“When you look at the budget, you’ll see $1.9 trillion worth of new tax revenue and $1.5 trillion worth of more spending.”
--House Speaker John Boehner (R-Ohio), Feb. 15, 2012
“The president’s budget has $1 of revenue for every $2½ of spending cuts.”
--White House Chief of Staff Jack Lew, Feb. 12, 2012
Are these guys even talking about the same document?
All presidential budgets are political documents—and it is easy to play politics with numbers. That’s why such a gap in the rhetoric is even possible. Each side can make a case for their spin, though much of it is dubious.
Let’s take a look at how they do it.
First of all, notice that Boehner and Lew are only speaking about one side of the ledger--either spending increases or spending cuts. The Republicans then emphasize the tax increases, while the White House deemphasizes them. We also are working with 10-year budget forecasts, even though the budget is rewritten every year, which increases the chance for mischief.
The White House math.
The key document for this exercise is Table S-3, on page 207 in the budget documents. The table is titled “Deficit Reduction Since January 2011,” which is already a hint that something different is going on here. Such a table did not exist in the 2012 budget.
Why such a specific date? It allows the administration to bank reductions in appropriations, past and future, that stemmed from last year’s showdowns with Republicans. That adds up to about $1.7 trillion in spending cuts.
There’s also nearly $600 billion from changes in mandatory spending. And there are some additional cuts, about $100 billion, that are not readily apparent from the document because the figures are shown as offsets or are simply too complicated to explain.
But the fishiest part of the calculation is $848 billion in savings from winding down the wars in Iraq and Afghanistan--even though the administration had long made clear those wars would end.
Here’s what the nonpartisan Committee for a Responsible Federal Budget said about this maneuver in its analysis of the president’s budget:
“The President employs a major budget gimmick by relying on the war drawdown for savings. This drawdown is already in effect and not the result of new deficit-reducing policies, and so it should not be counted as deficit reduction. Worse than simply counting it to inflate their numbers, though, the Administration uses some of the phantom savings to pay for existing unfunded transportation costs and to expand jobs and infrastructure initiatives. Paying for real costs with phony offsets is no way to budget or to control rising debt.”
(Interesting side note: The Bush administration never properly accounted for war spending, refusing to project costs in the future, which kept its deficit projections artificially low. Now that the wars are winding down, the Obama administration is happy to project costs far into the future, because it artificially inflates the potential deficit reduction. Funny how that works.)
The administration also counts $800 billion in savings in debt payments (from lower deficits) as a “spending cut,” which is a dubious claim. We didn’t realize that debt payments were now considered a government program.
Add it up, and you have nearly $3.8 trillion in spending cuts, compared to $1.5 trillion in tax increases (letting the Bush tax cuts expire for high-income Americans). Presto, $1 of tax increases for every $2½ of spending cuts.
Still, we find it interesting that the left-leaning Center for Budget and Policy Priorities, in its analysis of the budget, also discounted the savings from the wars and the interest costs and came up with a ratio of $2 of tax increases for every $3 in spending cuts.
The Republican math.
Boehner’s statement was based on calculations done by the House Budget Committee. Not surprisingly, the Committee’s staff dismiss a number of the White House assumptions, such as the $848 billion in war spending cuts, as “gimmicks.”
(Side note: We’ll be curious if the House GOP counts additional war savings in its 2013 budget resolution, since it banked $1 trillion last year as part of its deficit-reduction plan. See Table S-4.)
The committee also goes further and ignores already-enacted cuts as well, on the theory that it is better to focus on what the president is doing in the future. That takes an additional $2 billion in deficit reduction off the table, though we wonder if that is entirely fair, since the administration had make policy choices in the budget that reflect these lower levels.
The committee also adds back an arcane but expensive item known as the “doc fix,” a leftover problem from the long-ago Balanced Budget Act—mandating Medicare cuts to providers-- that Congress repeatedly defers. Here, the two sides are arguing over how this should be accounted in the initial baseline for the budget—see Table S-8 of the budget-- but in any case it is a $400 billion item.
All told, the changes reverse the administration’s claims of reducing the deficit and instead make it appears as if Obama is increasing spending by $1.5 trillion.
And how do the Republicans get to $1.9 trillion in tax increases when the budget says it is under $1.5 trillion? A large part of that is definitional dispute, such as how to account for tax cuts given to people who pay only payroll taxes or changes to federal employee retirement contributions. This is, frankly, a philosophical divide that is hard to bridge between the parties.
The Pinocchio Test
We intended this column as an explainer so, for the moment, we are not going to make a judgment about whether either metric is more valid; both sides make leaps of logic that spin the numbers in the best possible light. That’s the nature of federal budgets, and our advice is that readers should generally ignore any claims by politicians about what’s happening or not happening in the budget.
Still, our eyebrows will go up if President Obama begins to repeat the White House claim himself--given that even a group generally sympathetic to the administration has already discounted some of the White House’s numbers.
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