CBO Says Budget Deal Will Barely Cut Spending

April 13, 2011

A CBO analysis of the budget deal -- which will be voted on Thursday -- finds that the spending bill advertised as containing some $38.5 billion in cuts, will only reduce federal outlays by $352 million below 2010 spending rates, National Journal reports. 

CBO also projects that total spending is actually some $3.3 billion more than in 2010, if emergency spending is included in the total.

Politico: "It's not clear how big a worry CBO numbers will be for Republicans, but as the estimates gained more attention, the whip operation grew more concerned Wednesday night."

CBO Says Budget Deal Will Cut Spending by Only $352 Million This Year

By Tim Fernholz

Wednesday, April 13, 2011 | 11:40 p.m.

Luke FRAZZA /AFP Photo

Rep. Harold Rogers, R-Ky., chairman of the House Appropriations Committee, has boasted that the spending deal provided the biggest budget cuts in history.

A Congressional Budget Office analysis of the fiscal 2011 spending deal that Congress will vote on Thursday concludes that it would cut spending this year by less than one-one hundredth of what both Republicans or Democrats have claimed.

A comparison prepared by the CBO shows that the omnibus spending bill, advertised as containing some $38.5 billion in cuts, will only reduce federal outlays by $352 million below 2010 spending rates. The nonpartisan budget agency also projects that total outlays are actually some $3.3 billion more than in 2010, if emergency spending is included in the total.

The astonishing result, according to CBO, is the result of several factors: increases in spending included in the deal, especially at the Defense Department; decisions to draw over half of the savings from recissions, cuts to reserve funds, and mandatory-spending programs; and writing off cuts from funding that might never have been spent.

Also from National Journal …


10 Years, 10 Broken Debt Ceilings

National Journal previously reported that after removing rescissions, cuts to reserve funds, and reductions in mandatory-spending programs, discretionary spending would be reduced only by $14.7 billion. CBO’s analysis, which takes into account the likelihood that certain authorized funding will never be spent, suggests that the actual cuts will be even smaller.

With some conservatives already opposing the deal for not going far enough to meet the GOP campaign pledges to cut $100 billion, the news could complicate House Republicans' efforts to pass the bill. The minimal effect on current government spending, however, could improve macroeconomic forecasts that predicted lower economic growth if government spending was drastically reduced.

"This bill will cut $315 billion in Washington spending over 10 years, $78 billion compared with the President's request this year alone," said Michael Steel, spokesman for House Speaker John Boehner, R-Ohio. "Democratic spin and arcane budget jargon doesn't change that."

The CBO did confirm that budget authority would remain $78.5 billion below what President Obama requested in his fiscal 2011 budget request, and Republicans can point to long-term savings as a result of lowering the government’s spending baseline, including some $40 billion from cuts to Pell Grants. 

“It is kind of crazy to have come to the brink of shutting down the government over a $350 million difference,” said Scott Lilly, a former staff director at the Appropriations Committee under Chairman David Obey, D-Wis.

