Was GOP Fooled By Its Own Budget Numbers?

April 14th, 2011 at 3:07 pm | 14 Comments |

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A substantial number of the House Republican caucus are now complaining loudly about the “bad deal” their leadership struck to pass the Continuing Resolution for FY11 last week.  That agreement kept the government open and many expect it will pass the House today only because enough Democrats cross the aisle and vote with Speaker Boehner.

The complaint centers on two realities.

First, many of the new House Republicans pledged to voters last November that they would fight to the bitter end to get $100 billion in spending cuts in the FY11 budget.

Second, as the “real” numbers begin to emerge, many of these members now realize that the $38 billion in “cuts” could mean perhaps as little as $15 billion in true deficit reduction in FY11.

We touched on both these issues before.

To repeat—no way existed short of closing down most domestic government agencies to get $100 billion in real deficit reduction from the FY11 budget.

And, just because you “cut” appropriations bills by $100 billion doesn’t mean you have cut the deficit by $100 billion.

Things get a bit wonky here, but if one doesn’t know the budget process and the federal budget, both wonky things, one makes bad assumptions.  The conservative complaints now reveal how little too many incoming GOP members knew about either.

If you cut money from the president’s proposed budget for FY11, you have to make sure that you are cutting from already-authorized (enacted) programs, not from the president’s wish list of new spending.  Obviously, if you are rejecting additional money to already existing programs, or are refusing to fund new initiatives, you really aren’t cutting the Congressional Budget Office’s deficit baseline.  After all, you are cutting things that don’t yet exist.

If you refuse to spend monies that were appropriated, but now lie unused (as in the case of census expenditures) and will never be used for the purpose intended, you are cutting spending in some sense, but you surely cannot claim to be cutting deficits.  That money was never going to be spent any way.  You cannot restrain spending by restraining non-spending.

Finally, when you get down to the real meat of cutting presently-enacted programs in which money is being spent and will continue to be spent, you have the nasty little fact of something called “spend-out rates.”

This is where most folks go to sleep.  But, it’s also the most important part of understanding the appropriations and budget processes.  As senior budget staff in the Senate, we used to say that the most important thing we could teach new senators was the difference between budget authority and outlays.  Sometimes we succeeded.

If you want to cut $100 billion from spending in non-security, discretionary accounts—really cut monies that will be spent otherwise—you would probably have to cut about $250-$300 billion in budget authority.  Since the total budget authority for all those accounts amounts to less than $500 billion in FY11, and since the Fiscal Year is about half-over, that means to truly save $100 billion in outlays, about a third of the government agencies would be shuttered.

Most money that is destined to be spent in any fiscal year goes to salaries, expenses, medical benefit support, and entitlements.  Large construction projects, or defense projects like new ships or planes, spend out their budget authority over four, five, as much as seven years.  So eliminating all funding for a new ship channel might cut $500 million in budget authority, but would cut deficits only a small fraction of that in the first fiscal year.

The way to cut spending with any assurance is to change underlying authorizations.  You have to change the way we implement Medicare, Medicaid, Social Security, farm subsidies and other mandatories and entitlements.

And even if you fundamentally, radically reform entitlements, real deficit and debt savings won’t occur to any great degree within the next couple of fiscal years.

Let me guess: so, now you are bored out of your mind.  You wonder why you had to listen to all this gobbledy-gook.  You just want to cut spending and now some budget geek is telling you that when you cut spending you don’t cut spending?

That’s how many of the new House Republicans must feel about now.  They should have listened carefully when they discussed with their colleagues how to cut $100 billion or even $38 billion.  But too many of them didn’t and now they feel misled and embarrassed.

They weren’t misled.  Too many of them might have happened to sleep through that boring budget lecture that the House Republican leadership provided a couple of months ago at the “budget camp.”

Now comes the debt ceiling increase vote.  It will even more complicated.  And the scar tissue from the CR fight will be fresh.


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14 Comments so far ↓

  • StarSpangledSpanner

    Asking the GOP to get numbers right is crazy.

    You only have to look at Ryan’s plan to see that numbers confuse Conservatives. WillyP here on this forum is typical. Numbers and facts just do not register with these people.

  • cporet

    My newly elected house member ran on his small business know-how (he owns an auto dealership) and common-sense approach to running a business. Guess what? The United States government is not a small business. I’m afraid it will take a long time for the newest members to realize that.

    • tommyudo

      By the time these newly elected GOPers figure out how DC works I suspect they will already have been voted out of office.

    • dante

      I’d actually be happy with a small business owner in congress… They might know that “reducing revenue” is a COST, which has to be made up for either by increasing some other revenue or decreasing expenses.

  • busboy33

    Given that the freshman GOP class swearing before God that they would spearhead things that just were not going to happen (like the 100 billion target), I’m not particularly surprised that they seem startled as the real world stops to say hello.

  • sweatyb

    They nearly shut the government down over this and even though they got all that they asked for they’re mad because they were too stupid to figure out how the government they’re supposed to be running actually works?

    the scary thing is that they’re likely to bring the same level of understanding to the debt ceiling hostage negotiation… er… debate.

  • Non-Contributor

    Additionally, most people do not know the difference between the deficit and the debt so I am sure that there is zero understanding that lowering the deficit does not change the debt.

    From Rodger Mitchell’s site: http://rodgermmitchell.wordpress.com/2011/04/14/why-the-federal-debt-is-not-the-total-of-federal-deficts/

    What is the relationship between federal deficits and federal debt?

    Functionally, none. Federal crediting of checking accounts could exceed federal taxes (aka “deficit) by many trillions of dollars, yet the government never would have to create a single T-bill. Similarly, the federal government could credit T-bill accounts by many trillions of dollars, and never have to credit a single checking account. The only relationship between federal deficits and federal debt is a legal one. Either can exist without the other.

    So the next time you hear a politician say he wants to reduce federal deficits because the debt is too high, realize he has no idea what he’s talking about. And the next time you hear him say the deficits or debt are unsustainable, realize he’s claiming that somehow the federal government has lost the ability to credit checking accounts.”

  • jnail

    YES! Obama’s team beat them like a red headed step child using the hard facts behind the curtain. $358M vs $38B? Oops..

  • ottovbvs

    many of these members now realize that the $38 billion in “cuts” could mean perhaps as little as $15 billion in true deficit reduction in FY11.

    According to the FT this morning the CBO says actual budget cuts in Fiscal 2011 will be $358 MILLION (no that was not a misprint $358 MILLION and NOT $38.5 BILLION). Looks like Obama shafted Boehner. And Boehner had to rely on Democratic votes to pass it as I always knew he would. When is the penny going to drop in the Republican house caucus?

  • TJ Parker

    You forget that the Tea Party doesn’t believe in any Arithmetic not in the Bible. So omit zero and negative numbers.

    • Bunker555

      Off topic but may be related to arithmetic not in the Bible.

      In the BC calendar era, the year 1 BC is the first year before AD 1; no room is reserved for a year zero. By contrast, in astronomical year numbering, the year 1 BC is numbered 0, the year 2 BC is numbered −1, and so on.

  • mickster99

    Deficit reduction and cutting back on spending and federal staffing and extending tax Bush tax reductions on the richest 1% while the economy is still in the tank for most Americans is just plain stupid. The same dim bulbs who passed the aforementioned Bush disastrous tax cuts and unpaid for wars and Medicare Part D are just plain ignorant ideologues.