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  • Reid Suggests Exploiting Budget Gimmicks for Sequestration

    Harry ReidSenate Majority Leader Harry Reid (D–NV) is proposing not one but two old budget gimmicks to spend $85 billion more in 2013 than allowed under sequestration. Contrary to Senator Reid’s claim that “it wouldn’t add a penny to the deficit,” this spending would in fact add every single penny in foregone cuts to the deficit.

    1.      Phantom War Savings

    Reid’s proposal (S. 788) suggests placing caps on war-related spending for Iraq and Afghanistan, referred to as Overseas Contingency Operations (OCO), a category otherwise exempted from the Budget Control Act caps. The savings from the caps are phony because they appear to be based on the Congressional Budget Office (CBO) baseline, which assumes that OCO spending will rise, even though it’s winding down.

    Under this inflated baseline, Reid could claim nearly $110 billion over three years in phony savings from his OCO spending caps. Under the CBO alternative baseline, however—which includes the reality that the number of troops deployed will fall by 2015—Reid’s proposal could actually increase spending by $28 billion. And that is before cancelling sequestration, which increases spending by $85 billion in 2013 for a total spending increase of $113 billion over three years.

    The practical reality is that there is no accepted baseline for OCO spending. Even the President’s budget resorts to mere placeholders for OCO “because final decisions about the pace of the drawdown in Afghanistan have not yet been made.”

    2.      Spend Now, Save Later

    Even if Reid’s savings were real, his proposal would increase spending immediately by $85 billion while cutting it by that amount over the course of three years. If it takes Reid three years to offset five months of sequestration, how long would it take to replace all of sequestration with other cuts? Too darn long for them to possibly ever materialize.

    Real Savings Are Only $95 Billion in Overlap Waste Away

    Senator Reid should stop playing budget games and instead find real savings that would avoid unnecessarily painful sequestration impacts. He could start by following the Government Accountability Office’s suggestions to save $95 billion from 31 new areas of overlap. Heck, he’d have $10 billion left over to reduce the deficit! Now that would be a proposal that taxpayers could embrace.

    Posted in Economics [slideshow_deploy]

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