Federal Resources for Children Challenged by Automatic Growth in Adult Entitlement Programs

Contact: Simona Tudose, (202) 261-5709, [email protected]

WASHINGTON, D.C., March 15, 2007--Caught between ever-rising expenditures on adult health care and retirement programs and their own programs that often lack automatic growth, children will see their shares of federal domestic spending and the gross national product decline by double digits over the next decade, according to a report released today by the nonpartisan Urban Institute.

The report, "Kids' Share 2007: How Children Fare in the Federal Budget," is available at http://www.urban.org/url.cfm?ID=411432.

As a piece of the federal domestic budget (excluding defense and international affairs), spending on children will decline under current law from 15.4 percent in 2006 to 13.1 percent in 2017, a nearly 15 percent drop, economists Adam Carasso, Eugene Steuerle, and Gillian Reynolds project. It declined from 20.1 percent in 1960 to 15.4 percent in 2006, even as it grew from $53 billion to $333 billion in today's dollars over that period.

As a share of GDP, children's spending will slide from 2.6 percent in 2006 to 2.1 percent in 2017, the researchers estimate. It climbed from 1.9 percent in 1960 to 2.6 percent in 2006. The nonchild portions of Social Security, Medicare, and Medicaid, they say, nearly quadrupled from 1960's 2.0 percent of GDP to 2006's 7.6 percent (or from $58 billion to $993 billion) and will hit 9.5 percent by 2017.

While children enjoyed 20.1 percent of federal domestic spending in 1960, their share of the increase in spending between 1960 and 2006 was 14.7 percent. Under current law, children's share of new federal spending between 2006 and 2017 will be 5.6 percent—$36 billion—while other domestic programs will expand by $609 billion.

"Children's programs are on track to receive an extremely modest share of rising federal spending made possible by the revenues that accompany economic growth and to continue their slide as a share of GDP," the researchers conclude. "Despite frequent rhetoric from policymakers on the priority given to children, the federal budget makes fairly clear that children are less of a priority and more of an afterthought in the budget process."

"Kids' Share 2007: How Children Fare in the Federal Budget" tracks federal spending from 1960 to 2006 and uses current policy and some assumptions to project activity through 2017. The report looks at more than 100 major programs that aim to improve children's lives through income security, health care, social services, food and nutritional aid, housing, education, training, and tax credits and exemptions for their families. Children are defined in the study as individuals under age 19 who are not in postsecondary education.

Spending Shifts toward Low-Income Children

The analysis contrasts how elderly entitlement programs tend automatically to outpace growth in the economy, wages, and medical costs, while individual children's programs tend to slip behind inflation and economic growth. The children's budget has maintained its share of GDP mainly through the introduction of 13 new programs since 1960, which, in 2006, accounted for 65 percent of the spending on children. Just three programs—the child tax credit, the earned income tax credit, and Medicaid—were responsible for 38 percent of the spending in 2006.

Children's expenditures have increasingly targeted low-income groups, with the share devoted to these children jumping from 11 percent in 1960 to 61 percent in 2006. At the same time, the universally available dependent tax exemption, once the largest single source of federal spending on children, dropped from 68 to 7 percent of all children's spending.

In 1960, tax and income security programs comprised 92 percent of the children's budget, but last year they combined for 49 percent. During that period, the share devoted to health, education, and nutrition programs climbed from 8 to 37 percent.

"Kids' Share 2007: How Children Fare in the Federal Budget" was funded by the Annie E. Casey Foundation and by First Focus, a bipartisan advocacy organization that is committed to making children and their families a priority in federal policy and budget decisions.

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