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A Trillion-Dollar Gimmick

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Washington, Jul 25, 2011 | comments

 “Why, one wonders, not ‘save’ $5 trillion by proposing to spend that amount to cover the moon with yogurt and then cancelling the proposal?”

-George Will, Washington Post, March 12, 2009

Claim 1: “Winding down the wars in Iraq and Afghanistan will save $1 trillion.”

Reality: The Reid plan relies on the inaccurate assumption that surge-level spending in Iraq and Afghanistan is scheduled to continue over the next decade. An honest budget cannot claim to save taxpayers’ dollars by cutting spending that was not requested and will not be spent. Senate Democrats are employing a budget gimmick that will not fool the credit markets and does not address the urgent need for Washington to get its fiscal house in order.

Claim 2: “Paul Ryan’s budget also included this savings in its deficit reduction calculation.”

Reality: False. The House-passed budget cuts $6.2 trillion in spending relative to President Obama’s Fiscal Year 2012 budget request. This $6.2 trillion figure assumes ZERO savings from the global war on terror relative to the President’s budget.

Background

The $2.7 trillion debt-limit increase proposal offered by Senate Majority Leader Harry Reid contains a $1 trillion gimmick meant to disguise the plan’s shallowness on spending cuts. Supporters of the Reid plan are measuring their savings against a baseline that assumes the continuation of surge-level spending in Iraq and Afghanistan, even though the President has neither requested this funding nor signaled that he might request it. Instead, the President has signaled the opposite: a troop drawdown over the next few years. In other words, the Reid plan is claiming credit for “savings” that were already scheduled to occur, and for “cutting” spending that no one has requested.

Rather than defend this gimmick on the merits, supporters of the Reid plan are defending it by claiming that House Republicans “also included” this $1 trillion in savings when calculating spending reductions in the budget resolution that passed the House last April. This claim is false. The House-passed budget cuts $6.2 trillion in spending relative to President Obama’s FY2012 budget request, and this spending reduction assumes ZERO savings from the global war on terror relative to the President’s budget.

In the interest of maximum transparency, House Republicans produced additional estimates in order to provide a broad range of comparisons by which outsiders could judge the seriousness of the their budget’s commitment to real spending cuts and controls.

For instance, Table S-4 of the House-passed budget provides two savings estimates. The first estimate compares the House-passed budget to the “current law” baseline used by the Congressional Budget Office [CBO], even though House Budget Committee Republicans have consistently noted that the CBO current-law baseline is not the most reasonable budget baseline with which to compare future-year budget plans. For example, the current-law baseline assumes a $3.5 trillion across-the-board tax increase in 2013, as well as a continuation of spending for the global war on terror at its current level for the rest of the decade, with upward adjustments for inflation. The CBO has noted that these policy outcomes are unlikely, which is why it has also constructed an “alternative fiscal scenario” baseline that assumes more realistic outcomes.

In order to provide a more relevant comparison, House Budget Committee Republicans provided a second estimate in Table S-4, comparing the House-passed budget to President Obama’s FY 2012 budget request. This comparison makes clear that, even with no savings attributed to the troop drawdown and with identical numbers to the President’s on the war on terror, the House-passed budget cuts spending by $6.2 trillion relative to the President’s request.

It’s one thing to include, as the House-passed budget does, information about savings relative to the CBO’s current-law baseline as part of an effort to be comprehensive and transparent. It’s another to claim, as supporters of the Reid plan are claiming, that such “savings” represent a major commitment to cutting spending. It simply isn’t true.

It is encouraging to see Senate Democrats acknowledge that job-destroying tax increases are a bad idea – and that they are ready to work with House Republicans to cut government spending. Yet it is critical for policymakers to maintain credibility as they work together to deal responsibly with the debt ceiling. Senator Reid’s misleading claims will not pass muster with credit markets. Such gimmickry does a disservice to the American people, who deserve responsible, honest leadership.

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This document was prepared by the Republican staff of the Committee on the Budget, U.S. House of Representatives. It has not been approved by the full committee and may not reflect the views of individual committee members.

 

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