Monday, March 28, 2011

The federal spending controversy

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.
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

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