Debt

The Debt Deal's Fake Spending Cuts

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Cato's Chris Edwards offers yet another reminder that cutting from a baseline of rising spending, as yesterday's debt deal calls for, is not the same as cutting spending from this year's levels. 

The "cuts" in the deal are only cuts from the CBO "baseline," which is a Washington construct of ever-rising spending. These "cuts" from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary.

No program or agency terminations are identified in the deal. None of the vast armada of federal subsidies are targeted for elimination. Old folks will continue to gorge themselves on inflated benefits paid for by young families and future generations. None of Senator Tom Coburn's or Senator Rand Paul's specific cuts were included.

The federal government will still run a deficit of $1 trillion next year. This deal will "cut" the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.

The timing of the cuts is important. The deal kicks most of the cuts to the back of the Congressional Budget Office's 10-year spending window, which means they may not occur at all. As the Manhattan Institute's Josh Barro notes, it's not only that less than one percent of the deal's baseline spending reductions occur in the 2012 fiscal year. It's also that "the long term changes will be subject to revision by future Congresses," which means they aren't a credible commitment to cutting much of anything. When this year's Congress calls for baseline spending cuts to occur ten years down the road, conditioned on the approval of another Congress, it's a decent bet that at least some of the cuts will never occur at all. 

Post updated to fix a typo and make a few clarifications.