployment Compensation, and Supplemental Security for the Disabled. Interest payments on the $16 trillion national debt at $223 billion, is also part of the mandatory budget.(Source: OMB, FY 2014 Budget, Table S-5)
Discretionary - Just over a third of spending, or $1.258 trillion, goes toward Discretionary programs. Even without sequestration, this is significantly lower than in prior years, when around 40% of the budget was discretionary. That's important, because that's the only portion of the budget that the President and Congress can negotiate each year. Just under half of that ($606 billion) is being spent on all Federal government activities not related to defense. Every department's budget is being cut except for Education, which rose to $69.8 billion from $67.4 billion in FY 2012. Spending on the other large departments is:
- Health and Human Services -- reduced more than 10% to $71.7 billion.
- Housing and Urban Development -- also reduced 10% to $34.5 billion.
- Justice -- slashed 33% to $17.9 billion. (Source: OMB, FY 2014 Budget, Table S-11)
Military - The other half of the Discretionary budget, or $651 billion, is being spent on defense. This includes the Department of Defense (DoD) base budget ($525.4 billion), which is down from its high of $530.4 billion in FY 2012. It also includes Overseas Contingency Operations ($96.7 billion) for the War in Afghanistan. Spending on the war is down from the $126.5 billion spent in FY 2012, $159.4 billion in FY 2011 and $162.6 billion in FY 2010. Nevertheless, defense is the second largest budget item after Social Security ($813 billion).
However, even this estimate is low because it doesn't include the costs for activities from other departments that support defense. The Obama Administration did include these costs in prior year budgets.
Here's the estimated spending for each of these security-related department:
- Department of Defense - $525.4 billion, down $5 billion from FY 2012.
- Veterans Affairs - increased to $61 billion.
- State and other international programs, increased to $48 billion.
- Homeland Security - reduced slightly to $39.5 billion.
- National Nuclear Security Administration - increased a bit to $11.5 billion.
This totals $158.6 billion. It also excludes Homeland Security ($39.5 billion) and Veterans Affairs ($61 billion). If all these were added together, the true cost defense spending is $780.7 billion. (Source: Office of Management and Budget, FY 2014 Budget, Table S-11)
The Budget Deficit Is Dropping:
In FY 2013, the budget deficit is estimated to be $973 billion. This was the first time it was less than $1 trillion since Obama took office: FY 2012 - $1.087 trillion, FY 2011 - $1.299 trillion, FY 2010 - $1.294 trillion, FY 2009 - a record $1.413 trillion. To compare U.S. budget deficits through history, see Federal Budget Deficit. (Article updated October 23 2013)
Compare to Other U.S. Federal Budgets: