The Congress that couldn’t cut straight

When the Republicans took over the house they had a promise of cutting the spending by at least $100 Billion during this year. However, somehow they managed to spend money instead of save and ended up increasing spending by $3.2 billion this year.

By Rex Nutting
MarketWatch
MARKETWATCH

WASHINGTON (MarketWatch) — Cutting government spending is a lot harder than it looks. Just ask John Boehner and Paul Ryan, who found out Monday that all the work they did this spring to cut spending will actually result in more spending.

Republicans stormed into control of the House of Representatives last fall on a promise to cut spending by $100 billion this year. It was going to be a down payment on finally getting the budget under control.

But instead of reducing outlays, the Republicans managed to do what all Congresses eventually do: Spend more.

The 11th-hour budget deal that averted a government shutdown in April was supposed to deliver on the Republicans’ promise to cut spending, immediately. The deal was supposed to reduce spending in the current fiscal year by $39 billion, or so they told us. (Republicans said they weren’t backing down on their promise, because cutting $39 billion over five or six months was equivalent to cutting $100 billion for a full year.)

It wasn’t much of a cut in the context of a $1.4 trillion deficit, but it made the symbolic point that there was a new sheriff in town.

Except it was all imaginary. Instead of reducing outlays, the budget deal reached last month will actually increase spending by $3.2 billion this year, the Congressional Budget Office said Monday, updating an earlier estimate that the budget deal would result in savings of just $350 million by the end of the fiscal year on Sept. 30. Read the CBO’s report on how the deal will cost $3.2 billion.

It turns out that most of the reductions were phony. Congress canceled the budget authorization for programs that weren’t actually going to spend a dime anyway. For instance, the Census Bureau had $2 billion left over from the decennial count that it wasn’t going to spend. The Republicans counted that as $2 billion saved.

As part of the deal, Congress also accelerated spending on some defense programs, pulling some outlays forward into this fiscal year. The CBO said $7.5 billion in extra defense spending offset $4.4 billion in cuts to domestic programs.

In the longer run, the budget deal will have some teeth. The CBO said it would save $122 billion over the next 10 years. That is far less than the $315 billion the Republicans said it would save. And it’s a drop in the bucket compared with the $7 trillion or $10 trillion in debt the government is expected to rack up in the next 10 years.

Although no one knew exactly how the CBO would score the budget deal, the fact that it doesn’t save very much money comes as no surprise to anyone in Washington. Lawmakers of both parties know how to use the jargon and procedures of budgeting that act like a fun-house mirror to make little things seem big, and big things seem tiny, and everything just a bit nauseating.

But the fact that the Republicans had to push the government to the brink of a shutdown to accomplish so little speaks volumes about the magnitude of our budget problems.

Cutting pennies is easy, because you can always find the equivalent of change in the sofa cushions. But cutting hundreds of billions of dollars or trillions of dollars from the deficit is politically difficult, if not impossible. Every program in the budget has its supporters, and most (but not all!) of that spending makes perfect sense, at least in the abstract.

It’s relatively easy to cut Planned Parenthood, or target the tax breaks for oil companies, or find $2 billion between the cushions at the Census Bureau. What’s hard to find is meaningful savings.

The big money is in Social Security, Medicare, Medicaid, the Pentagon, and in the multiple tax expenditures that subsidize the middle-class and upper middle-class lifestyle.

Want to save $200 billion every year? Get rid of the tax deduction for mortgage interest payments. Want to save $150 billion a year? Get rid of tax breaks that subsidize the retirement of upper middle-class earners. Read my column on ending tax-expenditure welfare.

Want to save $3 trillion? Go back to the tax rates of the 1990s. Read my column on “We have a revenue problem’

Are you beginning to understand how difficult this is, politically?

Any of those changes in law would save significant amounts of money and reduce the deficit. But achieving any of them would be a monumental achievement, one that would require a lot more political savvy than we’ve seen so far from either end of Pennsylvania Avenue.

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington.

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