Restraining Federal Domestic Spending

James C. Capretta
James C. Capretta Fellow and Milton Friedman Chair, Health Care Policy - American Enterprise Institute

January 1, 2007

Budget Options Series

How can we balance the budget in the next five years? In a series of papers on budget choices, Brookings analysts examine options for reducing domestic discretionary spending, pruning the defense budget, raising revenues, and investing additional resources in children. An overall deficit reduction plan uses the ideas developed in this series to balance the budget in the next five years. All five papers in this series, and more information about the Budgeting for National Priorities project, can be found at

Paper Summary

Spending restraint has never been more important as a policy objective. Several critical national priorities (the Global War on Terror, emergency preparedness) must be addressed simultaneously and will require substantial resources, even as the country is on the brink of unprecedented and expensive population aging. Curbing the near-term federal budget deficit is an imperative. This paper recommends appropriations cuts to and reforms of a number of government programs (including Amtrak, economic development programs, education funding, and Medicaid administrative funding), along with the adoption of certain new policies that would help reduce government spending. Taken together, these proposals save $275 billion over the five years from 2008 to 2012—more than half the savings needed to balance the budget at the end of this period.