White House budget spin on the House GOP payroll tax bill

at 06:02 AM ET, 12/13/2011

 
(AP)

“Their proposal ... makes harmful cuts to things like education, that strengthen middle-class security. Their plan seeks to put the burden on working families, while giving a free pass to the wealthiest and big corporations, by protecting their loopholes and subsidies.”

--White House spokesman Jay Carney, Dec. 9, 2011

 “What I understand is that in the Republican proposal you're talking about, they didn't spell out where the cuts would come. And I get that they were trying to hide the fact that this would be the result. … The result would be cuts in nondefense discretionary programs, education and clean energy, veterans programs. That's the effect of their proposal.”

--Carney, Dec. 12, 2011

There are few areas more confusing than the federal budget. In many ways, it is a funhouse mirror of numbers, allowing politicians to make claims that are designed to mislead and confuse voters.

The above quotes by White House spokesman Jay Carney provide a   case study of this technique.

On Friday, reading from a prepared statement, he accused the House Republicans of making “harmful cuts” to education in order to fund their version of an extension of the payroll tax cut. On Monday, he said that “they didn’t spell out where the cuts would come from.” But, he still insisted the result of their plan would be cuts in “education and clean energy, veterans programs.”

 It sounds pretty dreadful. Is it true?

 

The Facts

 The House Republican bill to extend the payroll tax for one year has a number of elements that concern the White House, but let’s keep the focus on the spending cuts. The best source for this information is the Congressional Budget Office estimate of the legislation, since the CBO is the nonpartisan scorekeeper.

The CBO report lays out the number of specific line items that are designed to help pay for the tax cut extension. As is typical, it takes 10 years to raise the money to pay for the one-year, $121-billion tax-cut extension.

Some items are minor and symbolic, such as ending unemployment benefits for millionaires. (Savings: $127 million.) Another item—also supported by Senate Democrats—would boost the fees that mortgage giants Fannie Mae and Freddie Mac collect from lenders. That brings in nearly $36 billion over 10 years.

But no matter where you look in the CBO score, you cannot find cuts for education, energy or veterans. So how does the White House justify this claim?

At the bottom of Table 1 of the CBO report, there is a line regarding changes in spending subject to “caps on discretionary funding.” That shows a reduction in outlays of about $9 billion over five years and $26 billion over 10 years.

House Republicans say they wanted to capture the savings from a proposed one-year freeze in federal employee wages. The freeze would amount to about $1.2 billion in one year, but over time the freeze builds up savings because all future salaries would increase from a lower base.

When the White House froze federal wages in 2010 for two years, for instance, it claimed $60 billion in savings over 10 years. (An administration official on Monday could not say how much of that savings was actually applied to reducing overall spending.)

Administration officials suggest they had hoped to use such a pay freeze yet again to find new savings needed to achieve a required cut in spending under the Budget Control Act, which ended the debt-ceiling stand-off. (GOP officials say this is news to them.) The White House maintains that the new, lower spending cap means that spending will be reduced by an additional $26 billion, beyond the deal on the debt limit.

 House Republican officials say they wanted to make sure the salary freeze actually resulted in lower spending but in reality the reductions will only affect spending on salaries, not programs. The issue is complicated because cost-of-living increases happen automatically — what is known as a mandatory budget item — but salaries are paid out of the discretionary accounts funded year after year by Congress.

Like we said, the budget is a bit of a funhouse mirror. In effect, there’s a race to use this money. The White House thinks that one of its possible tools to reduce the budget has been taken away. House Republicans believe that the White House wanted a use such a freeze on wages so it could spend more on other programs.

But let’s look at the big picture.

In a stunning leap of logic, the White House claims that it knows this reduction in spending will fall on education, clean energy and veterans programs. House Republicans did not reduce the defense side of the ledger, even though civilian Pentagon salaries are affected, giving some credence to the White House focus on such programs. But, still, the White House has no idea how future Congresses will write the budget, especially 10 years from now.

Moreover, the money is almost a rounding error in the context of the federal budget. The nondefense discretionary budget will be $5 trillion to $6 trillion over the next 10 years, so this amounts to perhaps one-half of one percent of that amount — even if you accept the White House line that this law will mean additional cuts. The House bill, in fact, lowers spending caps significantly less than a companion Senate Republican bill.

 For the 2014 fiscal year, for instance, the reduction in spending amounts to about $2 billion, out of some $500 billion in spending.  From this, the White House cries “harmful cuts” in education, clean energy and veterans.

 

The Pinocchio Test

 Administration officials say that Carney was merely offering an illustrative list of what could be cut, but it certainly did not sound like that. He spoke with certainty, decrying the “burden on working families” that would result from the House GOP bill.

 We make no judgment on which approach is better for extending the payroll tax cut. Certainly the discretionary budget caps are already reaching possibly unrealistic levels, particularly 10 years from now. But Carney’s rhetoric is over the top — given the relatively small amounts of money involved and the uncertainty about what future Congresses will do.

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    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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