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The House is currently debating and about to vote on the budget deal struck on Friday. But perhaps its members should’ve read the small print.
There was a mini-storm in the Tea Party cup on Wednesday evening when the $38bn of “cuts” provisionally agreed to on Friday disappeared. Vanished. Abacus-cadabra!
From the Associated Press:
The Congressional Budget Office estimate shows that compared with current spending rates the spending bill due for a House vote Thursday would cut federal outlays from non-war accounts by just $352 million through Sept. 30. About $8 billion in immediate cuts to domestic programs and foreign aid are offset by nearly equal increases in defense spending.
When war funding is factored in the legislation would actually increase total federal outlays by $3.3 billion relative to current levels.
Bored? Confused?
To understand the $352m it’s necessary to first remember what the $38bn (or $37.7bn, to be precise) actually means. It refers to a reduction in budgetary authority in the fiscal year 2011 (1 October 2010 through 30 September 2011) relative to fiscal year 2010 levels. Authority means that federal agencies are allowed to enter in spending obligations up to the amount appropriated to them — the new aggregate total for “nonemergency” FY2011 appropriations is $1,049.8 billion.
But authority is not the same as outlays, the actual transfer of the money from payer to vendor. Those authorised obligations involve money leaving Treasury accounts in 2011 or in subsequent years.
Indeed, the $352m is an estimate of the reduction in FY2011 outlays due to the $37.7bn reduction in authority. As Politico points out, the House Republican proposal back in February for $61bn in authority cuts would have led to $9.2bn worth of outlay reductions.
This is because the programmes on the chopping block in that proposal spent out at a faster rate (cuts to the EPA’s authority, for example, will take a while to translate into outlays) than the ones agreed to on Friday. And because we’re already half way though the fiscal year.
(Incidentally, this is why we were less worried than others about the impact of cuts on public sector employment in 2011.)
But surely the Tea Party faithful can relax — we’ll get to $37.7bn eventually, right?
If by $37.7bn you actually mean $20bn – $25bn, then yes. After running the numbers for FY2011 on Wednesday the CBO did a bit more on FY2012 – FY2020 on Thursday afternoon:
In response to multiple requests for estimates of the effects of post-2011 outlays from H.R. 1473, CBO has developed additional information about the budgetary impact of H.R. 1473 in years beyond 2011. CBO has not completed a precise estimate of the outlay effects for H.R. 1473 for years after 2011.
However, CBO estimates that enactment of H.R. 1473 would produce federal outlays over the 2011-2021 period that are between $20 billion and $25 billion lower than the amount of outlays that would be expected from having 2011 appropriations set at the same level as 2010 appropriations.
As a result, the estimated change in cumulative outlays under H.R. 1473 ($20 billion to $25 billion) is less than the reduction in 2011 budget authority ($37.7 billion).
Oh dear.
This is a lot less than the $315bn John Boehner is claiming the deal will save in outlays over the next ten years. He’s assuming that the reductions in authority will be rolled over annually. The CBO just assumes this is a one-time reduction.
This is because politics and politicians — in our experience — tend to like big numbers. It’s a good reminder of the importance of the CBO (and the OBR in the UK), too.
But there may be a gaggle of angry Congressmen right now who are voting while biting their tongues, and wishing they’d done their homework.
Related links: Budget Cuts Disappear in a Cloud of Smoke – Kevin Drum Shutdown averted, at least until Thursday – FT Alphaville
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