Lots of hype, few actual spending cuts

Senate Majority leader Harry Reid of Nev., speaks to reporters on Capitol Hill in Washington, Monday as he announced a new proposal to solve the debt limit crisis. (AP Photo/J. Scott Applewhite)

They may promise to reduce federal spending by $3 trillion or thereabouts, but the immediate spending cuts in rival budget and debt proposals by House Speaker John Boehner and Senate Majority Leader Harry Reid only measure a few billion dollars. The rest are mostly promises — and in Reid’s case, a glaring $1 trillion ploy.

Reid, D-Nev., claims $2.7 trillion in budget savings over a decade in his plan. But $1 trillion of that comes from reduced war costs from a troop drawdown that’s occurring anyway. Reid budgets $127 billion for the wars in Iraq and Afghanistan next year and then limits spending over the remaining nine years of the decade to $450 billion. That’s an average of $50 billion a year, far less than is likely to be required.

“Counting that $1 trillion towards claimed deficit reduction would be taking credit for policies already in effect, and would therefore be a gimmick,” says a policy brief from the Committee for a Responsible Federal Budget, a Washington-based think tank.

Under the rules followed by the Congressional Budget Office, the agency currently projects war spending to grow with inflation even as troop drawdowns are ongoing. That allows Reid to claim the $1 trillion in savings by taking advantage of the peculiar way government scorekeepers project war costs and by lowballing projected costs in future years.

To be sure, Reid is only following the example of President Barack Obama and House Republicans. Both already had claimed the war savings in their budgets.

Now House Republicans are perhaps the loudest critics of the maneuver. In his address to the nation Monday night, Boehner said Reid’s plan is “filled with phony accounting and Washington gimmicks.”

As for Boehner’s plan, it promises more than $1 trillion in cuts from agency budgets as the price for a commensurate increase in the borrowing cap. The initial raft of savings would be a precursor to $1.8 trillion more that would be put together by a special congressional committee. Only after the committee’s recommendations are enacted could Obama request a second debt increase that would be enough to keep the government afloat past the 2012 elections.

Boehner is hardly bulletproof in his claim to produce $1.2 trillion in savings by curbing spending by Cabinet agencies responsible for myriad federal programs, including national parks, education, defense, health research and foreign aid, among others.

Boehner, like Reid, promises to produce the savings — spread over the coming decade — in future cuts that would come from tight caps on the day-to-day agency budgets passed by Congress.

A Congressional Budget Office analysis released Tuesday, however, estimated that Boehner’s measure, rather than generating $1.2 trillion in cuts, actually would generate less than $1 trillion in cuts to spending authority — and just $851 billion in actual deficit savings, even after lower interest costs are included.

Boehner’s office said it would rewrite the legislation to make sure the spending cuts exceed the amount the debt limit would be raised. The plan had promised that the savings would balance out a $1 trillion increase in the nation’s borrowing authority.

The CBO does credit Boehner’s plan with producing savings because it sets the spending caps in law for the coming decade — backed up by the threat of automatic across-the-board spending cuts if future Congresses can’t hit the spending targets.

But Congress invariably makes inflated promises about the spending constraints it can live within in future years. For 2012, the Boehner and Reid plans would cut only $5 billion to $7 billion from the present $1.05 trillion appropriations cap and essentially freeze such spending at that level for 2013 as well. After that, agency budgets would rise by about 2 percent a year — which is certain to spark battles between defense hawks and defenders of domestic programs over who shares the increases and by how much.

The most recent attempt to impose such caps in law as part of a budget deal involved President Bill Clinton and former House Speaker Newt Gingrich. It was a spectacular failure.

The 1997 balanced budget pact ordered stringent spending caps for five years. The only year the cap held was the first one.

One Response to "Lots of hype, few actual spending cuts"

  1. egc52556  July 27, 2011 at 11:22 am

    I don’t know that Reid’s plan is a “ploy” at all. When everybody talks about the budget and the deficit, they include the war costs. Why shouldn’t everybody include the savings from the drawdown when they are looking at reductions?

    If I say, “I owe $100 and need to only owe $70,” why shouldn’t I be able to say, “Well, $15 of the $100 is going away anyway.”? The end result is I’m $15 closer to $70 than I was at the beginning of the conversation.

    Right?

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