Words are like bullets; once fired they cannot be recalled. As any range master will tell you, be careful of the ricochet.
One hundred and three House Republicans have sent a letter to House Speaker John Boehner and House Majority Leader Eric Cantor outlining the conditions under which they “might” vote to increase the federal debt ceiling.
These conditions are:
(1) cut spending immediately in order to cut the projected FY2012 deficit in half;
(2) enact statutory, enforceable spending caps that cut future spending down to 18 per cent of Gross Domestic Product;
(3) House and Senate passage of a Balanced Budget Amendment to the Constitution that includes a spending cap of 18 percent of GDP and “a high hurdle” for tax increases.
The letter, ram-rodded by Republican Study Committee Chairman Jim Jordan, contends that cutting the projected deficit in half in the coming fiscal year would require “only” spending cuts of $380 billion.
Signatories of the letter must make at least three assumptions.
First, the letter makes a nice press release for back home consumption, where very few voters will question the numbers.
Second, that when the right numbers emerge, the public will be sufficiently confused and stop paying attention.
Third, that when many of these signatories do vote for a debt ceiling increase, without the conditions they stipulate, all prior words on the subject will suddenly disappear from existence and voters will have forgotten what the 103 demanded.
We need to be clear here. Congress will pass an increase in the federal debt ceiling. It will do it with maximum confusion, unnecessary verbiage, and in such a manner that has the greatest possibility of spooking credit markets throughout the world.
Here’s a “green eyeshade” look at the letter.
The 103 signers believe that cutting next year’s deficit in half will require only $380 billion in cuts from projected spending, according to the Congressional Budget Office. They are right only if they also endorse full expiration of most of the Bush tax cuts, expansion of the Alternative Minimum Tax (AMT), and full implementation of cuts to doctors who have Medicare patients.
Yet, in all likelihood, all 103 are on record urging full continuation of the Bush tax cuts, keeping the AMT from expanding, and making sure that the cuts to Medicare doctors don’t occur. So those103 representatives have signed a letter that implicitly endorses what they have publicly repudiated, or they weren’t really paying attention to the little details of budgeting. Those little details loom large.
So, what is the real number? How much would it take to cut the FY2012 deficit in half, taking into account the very positions that the 103 have previously endorsed?
The CBO produces what it calls “an alternative baseline.” This baseline incorporates an important matter—political reality. Using this baseline, which assumes that politicians will continue the majority of the Bush tax cuts, will truncate the AMT’s reach, and will reject cutting doctors’ Medicare compensation, as well as other reasonable assumptions based on past behavior, the CBO gets this deficit number: $1.12 trillion, or roughly 7.1% of anticipated GDP. Now, half of $1.12 trillion is $556 billion, not the $386 the 103 say would achieve the goal of cutting the deficit in half.
Yes, this is getting boring. Pure boredom with all these numbers accounts for why the public finds itself completely confused about the true federal budget situation.
But, hang with me for just a moment more. Here are the numbers for spending as a percentage of GDP.
Medicare and Medicaid = 5.0%
Social Security and related = 4.9%
Defense appropriations = 4.5%
Domestic appropriations = 4.2%
Other mandatory = 3.2%
Interest = 1.7%
That adds up to 23.5 percent of GDP. The 103 letter signers want 18%. So, they have a menu of where they could cut just by looking at the numbers above.
Medicare has already been poisoned politically and is unlikely to suffer much cutting over these next 18 months. Social Security and related programs (disability insurance) have been declared out of bounds by both sides. House Republicans leaders have expressed real concern about defense cuts while the nation is embroiled in three, undeclared conflicts. The category “other mandatory” includes such things as veterans’ compensation and retirement, other federal retirement obligations, farm subsidies, and federal workers’ health benefits.
That leaves domestic appropriations as fair game in everybody’s view. Do you see how easy this is? Just eliminate all domestic appropriated accounts and you get down to about 19% of GDP. Take a little here and a little there and you can get to 18% of GDP.
Of the 435 Members of the House, you can safely estimate that not 75 would vote for elimination of all domestic programs.
So, the debt increase is going to pass, spending as a percentage of GDP will be far above 18%, a balanced budget amendment to the Constitution remains very problematic, and the FY2012 deficit will be well above $1 trillion.
What about all those fine words in the letter to Speaker Boehner? Sometime next fall, perhaps as early as late summer, many Republicans now in the House will find themselves confronted by 30 second ads outlining what kinds of cuts, and how many layoffs of workers, their 18% of GDP will yield in their districts.
Watch out for the ricochet.