A Pyrrhic victory

Michael Tanner Senior Fellow, Cato Institute
Font Size:

If this is victory, I’d hate to see defeat.

Later today Congress will vote on the budget agreement that narrowly averted a government shutdown last week. But before anyone gets too carried away on the victory lap, it’s worth taking a look at the details of that agreement.

Remember, Republicans started off during last November’s campaign calling for $100 billion in spending cuts. By the time they had taken office, the number had slipped to roughly $61 billion. After weeks of negotiations, and two temporary stop-gap budget bills, we ended up with $38.5 billion in cuts.

If true, that would have reduced federal spending this year by about one percent. Or to put it in better perspective, the Republican leadership is celebrating because they claim to have cut spending by roughly what the federal government borrows — not spends, borrows — in six days.

But now it appears that those $38.5 billion in cuts may have been just a little optimistic. If you discount rescissions, changes to reserve funds, and other non-cut cuts, the real reduction in discretionary spending is closer to $8 billion. That’s right, $8 billion, or just a bit more than the federal government borrowed today.

The other $30 billion is little more than smoke and mirrors. Actually, that gives a bad name to smoke and mirrors. For example, the final deal saves $6.2 billion by not spending money that was not spent for the 2010 Census. Similarly, the legislation saves $4.9 billion by not spending money in the Justice Department’s Crime Victims Fund, money that was never scheduled to be spent this year. And, the budget deal also successfully saved some $4 billion by canceling transportation projects that had already been cancelled by other legislation.

The deal also eliminates four White House policy “czars,” which sounds good until one realizes that those positions had already been phased out by the White House. And it eliminates $3.5 billion in bonuses that states could earn under the State Children’s Health Insurance Program. But since few, if any, states were actually expected to qualify for the bonus money this year, the funds would have remained unspent even without the budget deal.

Even some of the actual cuts are less than meets the eye: for example, a one-time cancellation of a milk-price support payment. And, of course, $12 billion of the cuts in the latest deal were already negotiated under previous stop-gap spending measures.

The bill does, as Republican leaders claim, eliminate some 55 government programs. But the total savings from all 55 of those programs adds up to barely $1 billion. Break out the champagne.

Republicans once promised to roll back federal spending to 2008 levels. The final compromise actually leaves 2011 spending more than $773 billion higher than that 2008 level. But, then, what’s a few hundred billion among friends?

Worse, contrary to assurances by the Republican leadership, the budget agreement actually increases the budget baseline. While that sounds like the sort of accounting-speak that makes eyes glaze over, it means that next year’s budgeting process will start with an automatic assumption of higher spending, making it more difficult to cut spending in the 2012 budget.

From the negotiating brinkmanship, Republican leaders made it clear that they were more concerned with avoiding a government shutdown than in making real spending cuts. That’s exactly what they got.

As we move next into negotiations over whether to raise the debt ceiling, we should keep in mind the words of the Epriot general Pyrrhus after the battle of Asculum: “Another such victory and we will be undone.”

Michael D. Tanner is a senior fellow at the Cato Institute, and the author of Bankrupt: Entitlements and the Federal Budget.