Under the Administration’s budget, domestic discretionary programs — the programs that are funded each year through the annual appropriations process, other than defense and international programs — are slated for sizable reductions over the next five years. The budget calls for these cuts to start in 2008, when domestic discretionary programs as a whole would be funded below a freeze of the levels provided for 2007 in the full-year continuing resolution now moving through Congress.[i] The cuts would then grow deeper each year after 2008, and would come from almost every part of the domestic budget. The largest cuts would come in 2012, when domestic programs would be cut $34 billion, or 7.6 percent, relative to the 2007 funding level, adjusted for inflation.
Grants to state and local governments have long been an important way in which the federal government supports and administers programs efficiently. The new budget, however, continues to significantly erode those grants. This leaves states and localities the option of either curtailing services or increasing their own taxes to compensate for declining federal funds.