Medical services under the department of Veterans Affairs are classified as “non-defense” spending — subject to statutory budget caps. | AP Photo Congress Cuts to job training, vet care stoke anger in 2016 Washington gives short shrift to the casualties of far-reaching decisions on war and trade.

In searching for meaning in this year’s elections, a lot can be learned by looking at two budget numbers: medical care for veterans and job training for displaced and low-skilled workers.

Each is some measure of how Washington cares for the casualties of its decisions, whether in war or trade. And each poses its own Catch-22 that helps explain the alienation many working-class voters are now showing toward their government.


In the case of veterans, there’s a huge disparity between how their medical care is budgeted vs. how the government financed the wars in which the same men and women were wounded.

In the past 15 years, Congress has approved more than $1.5 trillion in emergency or “contingency” appropriations for war-related costs in Iraq and Afghanistan — all money counted outside any budget limits. But medical services under the Department of Veterans Affairs are classified as “non-defense” spending — subject to statutory budget caps.

In the coming year, for example, it’s estimated that $5.6 billion of the VA’s medical care will go to help those who served in Iraq and Afghanistan. But none of these costs will receive the same budget exemptions as the tens of billions in overseas contingency or OCO funds that are still allocated for the Pentagon.

The result is to pit veterans care against other domestic needs, a competition that’s received little attention to date but one that’s grown to have real-life consequences.

Indeed, VA medical costs have more than doubled over the past decade, as the aging Vietnam generation converges with the younger Iraq-Afghanistan vets entering the system. The rapid growth far exceeds the pace of inflation. And under the budget caps, this leaves less money on the table for other “non-defense” needs — among them worker training and assistance.

To better understand what’s happening, consider these numbers from the past 10 years.

Back in fiscal 2006, the Congressional Budget Office estimated that annual appropriations for the government’s core non-defense programs totaled $418 billion. When adjusted for inflation, that would be about $510 billion in today’s dollars.

In fact, that’s pretty much where things stood for fiscal 2016 prior to last October’s budget deal. With the spending caps then in place, President Barack Obama faced a level of non-defense spending effectively frozen at the same level that his Republican predecessor, George W. Bush, had enjoyed 10 years before.

The deal struck with congressional Republicans gave the White House about $32 billion in new purchasing power for non-defense programs in 2016, when compared with 2006. But what’s overlooked in these calculations is the impact of VA’s rapid growth in this same 2006-2016 period.

In 2006, discretionary appropriations for the department totaled about $34.1 billion, according to historical tables prepared by the Office of Management and Budget. By 2016, the same costs were estimated at $71.5 billion.

That’s $31.5 billion higher than where the VA would be if it grew at only the rate of inflation. And two-thirds of that extra growth can be explained by the increase in medical services.

Going back to the budget deal, all things being equal, Obama might have had $32 billion in new money. But all things weren’t equal. And most of the “extra” money was needed simply to fill in the holes left by the growth in VA since 2006.

In the presidential campaign now, these chickens are coming home to roost.

There’s been renewed debate over the price paid by America’s blue-collar workers in the wake of the North American Free Trade Agreement in 1993 and pro-China trade legislation in 2000. And this highlights, in turn, the decline in funding for employment and training services to help displaced workers.

Adding fuel — or at least some intellect — to the fire was January’s publication of a new working paper by the National Bureau of Economic Research, titled “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade.”

The three authors, all university economists, argue that “alongside the heralded consumer benefits of expanded trade,” workers can suffer “substantial adjustment costs and distributional consequences.”

“Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences,” the paper says in its summary. “Exposed workers experience greater job churning and reduced lifetime income.”

Thus far, Democratic front-runner Hillary Clinton has paid the highest price for this renewed focus on trade. That’s because her husband, former President Bill Clinton, oversaw Congress’ big votes on NAFTA and China trade.

But Republicans and their business allies pushed hard for both trade measures, and the GOP has a record since of cutting funds for job training programs and aid for displaced workers. As president, Clinton made significant investments here, for example, but his requests were also trimmed back often by Republicans in Congress.

When compared with other industrial nations like Germany, the record shows that the U.S. devotes a far smaller share of its resources to job training and other so-called active labor market programs — such as counseling — to help displaced workers.

Amid the wholesale job changes provoked by trade and new technologies in the past 20 years, the gap is all the more striking.

To get some measure of this, Politico looked at annual data collected by the international Organisation for Economic Co-operation and Development for the latest 10-year period, 2004 through 2013. As a percentage of its GDP, Germany spent an average of five times more per year than the U.S. on training programs and almost seven times more on all forms of active labor market programs.

A second way to get some handle on the U.S. record is to track data for the “training and employment” budget sub-function in OMB’s historical tables.

In fiscal 1993, these annual outlays were $6.7 billion, or about $11 billion in today’s dollars when adjusted for inflation. The tables show a brief spike with passage of the stimulus bill in 2009, and Obama is seeking big increases again in 2017. But in real life, outlays are estimated to be $7.6 billion in 2016 according to OMB, almost a third less than what the government was investing before NAFTA.

“They have really trimmed those programs,” said David Card, a professor of economics at the University of California, Berkeley. He argues that critics tip the scales in advance by setting unrealistic goals of what can be accomplished from job training programs, in which the government typically commits far less than the cost of a year in college.

“We would expect a year at one of the nation’s top universities to raise earnings by 10 percent,” Card said. “By comparison, most training programs are a tenth of that big investment. So the realistic expectation for these programs is very small, and that makes it very easy for people to look at the data and say these programs didn’t do anything so we’d better get rid of them.”

In an interview, David Autor, one of the authors of the NBER China paper and a professor of economics at the Massachusetts Institute of Technology, emphasized that the complexity of the challenge defies easy answers.

“It’s not always clear you should take time out to go back to school,” he said of the training options. “There are no real magic bullets — things that just get adults, who have been displaced from their jobs, quickly back into the workforce on good terms.

“It’s a really hard problem,” he added. “So I don’t want to suggest there is something that we all knew we could do if we just had the money.”

But in a follow-up email, Autor said “more of an investment in helping workers adjust to trade (or technology) shocks is absolutely justified. … I’m in favor of more investment in active labor market programs. Training should be one part of that portfolio, carefully targeted.”

Given this debate, it’s too simple then to say that the appropriations crunch — aggravated by the increased VA costs — is the single culprit. But it’s very clearly a factor.

In fiscal 2000, the last year of Clinton’s presidency, the dislocated-worker program was funded at a level of $1.589 billion. By 2006, that had dropped to $1.476 billion. For 2016, it is down to $1.241 billion.

Adjusting for inflation, that’s a 29 percent drop in 10 years and 43 percent less than what Washington was providing before the May 2000 vote in Congress that opened the door to more trade with China.

“That’s certainly worth pointing out,” said Autor.

It might even have the makings of a Merle Haggard song.

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