Boehner: 'I'll get there' on budget By: David Rogers April 13, 2011 08:06 PM EDT

Speaker John Boehner brings his White House budget deal to a floor vote Thursday, predicting success but still battling worrisome new cost estimates and awkward relations with President Barack Obama, who chose to deliver a partisan-tinged deficit-reduction address on the eve of the debate. Congressional Budget Office data, posted Wednesday morning, credit the Boehner-Obama deal with capping appropriations at a level nearly $38 billion lower than when Republicans took charge of the House in January. But this will have only a minimal impact on outlays or direct spending before the 2011 fiscal year ends Sept. 30. And once contingency funds related to Afghanistan and Pakistan are counted, the news gets worse: The CBO now says that total appropriations outlays for 2011 are higher — not lower — by about $3.3 billion than it had estimated in December. “I’ll get there,” the speaker told POLITICO. And given the level of Democratic support, Rep. Rob Andrews (D-N.J.) felt bold enough to predict: “I don’t see any chance that this fails unless the bottom falls out with the House Republicans.” But that’s exactly the nightmare for Boehner, and much as he dismissed any notion of doing the vote count himself, the speaker took time Tuesday to meet with and fortify those lawmakers charged with doing the whipping for the GOP. The leadership is betting heavily on loyalty to Boehner and a desire to move on to larger budget battles to hold together the rank and file. “This fight is over, move on to the next one,” said House Armed Services Committee Chairman Buck McKeon (R-Calif.). But Obama’s speech at The George Washington University fed into a new round of partisan sniping, and Republicans were privately baffled that the president gave no heads-up to Boehner when the two men were negotiating the final deal last week on 2011 spending. Late Wednesday, the Republican Study Committee was preparing its own critique of the deal and, citing the CBO outlay projections, freshman critic Rep. Tim Huelskamp (R-Kan.) dismissed the bill as a “Dollar Store” deal. “Right now, I’m undecided. I thought I was for it, but I’ve got to find out more of what’s in it,” said Rep. Todd Akin (R-Mo.); and Rep. Joe Walsh, an Illinois freshman, described himself as “genuinely as undecided as a human being can possibly be.” “You can make a very compelling argument on either side,” Walsh said. “Look, Boehner and the Republicans won when it comes to the straight negotiation. Obama didn’t want to cut, period, and we’re getting cuts. … It’s like we made it this high up the mountain, let’s gather right there, and let’s get ready for the next fight.” “That’s a compelling argument. But on the other hand, we should’ve made it a lot further up the mountain. On the other hand, that number should be a lot bigger, because the crisis is so big. So in a way, it’s not enough. It’s not nearly enough.” On the Democratic side, there has been little evidence of the White House helping round up votes, and that task has been left more to Democrats on the House Appropriations Committee, who hope to deliver as many as 70 votes. But much as it irritated Republicans, Obama’s deficit speech did help among Democrats, and leadership liberals like Michigan Rep. Sander Levin, ranking Democrat on the House Ways and Means Committee, told POLITICO he felt more comfortable now backing the deal. “The president’s speech will allow me to vote for it because he made clear that Medicare and Medicaid will not be destroyed on his watch,” Levin said. “He drew a larger picture, and I think it was critical for him to do that. … When he paints the larger picture, it makes it possible to vote for a piece about which I have some worries.” It’s not clear how big a worry CBO numbers will be for Republicans, but as the estimates gained more attention, the whip operation grew more concerned Wednesday night. Outside conservative bloggers picked up on the issue and former Minnesota governor Tim Pawlenty, now running for the GOP presidential nomination, weighed in against the deal. By any measure, the budget deal still represents a significant shift in government policy. And while the news coverage tends to focus on a few high-profile give-and-takes, the fact is that billions in long-term spending are being taken out of the mix, especially affecting federal aid to state and local governments. Whether Republicans will be patient enough to have made this change is the real question behind the outlay projections for the next six months. The decision to increase Pentagon appropriations — together with the mix of spending that produces higher outlays — is clearly a major factor. But even if the Pentagon portion of the budget is entirely discounted, the net outlay reduction is just $8.2 billion from the CBO forecast at the end of last year. Given the GOP’s famous “$100 billion cut” rhetoric of the 2010 campaign, the influence of tea party conservatives and projections now of a $1.4 trillion-plus deficit, this is a problem for Boehner — so much so that the Ohio Republican may be forced to borrow a phrase from Obama and try to sell the deal as an “investment in the future.” From this standpoint, the CBO numbers put the speaker on stronger ground. The new appropriations cap of $1.0498 trillion represents a $78.5 billion cut from earlier CBO estimates of Obama’s 2011 budget requests and will significantly alter the CBO’s own spending baseline going into the future, especially for nondefense spending. Indeed, separating out increased Pentagon appropriations, the CBO numbers confirm that the rest of the government will be cut $42 billion from the level when Boehner became speaker. House Appropriations Committee Chairman Hal Rogers (R-Ky.) is clearly betting on this point to win support from his caucus. “I think they will look at the big picture,” he told POLITICO in a brief interview Tuesday prior to the release of the CBO numbers. “This is a historic event, the biggest cut in history, the biggest nondefense cut in history.” That said, CBO’s low outlay-savings estimates show the agency is unconvinced by some of the alternative mandatory spending changes that were substituted for appropriations cuts in the final package. The White House and Senate Democrats had insisted on this strategy, especially to protect health and education programs. But in scoring the giant labor, health and education chapter of the bill, CBO credits few real savings to what look on paper like billions of dollars in reductions. The chief exception is reforms in the Pell Grant aid program for low-income college students. Here, CBO projects modest outlay savings of $133 million in 2011 growing into big multiyear outlay reductions of more than $8 billion in the next decade. But the budget agency is very dubious about any large outlay savings materializing from other mandatory spending cuts in this section of the bill. For example, $3.5 billion is cut from performance bonus payments to states to expand Medicaid coverage for the children of working-class families just above the poverty line. Because the money has not already been used, CBO appears to conclude that cash-strapped states won’t soon come back for it, and thus no real deficit reduction will result. The one-page table released Wednesday includes no specific commentary on the deficit impact, but it is possible to make comparisons with CBO tables from before the new Congress took office and a rapid-fire series that have followed throughout the budget debate this year. To be sure, there is always a time lag between appropriations cuts and immediate savings. A $1.143 billion across-the-board cut in the budget deal yields just $688 million in outlay reductions before Sept. 30, according to CBO — an almost 2-1 ratio. Republicans themselves sought to avoid deep cuts in fast-spending salaries and operations accounts. As a result, many of the reductions are from state and local grants and capital accounts — such as EPA water and sewer projects — which spend out at a lower rate. And the fact that the budget fight has dragged on for two months also creates disparities, because there is that much less time for the cuts to take effect. Nevertheless, when CBO estimated the initial House bill in February, it projected that the $61.3 billion in nonemergency appropriations cuts would result in $9.2 billion in outlay reductions by Sept. 30 when measured against comparable outlay estimates two months earlier, on Dec. 20. By comparison, the precise appropriations cut now, $37.7 billion, translates into a vastly smaller sum, $352 million, using the same standard. A more accurate picture can be drawn by separating out the annual Pentagon portion of the bills. When this is done, the House bill in February can be seen as having truly proposed to cut more than $68 billion from largely domestic and foreign aid appropriations. The resulting 2011 outlay reduction forecast by CBO was about $18 billion — a roughly 4-1 ratio. By comparison, the deal now cuts $42 billion from non-Pentagon accounts, but the outlay reduction is about $8.2 billion — a 5-1 ratio. Jake Sherman contributed to this report. CORRECTION: The headline on an earlier version of this story misrepresented Boehner's statement as "I'll get there on budget."