President Obama previewed his budget over the weekend in his weekly address: "My budget freezes annual domestic spending for the next five years – even on programs I care deeply about – which will reduce the deficit by more than $400 billion over the next decade. This freeze will bring this type of spending to its lowest level as a share of the economy since Dwight Eisenhower was president."
$400 billion over ten years is about $40 billion a year, which sound like a lot of money — until one remembers that the federal budget overall is about $3.8 trillion. It amounts to a cut of about 1% — like an individual spending $100,000 a year deciding to tighten his belt by spending only $99,000 a year. And the "freeze" applies to a spending baseline that has been dramatically ramped up over the past decade. Looking at it as a "share of the economy" is deceptive, because there needn't be any fixed link between the size of government and the size of the economy. Some costs are fixed: We need to pay for the same nine Supreme Court justices no matter how large the economy gets. And to the extent that economic growth means prosperity, a larger economy may mean less need for federal antipoverty spending.