James Pethokoukis

Politics and policy from inside Washington

Two cheers for Boehner’s two-step plan

Jul 26, 2011 14:26 UTC

Now is not time to let the perfect be the enemy of the good. Neither the Reid budget plan nor the Boehner budget plan packs the fiscal wallop of Cut, Cap and Balance. But significant progress on cutting debt can still be made before the Aug. 2 (or is it Aug. 8 or 10 or …) debt ceiling deadline. And by that measure, the Boehner plan is not only far better than the Reid plan, it is a pretty darn good plan in and of itself. While both plans would cut some $1.2 trillion in discretionary spending over a decade, Reid would then close up shop until 2013. The only other major cuts would be to future defense spending that no one really expects to happen.

I can’t believe S&P and Moody’s would find the Reid plan a compelling reason to keep the U.S. debt rating at AAA. While it is better than not cutting spending at all — as President Obama originally intended — and doesn’t raise taxes, Americans should expect and demand more from Washington.

Boehner, on the other hand, would keep the debt cutting process going and more likely result in substantive spending cuts of $3 trillion, nearly three times the Reid plan. (And if you tack on the Reid defense cuts, you suddenly have a $4 trillion plan, including interest savings. The raters would like that.) I don’t think spending hawks should fear the Boehner debt commission if it has real teeth and doesn’t create a trigger for higher taxes.

But wouldn’t financial markets be upset by the continued uncertainty of having to address the debt limit issue again in a matter of months? Goldman Sachs doesn’t sound particularly alarmed in a new report:

A short-term increase, with another shot at deficit reduction later this year? A two-stage process continues to look like the most likely agreement, since it is very difficult to generate savings of the magnitude being discussed without developing more complex policy reforms in a number of areas, including health programs and potentially tax policy, and those would take time.

And after that, both parties can use the upcoming election season to make their respective cases to the American public for sweeping entitlement and tax reform. I think Boehner’s plan will pass the House and become the core of the budget bill that actually gets signed by Obama. And the sooner, the better.

 

COMMENT

Now suddenly, you like the Bohner plan? What a suprise? Wow, you mean you support the Republican plan. I’m shocked. What a thoughtful commentary. However it too late. The House will get neither the Boehner or the Reid plan through. That is what happens when you support people whose best talking point is, “I raised a family so I know how to control a budget” I guess participants in the International bond markets are the same as getting a 12 year old to do their homework. No James, it’s too late for that. And even if it did it would never get through the Senate, and once again you are wrong saying the president would sign it. He and the Democrats have given up everything. He may have the most idiotic political and economic advisors in history, but even they can figure that out. Do really think he is going let go of his one last requirement? I guess we will see. I wish I was more secure in my convictions.

Posted by robscheerger | Report as abusive

The stark difference between Reid’s defense cuts and Ryan’s

Jul 26, 2011 12:41 UTC

Here’s the big problem House Republicans have with Sen. Harry Reid’s budget plan: Some $1 trillion of its $2.7 trillion in savings over the next decade — or 37 percent — come from factoring in an expected troop drawdown over the next few years from Iraq and Afghanistan. This is something everyone expects — other than the Congressional Budget Office baseline fiscal forecast. It assumes no drawdown, and it is against CBO’s unlikely scenario that Reid compares his plan.

So, Republicans say, the real savings are just $1.3 trillion, excluding $400 billion in interest payment reductions. That is far less than the $2.4 trillion hike in the debt limit Reid is asking for. And recall that Republicans want spending cuts to at least equal the increase in the debt limit. So Reid is still short, from the House GOP perspective, anywhere from $700 billion (if you accept the interest savings) to $1.1 trillion.

But Democrats charge hypocrisy, noting the recent House Republican budget from Rep. Paul Ryan also assumes a troop drawdown. So GOPers should quit playing politics and embrace the Reid plan.  But what Democrats aren’t saying is that even with that assumption, the House-Ryan budget plan cuts spending by $6.2 trillion vs. President Obama’s 2012 budget since the Obama plan also assumes savings from a drawdown.

So zero percent of Ryan’s $6.2 trillion in spending savings vs. the Obama budget comes from the drawdown. And even against the CBO baseline (which assumes perpetual war with no drawdown), just 17 percent of the House-Ryan budget comes from the drawdown. It still has $4.8 trillion in actual cuts.  This chart from the House budget committee helps explain things. The key spending line is “Global War on Terror”:

 

COMMENT

I appreciate your response and PLEASE, don’t misinterpret me. I am NO fan of Mr. Obama, not at all. My objection is numbers going out ten years in the future and treated as though they are real and unassailable. I also disbelieve this whole global warming thing because it relies too much on predictions of the distant future. Nobody, and I mean NOBODY, can predict the future with even remote accuracy. Certainly not politicians, so these numbers showing surpluses or deficits well into the future, and with three-digit accuracy no less are, in my huimble opinion, worthless.

Posted by Elektrobahn | Report as abusive
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