The federal spending controversy

March 9, 2011

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With another federal spending controversy brewing on Capitol Hill, recall that in his 2010 State of the Union Address, President Barack Obama said, “We’ve already identified $20 billion in savings for next year.” Now it’s next year — so what happened to the $20 billion in savings? Let’s follow the bouncing budget cut.

The “$20 billion” promise was not the sort of empty verbiage that dominates the federal spending debate. How many times have you heard a politician thunder about cutting spending but not cite even one specific reduction he or she supports? A year ago, the Office of Management and Budget laid out Obama’s proposed cuts in specific detail.

Some highlights: End production of the C-17 cargo plane, $2.5 billion saved. End federal funding for local hospital construction, $338 million saved. End the Save America’s Treasures program, $30 million saved. (The new book “Triumph of the City” by Edward Glaeser of Harvard argues that programs such as this actively backfire by slowing urban rebirth.)

Cut the Homeland Security Activities budget of the Environmental Protection Agency — the EPA fights terrorism? — by $35 million. Cut $1.5 billion in tax favors to Big Oil. Eliminate numerous overlapping education-grant initiatives. Cut $20 million from the critical, crucial, vital Right-Size Component Personnel Travel program. A litany of specific federal spending or tax-favor reductions were proposed in 2010 by the White House. The total saved came to $23 billion, more than the president promised.

Here’s what happened: nothing.

The spending cuts the president requested in 2010 were part of his fiscal 2011 budget proposal — and Congress never voted on the FY11 budget. Since October, the country has been operating on “continuing resolution,” meaning the budget of fiscal 2010 is frozen in place:  including billions of dollars in spending that even a liberal Democratic White House considers improvident.

Congress failed to enact an FY11 budget because of the childish sandbox fight between Republicans and Democrats over who would be blamed for what. The effect of Congress’s failure to fulfill its duty is to ensure that even clearly undentified wasteful spending continues. Welcome to Washington!

Last week, Congress approved a continuing resolution that keeps government in operation till mid-March. Included in the bill was about $2 billion in spending cuts for 2011 — less than 10 percent of what President Obama backed, and more to the point, a barely detectable 0.05 percent of all federal spending for this year. Nevertheless, Senator Dianne Feinstein of California called the cut “huge.” For politicians  whose mindset is giveaway, giveaway, giveaway, a 0.05 percent reduction is strict discipline.

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The Senate is considering a continuing resolution that would carry the country through the end of the fiscal year. Democrats have proposed an additional $11 billion in cuts, which Senator Dick Durbin of Illinois calls “the limit” of possible cuts. Durbin’s “limit” — $2 billion already cut, $11 billion more reduced — would be considerably less than what President Obama said in 2010 he wanted to cut. And this “limit” cut would still represent just one-third of 1 percent of 2011 federal spending.

Many of the reductions in spending and tax favors that President Obama requested in 2010 are now in the White House’s proposed fiscal 2012 budget. So that critical, crucial Grants to Manufacturers of Worsted Wool program may finally go out of existence — assuming Congress ever deigns to enact an FY12 budget. Congress might even finally eliminate an Army Corps of Engineers allocation hilariously called the Low-Priority Construction Projects Program. Deleting the program — “Mr. Chairman, my agency desperately needs more funding for low-priority projects” — would save $214 million in a year. If, that is, Congress ever enacts a budget.

The lesson of the phantom $20 billion budget cut is that anybody can blow hot air about big spending reductions in the future: all that can be believed is cuts in the current year.

Last month, President Obama announced a plan to reduce the deficit by $2.2 trillion over the next decade. But hardly any cuts take effect now; the bulk of the president’s proposed reductions would not begin until 2016, when a second-term Obama would be preparing to leave office. Tea Party types, for their part, call for extensive future spending cuts — but want to exempt defense and Social Security. Unless defense and Social Security are on the table, as the recent bipartisan debt-reduction commission concluded, no significant fiscal reform are possible.

Saying the country will spend without restraint now but switch to strict fiscal discipline in the future is like saying, “I can quit smoking anytime I want.” In 2010, the White House asked for $20 billion in spending cuts, and Congress would not make the cuts. Until Congress makes right-now, this-year cuts, the national debt situation will keep getting worse.

Photos; Top: Shadows are cast on the White House in the early morning in Washington, February 4, 2009. REUTERS/Larry Downing, Bottom: Marine One (top) carrying U.S. President Barack Obama approaches the South Lawn as he returns to the White House from Camp David in Washington, February 8, 2009. REUTERS/Jim Young

9 comments

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The Feds have added 100,000+ jobs in the last few years while the rest of us downsized and can only find the will to cut $6 Billion-1.5 days worth of deficit spending! What’s wrong with this picture-anyone??

