Criticizing President’s Latest Offer, Speaker Boehner Ignores Reality of Spending Cuts

December 19, 2012 at 10:04 am

House Speaker John Boehner is complaining that President Obama’s latest offer in their “fiscal cliff” negotiations is too light on spending cuts, but he and his House Republican colleagues are ignoring the cuts that policymakers have enacted since last year as part of ongoing deficit reduction efforts.

“The White House offer yesterday was essentially $1.3 trillion in new revenues for only $850 billion in net spending reductions,” the Speaker said yesterday.  “That’s not balanced in my opinion.”

But, to describe the state of play that way, you have to turn a blind eye to reality in at least two ways.

For starters, Boehner complains that, in what the White House describes as an offer of $1.2 trillion in spending cuts and the same in tax increases, Obama counts interest savings that accrue as spending cuts, thus making the one-to-one ratio illegitimate.

Well, interest savings are counted as “outlay” savings in the federal budget.  Besides, the Bowles-Simpson plan, to which policymakers and pundits often point as a standard against which to measure other deficit-cutting proposals, did the same thing.

More importantly, however, is that, when viewed correctly and in their entirety, the non-interest spending cuts under the President’s latest offer would actually exceed his proposed tax increases and would roughly equal the spending cuts that Boehner himself proposed in his deficit-related negotiations with the President last year.

When those negotiations broke down, the President and Congress enacted the 2011 Budget Control Act (BCA), which established annual caps on discretionary spending for each of the next ten years.  These caps, which will cut spending by what the White House estimates to be $1 trillion over the next decade, reflected a tentative agreement by the President and Speaker over discretionary spending in those negotiations.

Should we ignore those spending cuts when tallying up deficit-cutting efforts and the mix of spending cuts to tax increases?  Absolutely not.  It’s completely arbitrary, as the following scenario makes clear:

Suppose the BCA achieved half of the discretionary savings that it did, and Obama was now proposing the other half in his negotiations with Boehner.  Suppose as well that, because this hypothetical offer from Obama changed the spending-tax ratio — so that the size of the new spending cuts equals the revenue increases — Boehner accepted it.

Would that be any different than what Obama’s now proposing — to build on the actual BCA savings with his actual offer of the last day?

Of course not.  The result would be precisely the same.

The Speaker may want to ignore the reality of the last two years.  That doesn’t mean anyone else should do so.

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More About James Horney

James Horney

Jim Horney is the Vice President for Federal Fiscal Policy at the Center on Budget and Policy Priorities, where he specializes in federal budget issues.

Full bio | Blog Archive | Research archive at CBPP.org

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