Federal Spending on Kids Falls, as More Dollars Flow Toward Older Adults and Debt

Federal spending on programs for children fell last year, as retirement and health care programs for adults and interest on the debt continued to consume an increasing share of the nation’s budget, according to a report released on Tuesday. 

The 13th edition of the Urban Institute’s annual Kids’ Share report found that federal government spending on children fell by about $12 billion, or 2.5%, in 2018 compared to 2017. Reductions in spending on education, nutrition programs and tax credits drove the decline.

These findings come at a time when the U.S. is in the midst of one of the longest economic expansions on record.

But costs for Social Security, Medicare and the adult portion of Medicaid are growing. Interest payments on the nation’s debt are also on the rise and the report projects that they will exceed federal spending on children by next year.

“Kids are still almost an afterthought,” Eugene Steuerle, one of the report’s lead authors, said on Monday. “It’s starting to have real implications. Particularly as we move into the future. In the past kids, on and off, fared fairly well.”

Steuerle noted that projections in the report show spending on kids will continue to erode in coming years if current policies go unchanged. “That has an implication not just for children, but at a more macro sense in terms of the extent to which the country is investing in itself and its future,” he said.

In 2018, the federal government spent about $6,235 per person under 19 years old in the U.S., the report says, with $4,877 of that amount going to programs and tax credits and $1,358 to tax reductions. The per capita total in 2017 was $149 higher at $6,384. 

Overall spending on programs for kids last year included $379 billion in budget outlays for programs, and $106 billion in tax reductions.

The $485 billion total was 1.9% of gross domestic product, off from a peak of 2.5% in 2010, which came amid recession-era stimulus spending. Spending on kids as a share of GDP was lower in earlier years, for example: 1.5% in 2000 and 1.1% in 1990.

Some of last year’s decline in spending is expected to be reversed this year when families see the full effects of the child tax credit expansion that was enacted as part of the Republican-backed tax package lawmakers approved in late 2017.

In 2018, the federal budget was about $4.1 trillion. Spending on kids was 9% of that total, the lowest level since 2007. The adult portions of Social Security, Medicare and Medicaid took up the lion's share at 45%. Defense was 15%, interest on the debt 8% and all other programs 22%.

Looking back, spending in the budget on kids grew sporadically from 3.3% in 1960 to a high mark of 10.6% in 2010.

Projections in the report show that the proportion of the budget going to programs for kids will drop to 7.5% over the next decade, assuming no changes to current law.

“Children’s programs are expected to receive very little of the projected increase in federal spending over the next decade: 3 cents of every dollar compared with 67 cents for Social Security, Medicare, and Medicaid and 28 cents for interest on the debt,” the report says.

Many federal programs for kids, Steuerle pointed out, are not set up to grow automatically to account for inflation or other factors. 

In contrast, he added, “health and retirement programs are indexed to grow quite substantially.”

Spending on Medicaid and the Children’s Health Insurance Program, which are both geared toward providing health coverage for lower-income Americans, is the only type of federal expenditure for children that the report estimates will rise steadily over the coming decade.

While per capita spending on children’s programs rose from around $292 in 1960 to the $4,877 figure seen last year, per capita spending on adults 65 or older shot up from $4,362 to $29,297 over that same time period.

The largest categories of federal spending on kids in 2018 included: child-related tax provisions ($178 billion), health programs, including Medicaid and the Children’s Health Insurance Program ($116 billion), and nutrition programs, including SNAP, also known as food stamps ($57 billion).

Only about $41 billion went to education, which is funded largely at the state and local level. State and local governments contributed about 65% of total public spending on kids in 2016. Data to analyze 2017 and 2018 state and local spending isn’t available yet, the report says.

Steuerle noted that current federal policies are also setting up younger Americans to grapple in future years with both larger sums of actual government debt and “implicit debt” due to the troubled funding outlook for health and retirement programs like Medicare and Social Security.

“There’s a generational aspect to this,” he said. “In a sense in our budget, we’re treating kids worse and worse.”

About 61% of federal expenditures on kids last year targeted low-income families. 

The report says that the nation’s child poverty rate in 2017 was around 18% and that based on one recent survey about 44% of parents of young children reported having trouble paying for food, medical care, housing or utilities in the past year.

A full copy of the report can be found here.