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10:00pm January 26, 2011

Will Five-Year Freeze on Domestic Spending Help African American Employment?

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In his much anticipated State of the Union address last night, President Barack Obama proposed a five-year freeze on domestic or discretionary spending to start this year in order to address increasing deficits.

Spending wise, budgets are separated into two main categories: automatic stabilizers, which include prior legislative commitments to social security, unemployment, and other entitlements. While specific amounts to be funded might not be written in law, rules determining amounts to be paid or eligibility requirements for receiving payments may be included in legislation.

Discretionary spending, on the other hand, is not subject to any prior commitments. They represent explicit changes in government purchases and/or tax policies with the intent of stabilizing business cycles, affecting inflation, or reducing unemployment.

Based on Mr. Obama’s address, non-security discretionary spending should remain at approximately $530 billion over the next five years. This freeze, however, would not necessarily result in reduction in the deficit or reduce the freeze’s impact on national economic growth or output.

The FY 2011 budget, which covers the period October 1, 2010 to September 30, 2011, has already projected a reduction in discretionary spending. For example, while discretionary spending is expected to be approximately $530 billion in FY 2011, discretionary spending is expected to fall to $490 billion in FY 2012; $480 billion in FY 2013; $484 billion in FY 2014; $493 billion in FY 2015; and $504 billion in FY 2016.

Discretionary spending is not expected to impact national output much either. In FY 2011, discretionary spending is expected to account for 5.8% of national output, but fall to 4.3% in FY 2016.

If overall employment and African American employment in particular is to rise, there will have to be a significant increase in national output. This increase will not come from discretionary spending much less a spending freeze in this portion of the budget. If African Americans expect to see a boost in GDP, and thus employment, other factors of economic growth, such as consumer spending, which accounts for 70% of GDP, and private investment, which accounts 14% of GDP will have to be relied on.



About the Author

Alton Drew
Alton Drew provides advocacy, legal and legislative analysis, and legislative monitoring services for not-for-profit associations and foundations with a particular emphasis on broadband adoption, spectrum acquisition, and capital accumulation. Using various social media platforms, Mr. Drew amplifies messages for not-for-profit associations and foundations as part of their online media campaigns. Follow him on Twitter @altondrew; Facebook at http://www.facebook.com/alton.drew.5; or visit him at www.lawandpoliticsofbroadband.com or www.lawandpoliticsofcapital.com.




 
 

 
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2 Comments


  1. John_Q_Public

    Let's hope that the government finds a way to allocate resources to digital literacy training initiatives. These hold enormous promise for helping the unemployed get back on their feet. And the best thing about these new broadband-enabled tools is that they are colorblind.


  2. Sy1

    I agree with you John. As the unemployment rates continue to rise, the African American community, in paticular bears the brunt of the economic downturn.



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