Wednesday, July 27, 2011

Gaming the CBO Scoring on Debt Limit Talks

The Congressional Budget Office has released its scoring on two competing deficit reduction packages, and the results aren't good in either instance.

Rep. John Boehner (R-OH) would cut about $850 billion over the 10 years studied by the CBO, but only $1 billion is cut in FY 2012.

While the headline says that the Sen. Harry Reid (D-NV) plan will save more than twice what is included in the Boehner plan, the fine print shows that the bulk of those savings come from capping military expenses for Afghanistan and Iraq - and counting them towards the calculations. That savings is not likely to be realized either (for the same reasons that the Boehner plan fails IMO).

Both plans are seriously backloaded; though Reid's plan provides more up front cuts - $30 billion in FY 2012, $99 billion in FY 2013, $156 billion in FY 2014, etc. However, when you back out the nearly $1 trillion in Afghanistan and Iraq limits, the overall savings under the Reid plan still exceeds that of the Boehner plan, but only by about $250 billion (again mostly backloaded).

CBO scoring requires a 10 year outlook, so everyone games the cuts to be backloaded to maximize the savings that are never actually realized. Reid cuts more up front and that gives him a slight edge, but about half of his cuts are based on reductions in Afghanistan and Iraq spending.

Reid's proposal is just slightly less deficient than Boehner's plan. Both plans are heavily reliant on backloading cuts that anyone in politics knows will never actually occur because Congress will change its mind down the line.

Because the Reid proposal includes more cuts up front, I'd put Reid's proposal ahead of Boehner's plan.

Everyone's trying to delay actual cuts (both the GOP and Dem leadership) - because no one wants to deal with the structural budget situation since it would lead to cuts in programs that both sides actually rely upon.

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