Posted by DrJJJJ | Report as abusive

Get real Mr. Easterbrook. Referring to even $20 billion in spending cuts as a pittance would be generous. By your account, $11 billion is 1/3 of 1% of 2011 spending, so what’s your vaunted $20 billion? Barely 2/3 of 1%. Utterly meaningless.

Posted by mheld45 | Report as abusive

Math -Earth size spending with nothing but the Moon to pay for it.

Posted by pHenry | Report as abusive

I know this is going to sound “extreme” but given the fact that NOTHING is working to reduce the defect, why can’t we simply CUT ALL PROGRAMS ACROSS THE BOARD AT 10%? Just farming do it. EVERYTHING. ACROSS THE BOARD, DO IT. NOW! And cut it another 10% next year. And then get on with tax reform. And Social Security and Medicare reform. And ObamaCare. Is this too complicated?

Gilbert A. Zimmerman, Jr.
Morris Twp., NJ

Posted by GilZimmerman | Report as abusive

Have politics gotten in the way of sound economic policy? Many economists have stated that the path out of a depression is for the federal government to increase spending. Are we kidding ourselves when we continue to call this just a recession? Paul Krugman may have stated with the most clarity that when the private sector is not spending and promoting growth then the public sector must step in and spend to promote economic growth and job creation. This is an inverse relationship that says when times are good the private sector is creating jobs and the public sector can spend less. When times are tough and the public sector is not creating growth the federal government must spend more to promote growth and job creation. Thus our misguided economic policy promoted by political policy has created what Krugman terms a “Liquidity Trap.” (http://krugman.blogs.nytimes.com/)
 
Is the public perception of national debt misguided by politicians that use this as a party issue, regardless of the impact on our economy and our population. I urge you to look beyond the rhetoric of our supposed “federal debt crisis.” Our public sector is hoarding cash and averse to lending needed to promote growth. Who then will spend in order to bring us out of our current economic situation? If not the federal government then where will the funds come from to create growth? Treasury Secretary Tim Geithner seems to be a strong opponent of increased federal spending as is the banking industry. Why he supports the banking industry in denying our country the tools that would seem the best way to promote growth and jobs is beyond me. Nor, could I say why he would oppose the nomination of Elizabeth Warren as the head of The Consumer Financial Protection Bureau. Is he looking out for the interests of the banking industry rather than the interests of the people? (http://baselinescenario.com/2011/03/17/ whos-afraid-of-elizabeth-warren/)

Posted by ebones101 | Report as abusive

Mr. Easterbrook, let’s be serious, please. If President Obama wanted spending cuts, dems had complete control over congress in 2010, yet refused to pass a budget bill. Too busy passing a 2700 page monstrosity (Obamacare) on a narrowly partisan basis, covering only 1/6 of Americans, yet affecting all 300+ million Americans and a price tag of 2.6 trillion. States, already facing a collective 175b budget shortfall will now have to cover an addition 118.04b through 2023. The only thing Obama wants to ‘cut’ is our defense budget while increasing on federal education! (I guess when we are facing the worlds army’s, we will be educated enough to ‘talk’ our way out)

Posted by joshvia | Report as abusive

Incredible how many deluded folk continue to blame the health care reform act passed by congress, which the CBO concluded will REDUCE the deficit over time, for the budget woes. Even more incredible is how many insist the Republicans can or have even started to cut deficits, when they actually increase spending while giving even more giveaways to the wealthy … take the case of Governor Walker of Wisconsin and his GOP-dominated state legislature which have trounced on unions, throwing teachers and public workers under the bus and yet still managed to increase state spending by hiring $170k political appointees and giving more tax breaks to the wealthy.

Posted by Chibiabos | Report as abusive

The CBO scored the health care bill as a money saver because they included the $500B in Medicare cuts that the Congress said they would make, but which has not and never will be, made. So, saying the health care bill “saves” money, is untrue. The real savings are the $400-500 Billion in cuts coming in the 2012 budget that will be in place by 1 October 2011 and the $6 trillion in additional savings over the next 9 years of budgets. We know this will happen because if it doesn’t, the House will not vote to increase the debt limitation ceiling and without that lifted, no further spending can occur. This is all due to the 1 Oct 2010 election which put the “adults” back in charge.

Posted by sr71 | Report as abusive

The only way to stop the reckless spending is to “stop the spending”…and you do this by NOT increasing the debt ceiling. Contrary to misguided beliefs, this does NOT mean we default on our debt. Rather, it simply means that without the ability to recklessly print new money or sell debt, it means we will be forced to cut current programs (something we don’t now do) and use these reprogrammed funds instead to pay off debt obligations. This has a four-fold benefit: 1) it stops the spending once and for all, 2) it forces us to make the hard decisions to cut current programs NOW and use that money instead to pay off debt, 3)it puts us on “glide slope” to eventually be debt free and to have a balanced budget as the economy has time to grow 4) it means we DO honor our existing debt obligations (there are no defaults as the liberals have claimed)!

Posted by sr71 | Report as abusive